Investor Presentaiton

MORGAN STANLEY BANK ASIA LIMITED UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION Year ended 31 December 2020 H. PILLAR 3 DISCLOSURE (CONTINUED) Table OVA: Overview of risk management (continued) Internal Audit Department IAD provides perspectives to both senior management and the Board Audit Committee for their consideration in discharging their legal, fiduciary, and oversight responsibilities. It is further detailed in Section A of the Unaudited Supplementary Financial Information. Stress testing Stress testing is one of the Company's principal risk management tools, which is used to identify and assess the impact of scenarios on its portfolios and capital, covering all products offered by the Company. Stress testing complements other company-wide risk metrics by providing a flexible approach to understanding risk and assessing the Company's resilience to different scenarios over a range of severities, relevant to current market conditions and forward looking macroeconomic views. Most notably, stress testing is used for: . • Risk Management: Identifying areas of potential weakness in Company's portfolio as a basis for senior management to take portfolio-level decisions, determining risk mitigation actions and set risk limits, and improving risk and control environment. Capital and Liquidity planning: Informing the proposed stressed capital and liquidity forecasts through severe but plausible stress tests. Others including business planning, new product evaluation and strategic business decision. The MSBAL Stress Testing Framework utilises stress testing methodologies, including sensitivity tests and scenario analyses, to identify and assess Company's resilience to different stress conductions. Risk Mitigation Risk Mitigation is further detailed in the note 24 to the audited financial statements. Adequacy of Risk Management Arrangements The Company is satisfied that the risk management arrangements and systems, as described, are appropriate given the strategy and risk profile of the Company. These elements are reviewed at least annually and, where applicable, updated to reflect best practice, evolving market conditions and changing regulatory requirements. 74 74

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