Latvijas Banka manages financial and operational risks. Latvijas Banka's risk management goal and basic principles are set out in the "Risk Management Policy of Latvijas Banka" adopted by the Council of Latvijas Banka.
Financial risks are managed with the aim of minimising their potential negative impact on Latvijas Banka's financial position and financial performance that might arise from adverse changes in financial market factors or a counterparty default. When managing financial risks, including market risk (price, interest rate and currency risks), credit risk and liquidity risk, Latvijas Banka takes account of the acceptable risk limits and risk parameters to preserve the value of investments ensuring the required liquidity and income earning in the long term (see also the sub-section "Risk management" of the section "Management of investments").
Financial risks of Latvijas Banka relate primarily to its investments in financial instruments, as well as the implementation of the single monetary policy operations associated with Latvijas Banka's participation in the Eurosystem and sharing of the related risks and financial results. Latvijas Banka's financial assets are mostly exposed to the market risk and credit risk. On the basis of reasonable risk estimates, the Council of Latvijas Banka decides on making provisions for financial risks associated with Latvijas Banka's investment management and other financial transactions, as well as the use of these provisions should the above risks materialise.
Management of Latvijas Banka's operational risks is aimed to mitigate a potential negative impact on Latvijas Banka's operation, reputation or finance, resulting from inadequate or erroneous execution of processes, acts or omissions on the part of an employee, inadequate operation or unavailability of either the information technologies, the information systems or other infrastructure of Latvijas Banka, or external events.
The operational risks of Latvijas Banka are managed within a common operational risks management framework, with the major risks being:
- compliance risks (inter alia in preventing conflict of interests, anti-corruption control, personal data protection, prevention of money laundering and terrorism financing, and ensuring workplace environment protection);
- business continuity risks;
- physical security risks;
- information security risks;
- information technology risks (including cyber security risks).
As regards operational risk management in 2021, it focused on managing risks related to the Covid-19 pandemic, as well as those of teleworking, including information security and cyber security risks, as well as those in relation to the FCMC integration process.
Latvijas Banka ensures risk management training for its employees, inter alia, conducts, on a regular basis, training sessions and tests for employees to maintain appropriate level of their know-how and skills.