Dear Readers,

The year 2020-2021 has marked history… not just because of the global pandemic but it has also been a stark reminder of how fragile our lives and our planets are. Alongside the many challenges that COVID-19 has bequeathed us, it has also sharpened the focus on the need to think long-term and adopt sustainability as a way of life, rather than a mere option. As the world continues to navigate through the pandemic, I am grateful to our AfrAsians, our customers and our shareholders for their unwavering support and trust in AfrAsia over the past year. Whilst our primary focus remained the safety and health of our employees and customers, we anchored our success on our four pillars: customer-centricity, teamwork, innovation and sustainability. The latter has been our guiding light in setting our recovery path, all the way to our future growth strategy.

Dear Readers,

The COVID-19 has offered an unprecedent opportunity for companies to move towards the integration of environmental, social and governance (ESG) in their management systems. There is a global increase in awareness in regards to ESG and operational resilience amongst the private sector community. We, at AfrAsia Bank, have also taken this commitment to work on a 2030 Sustainability Strategy to contribute to a net zero carbon economy. Supported by our Board of Directors, the Bank believed in sustainability as a long-haul value creation for all its stakeholders and a culture of transparency.

Based on the four pillars of sustainability (workplace responsibility, marketplace responsibility, environmental responsibility and social responsibility), our 2021 sustainability strategy has been our blueprint to integrate responsible principles within our business practices and to develop projects focused on long term value creation. Throughout the years, the focus was also on building a culture and awareness around sustainability and the Sustainable Development Goals (SDGs).

Looking back on the financial year 2020-2021, which has been severely disrupted by the COVID crisis, many projects were either postponed or adapted to fit the ‘new’ normal. For the third-year consecutive, a separate sustainability report with details on Bank’s non-financial performance has been provided. These reports can be found on our website in the Sustainability Section.

The different pillars will be explored in more details throughout the report in the various chapters.

Fig 1: Our 2021 Strategy

Fig 2: Overview of HR projects

Fig 11: Overview of Marketplace Responsibility

Fig 15: Overview of projects under Environmental Responsibility

AfrAsia Bank has two premises in Mauritius at Port Louis and Ebene. We rely on the Central Electricity board for our electricity needs and monitor our electricity consumption to detect any irregularities.

Fig 19: Overview of Social Responsibility pillar

The Bank’s risk appetite is defined by a risk appetite framework set by the Board. It aids to emphasise its strong risk culture and helps define thresholds, processes and controls to manage aggregate risks through an acceptable scale.

In line with Bank of Mauritius Guidelines on Credit Concentration, Country Risk Management and Cross-Border Exposures, the Board has established a set of policies and procedures in respect of cross-border activities, which clearly translate to the Bank’s strategic goals within approved risk parameters.

Stress-testing (“ST”) is an integral part of the Bank’s risk management process as it consists of both sensitivity analysis and scenario analysis.

Stress testing is a fundamental tool to

• facilitate a view of the organisation’s forward risk profile as a result of portfolio effects and/or changes in macroeconomic conditions;
• Identify potential vulnerability to unprecedented but plausible events; and
• Determine appropriate management actions or contingency plans to limit the impact of such events on the entity

Results of stress testing must impact decision making, including strategic business decisions via

• Strategic planning and budgeting;
• Internal Capital Adequacy Assessment Process (“ICAAP”), including capital planning and management, and the setting of capital buffers;
• Informing the setting of risk appetite statements;
• Liquidity planning and management; and
• Identifying and proactively mitigating risks through actions such as reviewing and changing risk limits, limiting exposures and hedging.

The various type of scenario analysis performed at ABL are as follows:

Scenario analysis

• Changing multiple risk inputs simultaneously with the source of the stress event being well defined;
• Macroeconomic stress testing involves the creation of a severe but plausible macroeconomic scenario and assessing the impact of key macroeconomic risk drivers (e.g. GDP, interest rates, inflation) on key risk inputs (e.g. PD, LGD and EAD);
• Other hypothetical or historical scenarios: “what-if”; and
• Assessing the impact on statement of profit or loss and other comprehensive income, statements of financial position and capital ratios. Sensitivity analysis
• Adjusting of a risk parameter, or a small number of very closely related risk parameters to understand the impact on a risk position; and
• It is important to note that the event that gives rise to the movements in the parameters is hypothetical.

Reverse stress testing

• Assessing scenarios and circumstances that would render its business model unviable, thus identifying potential business vulnerabilities:
• Starts from the point of failure of the Bank’s business model and then working backwards to identify circumstances or scenarios under which this might occur; and
• Point of failure is considered as significant financial losses that impact the Bank’s capital or lack of liquidity to such an extent that the existing business model would no longer be viable or where material supervisory intervention would result.

Both the local and global economies were severely impacted since the outbreak of the COVID-19 pandemic and this impacted the capital adequacy and stress test requirements of banks. In this current economic environment, similar to other banks, it was quite challenging for ABL to conduct stress-tests and estimate provisions under the IFRS 9 standard; as forward-looking judgement on possible losses from loans remains very challenging and uncertain. Notwithstanding the above challenges, the Bank has been guided by its Board in designing and implementing solutions and also conducting a number of “Stress-Test Scenarios” or “What-If Scenarios” in order to assess potential balance sheet and profit or loss impact in the current environment. The mitigations are in line with the regulatory Internal Capital Adequacy Assessment Process (“ICAAP”) mitigation plan. ICAAP is an internal review requirement that evaluates capital adequacy, capital management and planning at banks with a specific focus on core risk factors.

The goal of AfrAsia Bank Limited is to be recognized as an employer of choice and as well as the most trusted financial partner in Mauritius and across Africa. Remuneration is a key vehicle towards achieving this objective, encouraging and enabling the Bank’s 400+ employees to deliver the best possible customer experience (CX) through enhanced employee experience (EX). Remuneration plays an essential role in attracting top-talent. On the path towards excellence, the best people are drawn from the broadest pool of applicants from both local and international markets. We offer a decent workplace in which the richness of their diversity and experience are both welcomed and valued by colleagues.

The Bank promotes its culture through its values inculcating teamwork, a disruptive and innovative approach. AfrAsians are groomed to excel in their line of operations and expertise. Employees are encouraged to promote the highest ethical standards in their conduct, our internal policies promote integrity at all times and this is demonstrated through our overall business culture. The Bank is currently performing a broad based review of our remuneration programme as an attempt to find the potential gap between ‘where it is’ and ‘where it needs to be’ and for so doing opted to use the services of Korn Ferry to bring about the effective change required in measuring, evaluating and benchmarking both skillset and mindset of our employees.

Cultural change at AfrAsia Bank Limited is a multi-year journey, with strong senior management commitment and a clear tone from the top. Our organisational values were revamped in 2017 in order to be more in line with employees, a majority of which are millennials and digital natives. To make our values remain tangible our induction was also revamped whereby newcomers are exposed to experiential learning of our values. Moreover, refresher workshops are run on a regular basis for all employees where participants are given the opportunity to reflect and commit to living up the organisation’s values. These sessions help explain how the values relate to the bank’s vision, what the values and beliefs mean specifically in our everyday business transactions, client relationships and internal processes, and most of all how each employee can implement the values to bring about change in their department.

All employees are assessed using the balanced score card as a performance management online tool. Employees are not only assessed as to what they do through their objectives but also as to how they do what they do through the values assessment. The Talent Management system is helping the Bank move to another level in its management of talent. Investment in learning has been material and we believe in enhancing knowledge through soft and technical training and financial sponsorship to help towards growth in knowledge, skills and attitude. Quality of work life is key and work life integration is promoted along with flexible working arrangements.