1

Credit Risk

The inability of a borrower or a counterparty to meet the contractual obligations or simply to repay the loan. YWBN Mutual Bank will be lending mainly to the underserved. The risk profile of this market is largely unknown. Although credit losses are primarily defined by the inability of the borrower to repay, it also includes the delay in payments of the borrower.

YWBN Mutual Bank will conduct proper analysis before granting loans and should only sanction applications for individuals and businesses that meet a set criteria. YWBN Mutual Bank  will make use of data analysis technology that combines machine-learning and artificial intelligence to get a true picture of creditworthiness of applicants and ensure groups perceived as high risk such as self-employed, freelancers and small business owners looking to borrow to scale-up are not disproportionately or unfairly discriminated.

2

Business Risk

This results when a bank fails to generate profits during a specific period due to credit risks above or the bank not acquiring enough business / customers.

YWBN Mutual Bank will implement a strategy that will attract underserved and underbanked customers that includes SMMEs in the informal sector who according to Stats SA account for 5.2% (R208 billion) of GDP with other estimates placing it as high as 15% to 18% of GDP (R600 billion to R720 billion).

3

Operational Risk

The risk of loss resulting from inadequate or failed internal processes, people, and systems or from external events. This definition includes legal risk but excludes strategic and reputational risk. YWBN Mutual Bank will be exposed to Cyber Security Risk (probability of exposure, loss of critical assets and sensitive information, or reputational harm due to cyber-attack) and fraud.

The operational risks will be minimized by automating workflows to reduce human interventions to a minimum. YWBN Mutual Bank will invest in state of the art / world class fintech software and mobile apps that are very secure and impenetrable. The information will be kept private using a technologically advanced electronic medium.

4

Liquidity Risk

Arises if YWBN Mutual Bank fails to meet the obligations (paying depositors) or fails to raise capital. This may happen if the bank has assets locked up in illiquid assets such as loans or when the bank is too risky for other entities to lend it cash.

YWBN Mutual Bank will follow the regulation by the Prudential Authority and will keep a minimum requisite amount in the Mutual Bank to eliminate the chances of losses due to liquidity risk.

5

Market Risk

Risks involved in the fall of value in assets where the Mutual Bank has invested. This might include assets such as bonds and equities.

The Prudential Authority has prescribed that YWBN Mutual Bank may only invest in short term money market instruments with other banks or Treasury Bills.

6

Compliance Risk

Risk that the bank will not follow proper regulatory standards put down by the PA. This may result in financial (penalties) and legal losses.

All decisions taken by YWBN Mutual Bank are in line with the PA and Mutual Banks Act requirements. A Compliance Officer will be employed to look after all the compliance issues including regulatory reporting.

7

Reputational Risk

This is a significant result of the operational and security issues, e.g., when a bank fails to provide security to their customers, or when they perform inefficiently in processing their requests, then they suffer loss in users. The disaffection might cause the spreading of rumours about the bank, and the bank’s image may be negatively impacted.

YWBN Mutual Bank will ensure smooth functioning and provide safety and security to all of its customers. YWBN Mutual Bank will not participate in any unfair practices and will ensure customer satisfaction in every possible way. Again, data analysis technology that combines machine-learning and artificial intelligence will be used to process large volumes of customer requests/applications much faster than traditional players including creation of up-to-date monitoring and information system, strengthening internal controls, housekeeping, and reporting functions.