Financial risks
Latvijas Banka's objective is to preserve the value of investments over the medium and longer term, ensure adequate liquidity, generate income, and adhere to sustainability principles (see also the Risk Management sub-section in the Investment Management section). As Latvijas Banka manages investments and executes the Eurosystem's unified monetary policy operations, it is primarily exposed to the following financial risks: market risk (price, interest rate, and currency risks), credit risk, and liquidity risk.
Adverse changes in financial market factors or a counterparty default can negatively impact Latvijas Banka's financial position and operational financial results. To mitigate the potential adverse impact of financial risks, Latvijas Banka manages these risks by taking appropriate measures to reduce their potential impact and by establishing limits and parameters. On the basis of reasonable risk estimates, the Council of Latvijas Banka decides on provisions for financial risks associated with Latvijas Banka's investment management and other financial transactions, as well as the use of these provisions if the risks above materialise.
Recognising the potential adverse impact of climate change on Latvijas Banka's long-term financial performance, Latvijas Banka has implemented a climate change risk management framework. As the field evolves, adjustments are anticipated in Latvijas Banka's climate change risk management framework, the composition of its financial assets, and the sustainability parameters.
Operaitional risks
Latvijas Banka manages operational risks with the objective of ensuring high-quality outcomes for processes and projects within defined timeframes, while maintaining the continuous, secure, and efficient execution of operations. This approach aims to minimise potential adverse effects on Latvijas Banka's ability to fulfil its tasks, protect its reputation, preserve financial standing, and safeguard operational financial results. All operational risks are addressed within a unified and comprehensive operational risk management framework.
In 2025, operational risk management at Latvijas Banka focused on strengthening the institution's operational resilience and management of cybersecurity and information security risks. In 2025, operational risks were effectively managed. The implementation of targeted mitigation measures kept risk exposure within acceptable levels.
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Major operational risks |
Objective of governance |
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Compliance risks, including the prevention of conflicts of interests, anti-corruption controls, protection of personal data, prevention of money laundering as well as terrorism and proliferation financing, and ensuring the protection of the work environment |
To ensure compliance with the requirements in the legal acts governing the operation of Latvijas Banka and its staff, as well as their conduct in executing their official duties and responsibilities. |
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Business continuity risks |
To mitigate potential adverse effects on the execution of critical processes, the disruption of which could have significant repercussions for the Latvian financial system or hinder the effective fulfilment of Latvijas Banka's tasks. This includes ensuring the uninterrupted execution of critical processes or the prompt and complete restoration of them in the event of any disruption or interruption, as well as the efficient management of incidents. |
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Physical security risks |
To ensure the physical security of individuals on the premises of Latvijas Banka and of the premises themselves, including the transportation of valuables and of events organised by Latvijas Banka. The priority is to protect the life and health of individuals. |
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Information security risks |
To prevent unauthorised disclosure or misuse of confidential information, classifying that information by its degree of confidentiality and ensuring appropriate protection for it is essential. It is equally important to ensure that these protective measures do not hinder Latvijas Banka in providing non-classified information to its cooperation partners and the public. |
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Risks related to information systems, including cyber security risks |
To reduce any potential negative impact on the availability, security, and integrity of Latvijas Banka's information systems and infrastructure. Latvijas Banka classifies its information systems according to their criticality to Latvijas Banka's operations, as well as the confidentiality, integrity, and availability requirements of the data they process. Each classification level is assigned corresponding to physical and logical security. |
Latvijas Banka manages operational risks across processes and projects by classifying the processes and risks and assessing how those risks could affect the outcomes of the process or project, and by using this classification to decide on and execute the most effective actions for ensuring appropriate risk management. The Operational Risk Management Department is in charge of maintaining a common operational risk management framework, organising the processes of operational risk management and incident management, as well as providing regular information on operational risk management as required by Latvijas Banka's legal acts.
Latvijas Banka educates its employees on risk management, aiming to ensure the continuous development and maintenance of relevant knowledge and skills. To support this, regular training sessions and tests are conducted.