Seeing the Big Picture

Managers are being held liable personally more than ever before

Johannesburg, South Africa  (13 Oct. 2009)  –  THE seriousness of actions taken recently by the banking industry regulator in Nigeria highlights the lack of proper risk management and governance structures prevalent in several African countries, says Andre Zitzke, head of risk practice for the SAS Institute in SA.
He says while this is not a problem peculiar to Africa, there is a great need for African countries to conform to global best practice in governance, risk management and compliance issues.
SAS is an independent global business intelligence vendor based in the US dealing with governance risk and compliance in the financial services industry It has opened an office in SA.
Zitzke says that the institute has been working with Nigerian banks FCMB and Skye Bank, helping them to define their internal and external risk factors better and assisting them in managing their risk environment.
The company recently embarked on an enterprise risk management implementation at First Bank Nigeria, as well as a host of projects with other Nigerian banks.
He says that as a result of the global financial crisis enterprise risk management is becoming increasingly sophisticated internationally in the kinds of analytical risk models being used, with increasing evidence of cross-silo input coming into play.
"Historically, governance, risk and compliance have been treated in different silos within organisations, but with the emergence of new regulatory pressures, as well as pressures from various stakeholders, these core governance issues are moving ever closer to each other, although they still tend to be treated separately in annual reports."
"In reality, they are becoming increasingly integrated and this in turn puts pressure on boards and senior managers, who are being held more liable at a personal level than was previously the case"
Zitzke says that one of the major challenges will be to eliminate the silo mentality in organisational structures. Line managers in banks, for example, are likely to be made more responsible for governance, risk and compliance, and will be given incentives to take on this responsibility.
"There needs to be a pervasiveness of the whole issue of governance, risk and compliance in organisations. Organisational change takes time and can only come from the top. Policies and procedures need to be drawn up and executed in such a manner that they become part of daily business life. But these efforts need to be formalised, because at the end of the day you are working with people who are fallible." He says that while financial institutions in Africa have for the most part managed to weather the storm of the global financial crisis, there is a need to step up riskmanagement practices aggressively, track regulatory compliance and measure and forecast future business viability Gavin Searle, director of Durbanbased Econorisk Consulting, says that any legislation that asks companies to apply or explain principles associated with good governance and risk management, as King 3 is now set to do, is positive for the insurance industry and the market as a whole.
"In the event of a major incident or failure directors could be required to demonstrate that they have acted responsibly and have taken practical and reasonable steps to avoid the negative effects to protect their organisation," he says.

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