Risk management takes centre stage

under the theme “Creating a progressive financial services environment based on trust, accountability and innovation”.
As I was pondering on the theme of the winter school, I thought to myself that this was a perfect theme coming on the heels of the much hyped Renaissance Merchant Bank saga which saw the bank being placed under the management of a curator, just last month.

It was also after Reserve Bank of Zimbabwe Governor Dr Gideon Gono told the nation that the banking sector is generally safe and sound, not withstanding that over the past four weeks they had put one institution under curatorship.
Probably this meant that if one bank is under curatorship it does not mean that every other institution needs to be under curatorship.

He went on to say that such logic would be akin to suggesting that when one person in a village is sick, it means that everyone else in that village is also sick.
However, it seems there are two options here. Isolation and quarantine or at worst expulsion, in the hope that the sickness will pass and there would be no contagion.
Back to the winter school, the institute had lined up a number of high-profile speakers whom I thought had the capacity to unpack the theme.

RBZ senior division chief bank licensing supervision and surveillance Norman Mataruka was expected to speak on accountability and competence.
The bankers had burning questions for him but unfortunately he could not make it to Nyanga and Gift Chirozva the chief bank examiner, bank licensing, supervision and surveillance had to stand in for him.

Nonetheless, Chirozva managed to handle all the burning questions from bankers.
From the Government side, Secretary for Finance Willard Manungo also chronicled problems the country is facing and what banks can do to improve the situation.
What came out clearly during the three-day indaba was a strong need for risk management in the current financial environment.

Risk management is indeed a wide subject affecting the insurance and financial sectors where there are risks of losing money (investment).
FBC Reinsurance chairman David Birch has a brilliant presentation on risk management and one thing that came out strongly is the significant disconnection between boards, non-executive directors and their risk management teams. This, he said, has often led to a blinkered approach to the real risks facing local companies.

Over the years, the market has witnessed risk management failures especially in the financial services sector where non-executive directors professed that they relied on management to identify and deal with risks.
Non-executive directors would say that they did not know that, for example, insider loans had gobbled up depositors’ money and that the institution was in a negative capital position.

However, we all know that ignorance in no excuse and yet, we submit that there is a lot of blind flying going on at the moment in our market, especially in the insurance and financial sector.
David Birch was right in his presentation when he said companies should re-evaluate their procedures and structures so that risk management and others who identify weaknesses are encouraged to draw them to the attention of their directors.

Audit and risk professionals tasked with these duties also need to develop additional skills to fulfil this role adequately.
David Birch says: “I don’t know what it is that allows boards to accept without question what management tells them, without digging deeper into the financial well-being of the business whose shareholders and other stakeholders interests they represent.”

Him being an expect in risk management, he said the reason could be ignorance or a hope that all will be right on the night or maybe not wishing to appear uninformed in front of one’s peers.
It is surprising that given the enormous responsibilities that sit on the shoulders of non-executive directors, they are still willing to accept the risk to their reputation and pockets by sitting on boards of many quoted and private com-panies.