The 20th annual international conference of the Risk Management Association of Nigeria (RIMAN), holding on August 12th and 13th, 2021, is expected to be a platform to re-examine the plethora of risks associated with digital adoptions. MAGNUS NNOKA, president of RIMAN/Chief Risk Officer of Coronation Merchant Bank, in this interview with HOPE MOSES-ASHIKE, gives an insight into the conference and issues in the industry. Excerpts:
What is the 20th Annual International Conference of Risk Management Association of Nigeria (RIMAN), which will take place on August 12th and 13th, 2021, trying to achieve?
RIMAN’s Conference is the largest gathering of risk practitioners and stakeholders in Nigeria, with significant value addition over the decades. The conference provides a forum for RIMAN to collaborate with regulatory authorities in policy advancement and promotion of best practices in risk management. Since the advent of the COVID-19 pandemic, businesses have had to adapt their operations to cope with lockdown restrictions and the increased shift to remote working. . It is for this reason that this year’s conference has been themed “Risk Management in a Digital Era”. It is our expectation that the event will provide a platform to re-examine the plethora of risks associated with digital adoptions in various spheres of economic activities and private lives. We will be joined by a host ofseasoned speakers who will drive the conversation around risk management in the covid era and proffer strategies for managing these risks. RIMAN, over the years, have used the conference to promote Intellectual discourse on contemporary issues and provide strategic direction for policymakers in the public and private sectors.
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How beneficial is RIMAN as a professional body for risk management practitioners, to Nigeria and organisations?
Risk Management Association of Nigeria (RIMAN) offers a unique opportunity for capacity building, knowledge and experience sharing as well as networking with other Risk Professionals/Practitioners nationally and internationally. RIMAN have in the past two decades, played a vital advocacy role in risk management practices. We are the second professional body in sub-Sahara Africa that conducts professional certification in risk management in collaboration with our partners, the Chartered Institute of Bankers of Nigeria. In addition, we are collaborating with some universities on risk management degree programs. Overall, individuals and organizations benefit from these initiatives and other activities of the association.
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Your theme for this year’s conference is ‘Risk Management in a Digital era’. What risks do you see in digital adoption locally and globally?
Businesses are adopting agile digital transformation in response to shifting and ever-demanding consumer tastes and preferences. My response has two parts; first, given the strong correlation between digitization and risk exposure, a risk manager’s posture or approach to operational, product and reputational risk exposures must evolve digitally to keep up with rapidly changing business dynamics.
There is a need to build capacity in digital risk training, conduct regular vulnerability assessment of information security assets and controls as we continue to develop digital products or processes
Secondly, we should expect the risk of cyber-threats, especially ransomware, social engineering, and phishing, to be heightened as digital adoption by businesses continue to increase. Therefore, there is a need to build capacity in digital risk training, conduct regular vulnerability assessment of information security assets and controls as we continue to develop digital products or processes to drive business objectives,
Could you recommend ways such risks can be mitigated?
Possible ways through which we can mitigate digital risks include: being aware of the potential and actual digital risks inherent in your processes or functions; focusing on asking the right questions on new digital products or processes; comprehending agile digital business transformation before embarkment; and planning for a digitally proficient workforce and culture.
In addition, other ways include, implementation of robust Security Operations Center (SOC); ensuring regular vulnerability assessment of Firewalls protocols coupled with consistent and continuous awareness among the stakeholders within the ecosystem.
Recently, you made a courtesy visit to NEXIM and BSD of the CBN. What kind of partnerships do you want from them?
First, the Executive Council of the Association undertakes courtesy visits to our corporate members and partners as part of our strategic engagement and opportunity for knowledge sharing on common areas of interest within risk management practices. Therefore, our recent courtesy call on the Chief Executive of NEXIM and Director of Banking Supervision at CBN was in line with our broad objectives. However, there were specific issues discussed at the separate meetings, which I am constrained to share now, the outcome of some issues we discussed will be in the public domain at the implementation stages
The CBN recently discontinued the sale of foreign exchange to the BDCs. What risks do you envisage from this action?
With the ban of forex sales to the BDCs, Nigeria could save over $5.7 billion annually, according to a report from Bloomberg. The Banking system is a better platform to closely monitor operators, trends and manage the nation’s foreign exchange market. For example, since the sharp drop of crude oil prices to below $30 to a dollar in April 2020, the Deposit Money Banks have contributed significantly to price stability as dollar has depreciated by just 14% while the exchange rate of the naira in the black market has depreciated by about 40.2% to more than N500 to a dollar. We see short term risk of naira depreciation but with more transparency and enhanced regulatory oversight, the value of the Naira will remain stable in the FX market in the medium to long term, all other things being equal. I support the position taken by CBN on this, it is the globally accepted best approach
Private placement and IPOs seem to be drying in the market. What do you think are the limitations for such offers?
Private placements in Nigeria have had a checkered history. The major concerns include the lack of transparency, poor disclosures or information asymmetry, and lack of accountability associated with private placement, which acts as a disincentive to investors. I am aware however that the FMDQ has initiated actions to address some these issues and reverse investors’ apathy
I should also add that the trends in Private placement and IPOs are a reflection of business environment and health of the economy as investors tend to push for alpha in areas where their returns are optimized. We should also consider reducing the listing fee and associated cost of private placement which are relatively considered on the high side for the financial status of interested companies.
The Central Bank has often said the banking system is safe and sound. Does this imply that the sector is devoid of any risk? What are the inherent risks?
The Nigerian banking system is robust and financially sound. Average NPLs hovers around 5.7% while average capital adequacy ratio and liquidity ratio remain above minimum regulatory limit at 15.5% and 41.3% as of June 2021. We think credit, cybersecurity, macroeconomic, and regulatory risks are some of the inherent risks facing the industry. Don’t forget that there is nowhere in the world where the banking sector does not face some sort of risk in its operations, the most important thing is making sure that such risk are effectively mitigated at organization and systemic levels.
What actually is responsible for the recent rise in inter-bank rates, and what does it mean for the industry and economy?
In my view, the recent hike in the Interbank Rates is largely attributed to the efforts of the Central Bank to control the excess liquidity in the system and thereby curtail inflationary pressure. Therefore, the CBN from time to time do issue OMO Bills to mop up liquidity. In addition, the regime of Discretionary CRR debits as part of liquidity management by the CBN also contributes in creating the trend we have seen in interbank rates. On the positive side, this help to moderate inflation though still extremely high, but it could have been worse.
Is the Nigerian financial market beginning to see Investors coming back, with the changes in interest rates?
Investors are watching our economic and political developments with cautious optimism. Insecurity, high inflation rate and exchange rates’ volatilities are some of factors that deter foreign investors from investing in the economy. Therefore, there is a need for bold policy actions to reverse the current trends and boost economic activities.
When is the CBN likely to begin monetary policy tightening as seen in some other countries?
Unlike its peers, Nigeria’s key economic indicators such as (GDP, inflation rate and exchange rate) remain very fragile. In fact, you will recall that Nigeria barely came out of recession owing to the effect of COVID-19 pandemic and slump in crude oil prices. Therefore, accommodative monetary policy stance is recommended to continue in the short to medium terms.
We are aware that part of the events after the forthcoming conference of the Association is election of new officers, and having served for the maximum term of three years, how has it been for you leading the Association and legacies are you leaving behind?
As you may know, aside from the employees at the RIMAN Secretariat, all members of the Executive Council have their full-time jobs. So, it is expected that we all must put in extra hours to serve the two maters, and for the president, this is even more demanding because the buck stops on my desk. This is the challenge all past presidents have faced, but the unique nature of my tenor has been the additional challenges caused by COVID-19 which has tasked professional risk managers more than ever. I am encouraged by the strong thought leadership and support we provided to both our corporate and individual members in managing the heightened risk environment.
On my legacies, frankly speaking, I would not want to indulge in self-assessment, I will rather let our members and the professional risk management community to be the judge, but I am confident posterity will be fair to me. And don’t forget, I am joining the elite club of past presidents and will continue to avail the Association with advisory support when and where necessary.
