‘Evolving financial market increases demand for risk management’
The evolving financial services market resulting to increased competition, expansion, cross border investment and expanding risk has increased the demand for risk management guidelines and procedures across countries.
Experts say this rising challenges has further increased demand for compliance and ability to this risk as fundamental to growth and development.
Mohammed Kari, commissioner for Insurance said the evolution of financial markets and institutions has greatly affected the process of risk management which has broadened dramatically and thus affects the overall outcome in the various sectors.
Kari who spoke at The Risk Frontiers West Africa organised by Commercial Risk Africa with theme- ‘Changing The Risk Landscape’ held in Lagos said to ensure effective risk change, there must be a proper assessment of the risk involved most especially when new products are introduced.
“Tools available for measuring risk must be expanded and tested over time to ensure that they are in conformity with the country’s environment since different countries have different levels of risk.”
According to him, it is obvious that risk is definitely changing the various sectors at a fast pace and it is our duty to find different avenues to mitigate the identified risk.
He said policymakers most especially from the public sector must ensure that there are laid down processes and guidelines for strengthening risk management so as to prevent any unfavourable circumstances such as the global financial crisis of 2007/2008. “In addition, they must also ensure that there is a good monetary and fiscal policy in place for the economy to thrive in and maintain a stable inflation rate. Government should also ensure that the policies are implemented and not just on paper.”
On the other side of the divide, the private sector and regulatory agencies must continue to collaborate to develop an effective and efficient risk management framework and they must work together to break the traditional mistrust that has existed between them, Kari stated.
In July 2012, the National Insurance Commission (NAICOM) introduced the Risk
Management Framework Guidelines for identifying, measuring, monitoring and limiting the risk involved in the business of insurance in the country for insurance and reinsurance companies. The guidelines also laid down the processes for reviewing risk, identifying and prioritizing risk, and corporate governance issues, among others. The guidelines is primed to facilitate risk based approach and regime in the industry to ensure performance and effectiveness in its Risk Based Supervision and Risk Based Capital Approach.
The risk regulation approach was more focus on setting standard and shifting the responsibility of deciding the risk appetite of the operator to the Board and Management of the company. This is done within the guideline provided by the regulator.
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