1. The New Global Industry-wide Risk Regulation
and its Impact on Bank’s Risk Management
Practices
Eneni Oduwole
IBM/TWC Risk Seminar Event
June 20th
, 2013
Oriental Hotel, Lagos

2. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Preamble
 The financial crisis of 2007 – 2008 has been classified as the worst
financial crisis experienced since the Great Depression of the 1930s
 It resulted in the total collapse of large financial institutions, the bailout of
banks by Federal Governments globally, and downturns in stock markets
around the world
 Housing markets in many economies were affected, resulting in evictions and
foreclosures
 It also resulted in failure of many Corporate and SME businesses, and
inadvertent persisting unemployment
 Individuals experienced decline or erosion of personal wealth that resulted in a
downturn in economic activity globally
This crisis occasioned the panicky and high frequency of regulatory reforms that has
occurred in the last 5 years

3. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Compounding Factors
 Layered Complexity
 Geometric balance sheet and income growth
 Stringent investment in Technology
 Limited knowledge of product complexities
 Exportation of sharp practices to other jurisdictions

4. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Badly Hit Organizations

5. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Outcome
 As a result, Governments responded by making regulatory changes that were
spontaneous and reactive to current market situations. Usually, stipulations made,
were thought to:
 Impact the business model and strategy of firms
 Increase Infrastructural requirements of organizations
 Require a long time frame for full appreciation of benefits
 Be complex for implementation in some cases
 The cost outlay required for regulatory compliance also increased

6. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Outcome (cont’d)
 The replacement by Financial institutions of prudence, conservatism and
common sense with complex statistical models, products and high risking
needed prompt redress
 Regulatory changes aimed at curbing this new habit by putting in place strict
regulatory guidelines even if policymakers also suffered dearth of skills to
address the challenges faced players in the industry
 Result:
Undulating high frequency of policy changes and reversals
creating an environment tagged by Accenture as one of
‘Permanent Volatility’

7. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
 Manage effectively the Probability of failure by preventing / reducing
failures in financial markets
 Ensure that the Severity of failure is minimized and controlled to avoid
firm – industry – systemic failures
Regulatory Objectives

8. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Loads of it . . .

9. Eneni Oduwole – June 2013
Trends of Regulatory Reforms reported by
KPMG in Feb. 2013
2010 2011 2012 2010 2011 2012 2010 2011 2012
1 Capital Index
2 Liquidity
3 SystemicRisk
4 Supervision PressureRating
5 Governance HighPressure
6 Renumeration ConsiderablePressure
7 CustomerTreatment AdequatePressure
8 TradedMarkets MinimalPressure
9 AccountingDisclosure LowPressure
10 FinancialCrime&Tax
THEPRESSUREOFREGULATORYREFORMS:2010-2012
ReformS/N
EMEA-Europe/MiddleEast/Africa
EMEA USA ASIA-PACIFIC

10. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Challenges for Industry Players
• Confusion about business strategy to adopt
• Uncertainty of regulatory direction in the short, medium and long term
• Hike in cost of regulatory compliance
• Increased need for data completeness and integrity
• Scarcity of skills
• Increased investment in infrastructure
• Reduced revenue

11. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Solution
To ensure that there was no threat to the continued existence and viability of the
financial services industry, firms decided on having effectively run internal
structures that regulate risk taking and due diligence by entrenching the discipline
of:
RISK MANAGEMENT
Organizations metamorphosed from a value preserving/defensive outlook to
Risk Management to a value creating/progressive outlook that made proper
RISK MANAGEMENT integral to the decision making process

12. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Evolution of Risk Management
From a quantitative function saddled
with the
‘measurement of risk’
A proactive role that identifies, assesses,
controls, monitors and reports likely risk
exposures even at the behest of the
business and regulatory environment

13. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Risk Management Process
Key Internal Drivers:
 Leadership owned and
monitored
 Owned and implemented by All
 Knowledge/fact based
 Futuristic in outlook
 Proactive enablement for
decision making processed
 Eased data generation
 Data integrity and completeness
 Skilled workforce
 Value creation based

14. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Key External Drivers
 Strength and Quality of
Regulatory Supervision
 Frequency of changes to
Guidelines
 Competence of Policy Makers
 Global trends
 Access to information
Risk Management Process (cont’d)

15. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Risk Culture Trends
Source: www.ey.com

16. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Global Pulse of Risk Management
“The focus on risk regulation is now top of the list of
risk management issues, a tsunami of regulations is
washing over these firms at the moment”
Laurence Wormald, Head of Research, SunGard
Article - Risk Managers fear impact of regulation
Financial Times, April 07 ,2013

17. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
The Future of Risk Management
Create + Protect + Sustain Stakeholder Value
 Continuously assess strategy and business models in alignment with the long
term goals of the organization, for likely exposure to financial, reputational
or regulatory risk
 Manage risk holistically
 Institutionalize good governance, structures, processes, controls, and
standards
 Develop and deploy tools for effective risk management
 Invest in ICT
 Continuously evaluate risk taking against the risk appetite of the
organization
 Develop simple processes and products
 Conduct environmental scanning periodically to pre-empt regulatory
direction

18. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Challenges for Risk Management
vis-à-vis Regulatory Reforms
 Buy-in of Leadership
 Higher Capital requirements and liquidity buffers
 High rate of model/procedural obsolesce
 Exit from some profitable but non-core business
 Sale of assets/businesses to increase capital
 Compliance with varied cross-border regulatory guidelines
 Dearth of skilled labour in managing increased risk
 Optimal alignment of Risk-taking with the Risk Appetites of organizations
 Need for greater/higher business integrity
 Maintaining a holistic approach and commitment to risk management
 Sustaining an integrated approach to Compliance – Risk – Strategy
Management

19. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Way Forward
 Increased Investment and Capacity building in:
- Human Resources
- Systems and Tools for efficient data generation, processing and
reporting
- Industry/Market/Environmental scanning procedures
 Periodic Stress Testing that is also based macro-economic indices
 Clearly defined roles and responsibilities for Corporate Governance, and
Risk Appetite setting and Monitoring
 Effective Liquidity and Capital Management
 Increased collaboration by organizations to build capacity and set the tone
for regulatory guidance

20. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
The Outlook for Risk Management?
Great!
The future is in
our hands…

21. Eneni Oduwole – June 2013Eneni Oduwole – June 2013
Questions and Comments pls. . .

22. Contact Details
Eneni Oduwole
eneni.oduwole@gtbank.com
+234-8033045896