Nolwazi Nzama | A new dawn in risk governance

Effective risk management has become a cornerstone for financial institutions in their pursuit of sustainable growth. Success is no longer a mere box to check off in the executive suite; it is a strategic priority; a compass that navigates companies through an ocean of uncertainty.

A critical aspect of risk governance that can often go unrecognised is the role of leadership. Leadership has a significant impact on a company's risk culture. African Bank has learnt that it is not enough for leaders to merely understand and articulate risk priorities. Leaders must foster a culture where every individual, at every level of the organisation, is conscious of risk, understands their role in managing it, and is empowered to act. This requires leaders to lead by example, embedding risk awareness in all decision-making processes – from strategic planning to daily operations.

One of the key components of risk governance is compliance. Compliance does not just mean abiding by the laws, rules, and standards that govern the industry. It also involves adopting best practices to manage risk effectively. In the context of African Bank, compliance is a critical part of our Excelerate25 strategy to gain stakeholder trust. We continually focus on building strong internal compliance structures and adopt initiative-taking measures to identify and mitigate risks. This strategic decision enables us to transform our compliance function from a risk mitigator to a value creator, turning regulatory compliance into a competitive advantage.

Regulatory risks are no longer confined to the boundaries of a country. In an interconnected global banking landscape, they cross borders, adding layers of complexity.

African Bank recognises this reality and invests in developing an enterprise-wide approach to manage regulatory risks. This approach involves staying abreast of regulatory changes, understanding the impact thereof on the business, and aligning our Excelerate25 strategy accordingly. The bank also makes use of technology to keep pace with the rapidly changing regulatory environment. Yet, risk governance is not just about navigating challenges. African Bank has shown that it can also be a catalyst for innovation. Since 2016 the bank has adopted a risk-based approach to drive our innovation agenda. By understanding the risks associated with new products, services, or business models, we have been able to innovate while maintaining the trust of our stakeholders. This approach also allowed us to engage stakeholders in the innovation process, helping them to understand the associated risks and rewards.

These are the crucial risk lessons that we have learnt and continue to engage with. Digital transformation is no longer a trend – it is the reality of our times. Financial institutions need to proactively embrace digital technologies, not just to keep pace with the competition, but also to facilitate more effective and agile risk management. Innovations such as artificial intelligence, machine learning, and blockchain, offer valuable tools for tracking and mitigating risks in real-time.

African Bank's recent achievements, underscore the significance of strategic decisions backed by prudent risk management. The S&P's upward revision of the bank's outlook serves as a testament to the success of its Excelerate25 strategy. Launched in 2021, this strategy aims to create a scalable, diversified, and sustainable business, paving the way for a potential listing in 2025. The S&P's positive outlook is not just an affirmation of the bank's financial strength but also a recognition of its consistent growth and effective delivery over recent years.

The "new" African Bank, which emerged in 2016, has displayed resilience and the ability to rebuild. The bank's anticipated 2025 initial public offering not only symbolises its regained strength but also presents investors with an opportunity to buy into its promising future. The foundation of this success has been good risk management, visionary leadership, and an unwavering commitment to its core values.

In a digitally interconnected world, cybersecurity has become a critical area of risk. Institutions must prioritise robust cybersecurity measures, not only to protect their own operational integrity, but also to secure the trust of their customers. Regular cybersecurity audits, employee training, and investment in state-of-the-art security infrastructure, should be non-negotiable aspects of risk management.

Digital transformation extends beyond adopting modern technologies – it necessitates a cultural shift. Institutions must foster a risk-conscious culture where every individual understands their role in risk management. This means regular training and awareness programmes, as well as embedding risk considerations into decision-making processes at all levels of the organisation. Regulatory Technology (RegTech) can play a pivotal role in navigating the complex regulatory landscape of the digital era. By leveraging RegTech, institutions can automate compliance processes, stay up to date with regulatory changes, and proactively identify potential regulatory risks. Investing in RegTech should be seen as a strategic step towards efficient risk governance.

Lastly, financial institutions need to move from a reactive approach to a proactive stance on risk management. This involves the use of predictive analytics and real-time monitoring to identify and address potential risks before they escalate. In an era of rapid digital evolution, the ability to anticipate risks and take preventative measures can make all the difference in ensuring long-term success and stability.

*Nolwazi Nzama is Deputy Chief Risk Officer at African Bank.