Risk is an issue that many companies operating across the world need to manage. In particular, when running a business in Africa, unique challenges need to be carefully managed, attendees at the 2024 Finance Indaba heard.
Companies have become more aware of and resilient to risk following the global financial crisis of 2008/09, when banks in America had issued toxic loans that caused the collapse of several financial institutions, Preshanta Govender, CFO of Standard Bank South Africa told attendees at the 2024 Finance Indaba on 10 October 2024.
“Business leaders across industries are quite well versed on traditional risks,” she said.
Preshanta noted that credit risk is about half of all financial risk, with issues such as liquidity, capita, and the stock markets being prevalent across financial institutions throughout Africa. “The credit risk across Africa is huge, with banks failing across the continent,” she added.
The bank’s risk report shows that aspects such as environmental, social, and governance (ESG) issues, as well as cyber-attacks and fraud are key concerns in Africa. Preshanta said, because of this, Standard Bank has to continuously be vigilant.
She noted that, to address some of these issues, the bank has evolved its framework to continuously be up to date. At the same time, she says, the bank must ensure that it has the correct skills set to properly deal with the risks.
Polani Sokombela, CFO at the Auditor-General of South Africa (AGSA), added that it operates like any other auditing firm. “Our risk as an audit office mirrors those faced by other businesses, particularly in terms of the economy.”
Polani explained that the current economic environment means that the government entities it audits in South Africa are dealing with budget cuts, which results in financial distress as well as the inability to pay debt and adversely affecting being able to deliver services. Another aspect that a lack of money means is they can’t hire the right people.
The AGSA earns its revenue from the state organisations that it audits, Polani says.
Yusuf Bodiat, CFO African Risk Capacity, stated that the insurance company needs to be careful of what risk it takes on, because it needs to ensure it can fulfil its mandate. African Risk Capacity was established 10 years ago by the African Union to assist with climate-related disasters. “We’re an African insurer for Africa,” said Yusuf.
The insurer pays out within days, instead of the usual timeframe, helping people get back on their feet, he added. “The [weather] climate is changing. If you look on Google or turn on the TV, it’s at the top of the conversation. With our company, if you get one big threat, you wipe the company out.”
Preshanta noted that Standard Bank needs to assess risk before granting loans: “You have to do the right business the right way. We are here for our clients, but the risk has to be acceptable.”
Polani also said that the AGSA had to define its risk appetite. “On our side, we need to lead by example."
