Maravi

Kumwenda urges efficient auditing, risk management

COMMENT - Actually it was deregulation and the cumulative effects of neoliberal econmics since 1980 (deregulation, privatisation and markets open for corporate free trade).

Kumwenda urges efficient auditing, risk management
By Mutale Kapekele
Tue 23 Mar. 2010, 04:00 CAT

FINANCE Bank Zambia board chairman for audit and risk committees White Kumwenda has said auditors and risk managers should carry out their work efficiently to avoid corporate failures.

Addressing the first ever risk-based in-house training seminar for Finance Bank employees, Kumwenda said laxity in risk management led to the global financial crisis and bankers should work hard to prevent events that led to the crisis from recurring.

“My call to you is let us do our job! As you are aware Enron, WorldCom, Societe Generale and Barings Bank, to name but a few represent massive corporate failures resulting in untold damage to employees, investors, creditors and economies, but who was to blame?” Kumwenda asked.

“For sure, no one can claim to be doing their job and be ignorant of fraud or more precisely risk in the same line. Therefore, let us do our job. Consequences of laxity in risk management cannot be explained more than the recent financial crisis resulting in collapse of Bear Stearns, Indy Mac Bank and Lehman Brothers in the USA.

While state intervention for Northern Rock, Fannie Mae, and Freddie Mac and Citi Group just emphasises the cost of ineffective regulation and lack of capacity to understand risk being undertaken by the bank itself.”

He urged risk managers to learn from events preceding the global financial crisis and not to be scared to handle challenges.

Kumwenda said ever since the Bank of Zambia introduced risk-based supervision approach, its full implementation was hampered by lack of training.

He said risk based audit entailed change of culture for the bank to effectively manage risk.

“In order to yield and realise full benefits of the risk based audit approach the role of the board has been clarified and expectations heightened to an extent that the board cannot be a peripheral figure of the bank anymore,” he said. “Through the Bank of Zambia risk management guidelines, there is a call for active board oversight in policy and strategy formulation, review and ensuring that management executes its responsibility or is held accountable.”

Kumwenda said the governance structure should not impede proper risk management and reporting.

“Where this may be the case in the bank, it should be addressed as a matter of urgency and priority,” he said. “All risks affecting the bank should be addressed by policy, not just major and traditional financial risks so that no single risk is overlooked. In the modern world transferability of risk across jurisdictions and the interrelationship between risks is very high.”

He said there was need to re-look at the risk culture at Finance bank.

“So many good things are said about the risk audit approach. It will allow the bank to demonstrate that you can assume more risk as long as it is managed to the satisfaction of the bank itself as determined by the board and its policies,” said Kumwenda.

“Of course, other eyes like risk management and regulators as interested groups will have an independent opinion on the activities and quality of risk management.”

Labels: AUDITING, WHITE KUMWENDA

posted by MrK @ 2:35 PM