The Association of Stockbroking Houses of Nigeria in collaboration with a management consulting firm, IRM Professionals, has exposed capital market operators to a range of risk management challenges that impact their activities.
The Managing Partner and Chief Executive, IRM Professionals, Mrs. Owodunni Yussuff, explained at a forum with operators that certain risks were peculiar to capital market operations and they should be managed in order to ensure business continuity.
Yussuff said the risks were usually classified into business risk and consequential risk.
According to her, business risks include credit risk and market risk while consequential risks comprise legal risk, liquidity risk, operational risk, settlement risk and reputational risk.
She said apart from the technical risks, “there are regulatory risks that are currently affecting capital market operators in Nigeria.
“As part of minimum operating standard, they are expected to have a risk management function, and a risk manager. But many of them are not well equipped in the area of risk management department for optimal performance. As of now, many of our operators have not established what we call risk culture.”
According to Yussuff, the principal risk associated with a broker dealer or a capital market operator in Nigeria is compliance with the rules and regulations of the Securities and Exchange Commission, the Nigerian Stock Exchange, and the Investment and Securities Acts.
“Capital market operators are obliged to comply with the regulatory rules and regulations in order to avert sanctions with its attendant implications on corporate reputation,” she said.
ASHON’s Chairman, Patrick Ezeagu, said the association had no option but to expose operators to risk management training in view of inherent risks associated with the capital market operation.
Ezeagu said capacity building would always be on the front burner of ASHON’s activities in order to support global competitiveness of capital market operators in Nigeria.
He said “Effective and efficient risk management structure positions stockbroking houses to exist in perpetuity as going concern. Risk changes over time and, therefore, tools of identifying and managing risk must change over time, and the only way you can ensure that we are prepared to manage risks is to continually train and re-train risk managers within the capital market space.
“It is necessary to consistently train those who are involved in the day-to-day management of risk associated with our businesses. That was why we decided to organise the training workshop in risk management. We also looked through the other training programmes and they appear theoretical and do not cover some practical aspects of risk management.
“Once the integrity of the market is assured by the fact that people operate within rules and regulations guiding the market, then you can be sure that the market is well protected. The market is guided by rules and regulations and there is the apex institution that is like the ‘big brother’ watching you. These are the things that ensure that there is integrity and investors can trust the market and participate actively in the market,” Ezeagu added.
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