Regional experts from the global financial risk management industry have cited that the first response to the crisis should be ‘back to basics’. At the Dubai chapter meeting titled ‘Recent Lessons in Risk Management’, the discussion ranged from why, what, and how of the current crisis to ways, methods and response to it.
The forum was organised by the Global Association for Risk Professionals (GARP) and FRSGlobal, a risk and regulatory compliance solutions firm. The chapter meeting was attended by over 50 financial and technological risk experts from United Arab Emirates (UAE) and moderated by Horst Simon and Dr. Sunil Kumar, both co-regional directors for GARP Dubai.
Feroz Noorani, Al Hilal Bank, who has several years of risk management experience in the Middle East, cited an overheated real estate market, excessive speculative stock market, liquidity mismatch, and lack of alternative asset class as the main reasons for the huge impact of the crisis in the region. “Decoupling is a myth, the reality is systemic risk,” said Noorani in response to a question regarding the shielding of the local market.
Roy Barnes from FRSGlobal said that partial insolvency and delayed insolvency provides a false sense of security to the institutions thus making them more vulnerable. “Risk silos are history,” he said, emphasising the importance of integrated risk management as the way forward for the banks. Barnes suggested that funding diversification, overarching systems and control, and correctly pricing liquidity risk are some ways to manage the crisis at institution level.
Tanveer Bhatti, chief risk officer (CRO) private banking, Emirates NBD, pointed out that risk transparency in transactions with clients is of paramount importance. “Understanding the risks and pricing of structured products is key to effective risk management,” said Tanveer, adding that “it is vital that risk managers regularly ask questions and be intellectually honest if they do not understand something – otherwise the board will not get value for money.”
He also said: “The recent market crisis put valuation higher up the agenda and underscored the importance of strong communication between Risk and Finance functions.” Bhatti has experience in market and counterparty risk management in London and New York, and is also a chartered accountant (CA).
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