The Chairman, Association of Stockbroking Houses of Nigeria, Chief Patrick Ezeagu, says the fast-changing business environment calls for serious training of players in the Nigerian capital market, in view of the rising risk levels, in an interview with journalists. STANLEY OPARA was there
It is said that risk changes with time. Do yo think this also works in the Nigerian capital market space?
Certainly it does apply to all businesses and the Nigerian capital market isn’t exempted. For instance, effective and efficient risk management structure positions stockbroking houses to exist in perpetuity as a 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.
For me, it is very germane and necessary to consistently train those who are involved in the day-to-day management of the risk associated with our businesses. That was why we decided to organise a training workshop on risk management. We also looked through the other training programmes and they appear theoretical and they do not cover some practical aspects of risk management.
We, therefore, decided to bring in people who have skills and competencies in risk management to conduct this particular training for operators within the capital market in Nigeria.
You said ASHON had made a move to boost the risk management skills of stockbrokers. How were you able to do this?
Recently, ASHON collaborated with a frontline management consulting firm, IRM, to hold a two-day extensive training on risk management to expose the participants to risk management issues that impact the operations of securities firms.
There are remote and immediate factors that informed the intensive training programme. Overall, we felt that capital market operators should be proactive in order to keep abreast of the ever-changing environment of risk management in every organisation. The association in its own wisdom looked at the deficiencies in the human capital capacities of operators within the industry and found out that with the kind of economy that we are operating, risks are inherent in the business we do.
There are risks that are evident, arising from the way and manner government policies impact on the market as well as the global vicissitude that had sent out some shock waves within the industry. Therefore, we cannot continue to fold our arms while also pretending that these are not ominous for our business survival.
In your view, what are the developments you consider as risk management issues militating against players in the country’s stockbroking space?
For me, it is a function of how you identify them. There is financial risk, capital adequacy risk, operational risk, control risk, technology risk and human capital management risk, among others. There are different levels of risks in whatever we do. This explains the overriding importance of risk management for our businesses, and the capital market is a cardinal point in this respect.
Is the training programme is also an extension of capacity building initiative of ASHON?
No doubt, there is the need to ensure that we develop our own local capacities to be able to evaluate risk and then provide mitigants that will ensure that risks are reduced to the bearest minimum.
By doing that, we can ensure that our businesses operate within some checks and balances and risk is managed at all times. We must therefore ascertain and evolve mitigants to be applied promptly in a sustainable manner to manage risks. This is a stitch in time that will save messier situations.
Was ASHON satisfied with the outcome of the training considering the diverse feedbacks?
Feedbacks are already trickling in after the training we had with some stakeholders. From the feedback I am getting, the attendees were very satisfied with the contents offered them. The comments are impressive. We are convinced that the participants got value for their money. This is apparent from the post-training assessment conducted on the participants, including some chief executive officers of stockbroking firms who participated.
In the bid to ensuring compliance with the modern risk management approaches, what will be your advice to stockbroking firms and their promoters?
Given the realities of our time, it is very important for a stockbroking firm to comply with modern risk management strategy, and this is top on the list. It starts with capital adequacy, having the right organisational structure on ground, having the right management team, bringing on board the requisite experience to run the firm.
After which, the firm must meet the minimum operating standard stipulated by the regulatory authorities. With these on ground you cannot get it wrong because the rules are there, the markets are there, the capacities in terms of men and materials that you are going to use are there. And then, over time, you will be able to learn and key into the way and manner the business is administered.
In all these, how do we protect the investments of Nigerians in the market considering the risk levels?
The truth is that when you have knowledgeable people managing the capital market environment, that is in itself, a huge protection. It means that the professionals will not lead you astray except those that are fraudulent. The fact is that we have what is called Trade Guaranty Fund. We also have Investment Protection Fund. The fund in itself is not the issue, it is the integrity of the market participants that is more important
Once the integrity of the market is guaranteed by the fact that people operate within the 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 it.
To complement these, there are avenues for the ventilation of grievances between parties in the market. This is because in a situation where you have two parties that interact, sometimes there will be conflict. Therefore, we have a very robust conflicts management framework which has been designed and flows from firms to the Securities and Exchange Commission (the Nigerian capital market apex regulator) and even to the Investment and Securities Tribunal.
Clearly, if people are assured that they can come into the market and exit whenever they like in an orderly manner, they develop confidence and patronise the market. This is a global sentiment that has prevailed over time.
In addressing risk management issues among capital market operators in Nigeria, what do you think are the clear roles of market regulators like SEC and the Nigerian Stock Exchange?
Clearly, SEC is the chief regulator of the capital market and it plays the role of a supervisor alongside that of the development of the capital market. SEC has rules and regulations that guide and also mitigate against some of these risks. But people must understand the rules and regulations and then be able to apply the rules and regulations governing the market appropriately,
Our role as ASHON is to train our members to ensure that at least they will be able to work within that purview of what SEC expects of them in order to have a very healthy capital market. The same thing applies to the Nigerian Stock Exchange. The Exchange is a self-regulatory body that provides the platform on which trading takes place.
The NSE also has its rules and regulations that help to guide operators in the stock market. That in itself partially mitigates risk. However, when the people who function within the back office and those who are involved in daily activities are trained to understand what risks are, the issue of risk management becomes easier to handle and the market in turns becomes safer for all.
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