CAIRO: Global consensus is high that there needs to be a significant change made to the way the world economy operates. While markets will, forever, hit peaks and valleys, emphasis after an economic shock like the current one falls on how to bring stability and sustainable growth to economies.
To that end, a handful of experts in risk management, sustainable growth, and corporate excellence gathered for a panel called “New Age Banking in the Post-Crisis Era during the Euromoney Egypt Conference Tuesday.
Leading the panel discussion was Dalia Abdel Kader, head of marketing and communications for at Arab African International Bank (AAIB).
She argued at the outset that short-term booms in profit were a poor measure of success for a bank and that the economic crisis had advanced that line of thinking.
“New age banking is not only about making profit, it is about making long term sustainable profit, she said.
Key to that effort is successful risk management.
“Risk management is getting a boost at the moment, said Arthur Koops, head of risk management at AAIB.
Banks, Koops said, are making a real return to basics.
“Real assets backing up loans is back, he noted, heralding the return of collateral.
Koops is a risk management expert and he discussed how banks were backing off high leverage for the sake of protecting themselves against treacherous economic conditions.
He said another key to successful risk management is for banks to focus on their strengths.
He challenged a hypothetical bank, for example, to give up its small and medium enterprise business if the banks specialty lies elsewhere.
The cornerstone of successful banks going forward will be strong corporate governance, said Hala El Said, executive director of the Central Bank’s Egyptian Banking Institute.
“Good governance, she said, “is no longer an option. It’s a must.
It’s not just banks themselves that need to emphasize solid corporate governance, she said, but banks and client companies should evaluate the corporate structure of one another before doing business. It’s a thought that would make responsible corporate governance part of the fabric of deal making.
Board structure, board makeup, and responsible remuneration are among the keys to successful corporate governance.
A third important principle for banking post-crisis is doing business with socially and environmentally responsible companies, said James Gohary, senior operations manager for the International Finance Corporation (IFC).
Key to this, said Gohary, is understanding that doing business with socially and environmentally responsible companies isn’t just the right thing to do, it’s the most lucrative thing to do.
As the environmental movement gathers steam, environmentally friendly companies have become more popular. And, Gohary said, these “clean companies are less vulnerable to lawsuits and new environmental restrictions.
The banking puzzle is complex, and the outlook by the panel’s three experts represents a predictably cautious post-crisis mentality, but, they argue, their recommendations will do a lot to soften the blows of recessions to come.