Risk Management & Governance

Challenge

• The financial collapses and scandals of the 1980s and 1990s had resulted in draconian legislation in the US that had significant implications over financial reporting
• The rules and regulations applied globally and did not take account of the scale or local practices of overseas jurisdictions
• Local management processes and procedures were not standardised across the Group
• here was a very tight deadline in which the Group had to report and be in compliance as the consequences of non-compliance would be significant on reputation and share price

Approach

• The Group appointed the global auditors to conduct a SOX audit of all overseas locations.
• This resulted in hundreds of exceptions being identified including 13 exceptions on a 2-man payroll in one jurisdiction.
• I worked with the Managing Directors and Finance Directors to address all of the exceptions raised through a mix of:

• Agreeing with auditors that the exceptions were not material and consequently not reported as exceptions
• Identifying that alternative controls were in place to negate the exception
• Amending processes and procedures to address and remove the exception

Outcome

• All exceptions were formally addressed and all audit reports following the implementation had no reportable exceptions

Challenge

• The group had very limited resources and expertise with an understanding of costs and practices of all of the global markets where the Group provided execution services
• As the markets became competitive there was greater pressure on pricing and many requests for non-standard pricing
• The management with the necessary expertise were constantly travelling and rarely in the same place
• The sales team needed prompt responses when they were pitching for new business
• There were a growing number of loss-making trades

Approach

• A deal calculator was established that enabled the sales team to indicate the profitability of the terms that the client was looking for
• Training was provided to the sales team as to the various costs that would be incurred driven by where the client was proposing to do business
• The calculator and terms of the deal were built into the proprietary settlement and trading platform
• Automated e-mail alerts were sent to the members of the credit committee who were authorised to approve deals.
• Platform required the sign off by 2 members of the committee
• Salesman was advised of when a deal was approved, more information requested or rejected by email

Outcome

• Deal and Client approval could be achieved in under 24 hours compared where they had been historically approved in monthly meetings
• Approvers could easily assess the profitability of potential deals and where necessary approve additional conditions
• Temporary approval was implemented to ensure that marginal deals were reviewed after 3 months
• There was a reduction in loss-making transactions

Challenge

• Regulators were putting increased focus on the risk management of regulated financial services companies
• Audit Committees of Listed entities were becoming increasingly concerned by the risks of overseas and remote businesses
• Most risk management was instinctive and borne by the local management teams on an informal basis relying on management knowledge of local conditions and practices

Approach

• We set up an international risk committee with members of the larger jurisdictions within the group ensuring coverage of key functions including sales, marketing & HR.
• Ownership of smaller jurisdictions was assigned to different members of the committee
• A full risk evaluation matrix was carried out of all functions using a broad questionnaire developed by external consultants at the Group level with appropriate localisation
• Risks were assessed in terms of low medium and high in terms of likelihood of occurrence and low medium and high in terms of impact
• An international internal audit team was established reporting to Group

Outcome

• The exercise produced a number of areas of high impact and all were reviewed for either:

• Amendments to current procedures or practices to reduce the risk to an acceptable level
• Detailing alternative controls or steps that were already in place that significantly mitigated the risk

• There were no events or reviews by audits or regulators that highlighted and shortcomings on the management of international risk
• The Risk matrix was reviewed on a regular basis by both the risk committee and as part of the routine internal audit reviews