Don’t leave home without it, By Kingsley Moghalu

Risk management is a culture. It is a way of thinking, leading, and managing, which starts and descends from the top of the organization. It does not appear that the CBN anticipated and planned enough to avoid the risks involved in rolling out a policy of this magnitude so close to the four-year national election cycle… I hope we learn the necessary lessons, and start applying those lessons to our leadership. and the Nigerian government.

From my point of view, it’s really risk management to ensure that humans have the ability to go elsewhere in the event of a major disaster on earth. – Gwynne Shotwell

In the early 2000s, I saw the rise from a trend to a subject that is very important for the success of our lives as individuals, small businesses and mega-corporations, banks, and, yes, public sector governance. Risk management. It has been around for centuries, reflected in Chinese symbols that represent the concept of risk and reward as two sides of one phenomenon. But apart from traditional professions such as agriculture, insurance, banking, medicine and engineering, risk management was not, before the 1990s and 2000s, fully appreciated because it has wider applications.

After taking a PhD at the London School of Economics as a part-time student, while working as a senior executive in the UN system and The Global Fund in Geneva in the mid-2000s, I registered and obtained the International Certificate in Risk Management. at the British Institute of Risk Management in London after nine months. I invested in this training because I consider risk management to be a critical skill. Not long after, I resigned from the UN system, set up and ran Sogato Strategies SA (Societe Anonyme), a global risk management and strategy consulting firm in Geneva. This background played an important role when I was headhunted to the Central Bank of Nigeria in late 2009.

We live in a world and live with risks – from the mundane such as jumping up and down the stairs to the “fat tail” risks like the COVID-19 pandemic or the global financial crisis of the past decade. Managing, then – trying to predict dangers or factors that lie ahead and may affect us, and deliberately preparing to overcome or “manage” those factors – is essential to success and progress. We cannot create and increase wealth, whether a nation or an individual seeking legitimate wealth, without it. When governments and states ignore the scale of national or local governance, the result is governance and institutional failure that hinders the robust achievement of mandates. Poverty, high levels of crime and corruption. The road to hell is often paved with good intentions, “President X, Governor X or CEO X means well” will be an excuse that does not affect a single fact of sub-par national, economic or institutional performance.

The reason why the Independent National Electoral Commission (INEC) has often had problems in managing national elections in the past is because it did not apply a muscular risk management and project management approach to what everyone knows is a difficult and complex exercise. In the same vein, as Nigerians are facing many difficulties with the implementation of the Naira Redesign project of the Central Bank of Nigeria, my mind cannot help but fly back to the concept of risk and management. It means that applied to the management of very large projects, I think it can make a difference in the results.

Once the organization has clearly identified the risks it faces in its line of business, the first task is to determine the risk or level of risk it can accept and bear. This is called “risk appetite” in risk professional terms. Enterprise risk management is a general framework that teaches how to manage risk.

So taking risks does not produce much progress in life, or optimal value for business or investors. On the other hand, we must not be reckless, take risks for the sake or sensation of risk itself. Risks should only be assessed and managed proactively. If I want to invest in the stock market, I need to know that I can lose my investment if the company, the stock of which I buy, does not perform well. So, I have to manage that risk with a diversified investment portfolio.

There are several types of risk – operational risk, strategic risk, legal risk, reputational risk, political risk, regulatory risk, etc. what risk or level of risk is acceptable and bearable. This is called “risk appetite” in risk professional terms. Enterprise risk management is a general framework that teaches how to manage risk. Here, there are four main approaches to risk, called the “Four Ts”:

1. Remove (eliminate / prevent) risk;

2. Treat (reduce/reduce);

3. Transfer (insurance – other people bear the cost);

4. Tolerate (accept) risk.

Reputational risk, political risk and operational risk are all red flags for the implementation of the Naira Redesign project in terms of timing and, more importantly, implementation (as I said, the CBN has the right to redesign the currency if it deems it so. the move is necessary, but the deadline 90 days seemed unrealistic and some of us said).

Reputational risk, political risk and operational risk are all red flags for the implementation of the Naira Redesign project in terms of timing and, more importantly, implementation (as I said, the CBN has the right to redesign the currency if it deems it so. the move is necessary, but the deadline 90 days seemed unrealistic and some of us said).

Risk management is an integral element of modern and strategic governance. As I argue in my book Build, Innovate and Grow (BIG), we must make it an integral part of governance and government, for Nigerian politicians all risk and no management. Muhammadu Sanusi II established a risk management approach and structure at the CBN early in his tenure as the apex bank governor. I, for my part, am concerned about systemic risk management for the financial system as the deputy governor in charge of Financial System Stability. Active risk management has played an important role in our success with various reforms that stabilized the system after the 2008 global financial crisis.

Risk management is a culture. It is a way of thinking, leading, and managing, which starts and descends from the top of the organization. It does not appear that the CBN has adequately anticipated and planned to avoid the risks involved in rolling out such a massive policy so close to the four-year national election cycle. These risks, of course, include the possibility of sabotage by some commercial banks and arbitrage trading of our national currency in Nigeria, all caused by scarcity. As the apex bank and all of us as a nation scramble with the current difficulties, I hope we learn the lessons we need, and start applying those lessons to the leadership and governance of Nigeria.

Kingsley Moghalu, former Deputy Governor of the Central Bank of Nigeria, is the CEO of Sogato Strategies LLC, a risk and investment advisory firm, and a Senior Fellow at the Council of Emerging Markets Companies at the Fletcher School at Tufts University, USA.