Viewpoints | Apr 20,2019
Jun 25 , 2022
By Asseged G. Medhin
Regardless of the outcome to any nation, they cannot be thinking of risk and finance the same way following the global financial crisis. Directly or indirectly, all countries have been affected. Ever since the global financial crisis, companies worldwide have changed their focus on risk management. This process has been accelerated by COVID-19, war and geopolitical events. Today, what was once a concern primarily of senior executives in the financial services sector has now become a top-management priority in nearly every industry.
Financial leaders, governors and CEOs are devoting much of their time and resources to financial management. Their focus is on the risk-managing function of the formal financial system that reallocates resources from savers to investors; monitors corporate control; facilitates trading, hedging, and diversifying; and balances financial development against stability.
Regulators' and policymakers' priorities are also changing. Financial risk is becoming a new phenomenon that the dynamics continue to evolve. No one expert can teach us how to control financial risks using past models as they have been challenged globally and a new approach is needed to improve the financial infrastructure to heighten confidence in financial institutions.
To build a data collection framework for better monitoring, and devise financial tools suited to help role makers address risk, management knowledge is crucial, without which no institute can absorb the type of shocks we are observing now. In our case, all macro and micro variables aggravate financial institutions’ liquidity risk. It has become challenging to mitigate inflation and the impact of risk associated with it.
Unless effectively regulated and controlled using the models, financial shocks will not only affect the institution but also transform the risk from one organisation into a systemic risk. We also need to assess existing polices, overall risk and challenges to adopt new policies that will foster financial stability through macro policy, select the right indicators of systemic risk, focus on crisis preparedness, and reduce regulatory uncertainty.
There should be a conscious approach and a wide-ranging package of financial risk management. Prudent financial inclusion, for instance, can enhance financial stability, but stability can be endangered when inclusion is uncontrolled. In our case, regulation is there but challenges and financial infrastructural problems are detrimental, a problem that will continue to persist until the latter meets the former.
Financial risk management is essential in today’s volatile economy. There must be readiness to mitigate challenges in the financial system, the market, liquidity, operational and legal risks. The same goes for stress testing whether the system is permeable to poor execution, flaws and monitoring. To do as such, there should be an extensive knowledge and global understanding of rampant financial risks, to which we are not an exception.
Regulators, policymakers and experts in the area should pursue a highly technical approach to financial risk management, especially for a financial sector which involves complex financial models. Sooner or later, Ethiopia will open its financial sector to foreign investors. Local bankers and insurers will be significantly challenged by the most extraordinary financial risk models augmented with advanced bank products and insurance policies. To compete and remain ahead, they need to troubleshoot existing problems and organisational culture.
We need a new approach. We should stop thinking of financial risk management as primarily a regulatory issue and re-conceive financial risk management as a value-creating activity that is an essential component of the strategic debate inside a company. The goal of that discussion should not be to eliminate financial risk but to use it to create a competitive advantage. Doing that effectively depends upon a far more dynamic interaction between and among all stakeholders of financial risk management experts and the financial institutions across the country.
PUBLISHED ON Jun 25,2022 [ VOL 23 , NO 1156]
Viewpoints | Apr 20,2019
Fortune News | Nov 25,2023
Year In Review | Sep 10,2021
Fortune News | Jun 03,2023
Commentaries | Apr 06,2019
Commentaries | Jan 05,2019
Fortune News | Jul 27,2019
Advertorials | May 29,2023
Viewpoints | Apr 30,2021
Photo Gallery | 83061 Views | May 06,2019
Photo Gallery | 75218 Views | Apr 26,2019
Fineline | 58730 Views | Oct 03,2020
Fortune News | 58495 Views | Jul 18,2020
Commentaries | Dec 02,2023
Life Matters |
My Opinion | Dec 02,2023
Sunday with Eden | Dec 02,2023
Agenda | Dec 02,2023
Editorial | Dec 02,2023
Dec 24 , 2022
Biniam Mikru heads the department of cabinet affairs under Mayor Adanech Abiebie. But...
Jul 2 , 2022 . By RUTH TAYE
On a rainy afternoon last week, a coffee processing facility in the capital's Akaki-Qality District was abuzz with activ...
Nov 27 , 2021
Against my will, I have witnessed the most terrible defeat of reason and the most sa...
Nov 13 , 2021
Plans and reality do not always gel. They rarely do in a fast-moving world. Every act...
Leaders of the National Election Board are in a charm offensive mood, of a sort. Last week, they organised a rare tour for members of the me...
When the country's most senior diplomats and envoys return back to their posts after two-week debriefings, they leave behind a point or two...
Dec 2 , 2023
The symphony of traffic noise in Addis Abeba is not just a sign of life, but a siren...
Nov 25 , 2023
Ethiopia's quest to develop a functioning capital market is a demanding yet not unach...
Nov 18 , 2023
Prime Minister Abiy Ahmed (PhD) has made a fervent call for landlocked Ethiopia to ga...
Nov 11 , 2023
In November last year, a ray of hope pierced the gloomy skies of Ethiopia as the Pret...
I have a love-hate relationship with my phone. It is my go to source for information. I enjoy interacting with text messages and browsing t...
Over the weekend, I attended a wedding where my husband was one of the protocols. Despite the typical joy...
Dec 2 , 2023 . By MUNIR SHEMSU
Mamo Mihretu, the governor of the National Bank of Ethiopia (NBE), has outlined a com...
Dec 2 , 2023 . By AKSAH ITALO
BGI Ethiopia, one of the largest brewing companies, is in the throes of a major trans...
Minister of Agriculture, Girma Amentie (PhD), is leading a charge to overhaul the fer...
Dec 2 , 2023 . By AKSAH ITALO
Amidst accession to a cross-regional trade, one of the oldest industries is strugglin...
Or see contact page