Stockbroking Firms Move to Reduce Operational Risks

capital market
  • Stockbroking Firms Move to Reduce Operational Risks

Stockbroking firms under the auspices of the Association of Stockbroking Houses of Nigeria (ASHON) have underscored the importance of sound risk management culture among capital market operators in order to safeguard market integrity and investors’ confidence.

As part of its initiatives to promote risk management culture, ASHON has partnered a frontline management consulting firm, IRM Professionals, to address a range of inherent risk management issues, which impact on the operations of securities firms in Nigeria and proffered the way forward.

Managing Partner, IRM Professionals, Mrs Owodunni Yussuff, who spoke at the risk management forum for stockbroking firms, , explained that certain risks were peculiar to capital market operations and they should be managed in order to ensure business continuity.

Yussuff stated that the risks were usually classified into business risk and consequential risk, saying that business risks include credit risk and market risk while consequential risks comprise legal risk, liquidity risk, operational risk, settlement risk and reputational risk

She explained that apart from the technical risks, there are regulatory risks that are currently affecting capital market operators in Nigeria.

“As part of minimum operating standard (MOS), they are expected to have a risk management function, and a risk manager. But many of them are not well equipped in the area of risk management department for optimal performance. As of now, many of our operators have not established what we call risk culture. The principal risk associated with a broker, dealer or a capital market operator in Nigeria is compliance with the rules and regulations of the Securities and Exchange Commission (SEC), the Nigerian Stock Exchange and the Investment and Securities Acts (ISA). Capital market operators are obliged to comply with the regulatory rules and regulations in order to avert sanctions with its attendant implications on corporate reputation,” Yussuff said.

Chairman, Association of Stockbroking Houses of Nigeria (ASHON), Chief Patrick Ezeagu, said that the Association decided on the risk management training in view of inherent risks associated with capital market operation.

He assured that capacity building would always be on the front burner of ASHON’s activities in order to support global competitiveness of capital market operators in Nigeria..

“Effective and efficient risk management structure positions stockbroking houses to exist in perpetuity as going concern. Risk changes over time and, therefore, tools for 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,” Ezeagu said.

According to him, it is necessary to consistently train those who are involved in the day to day management of risk associated with stockbroking businesses because once the integrity of the market is assured by the fact that people operate within 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 the market,” Ezeagu said.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]; Tel: +2347065163489.

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