Dealers urged to guard against market risks

Post was last updated: October 20, 2018

By Taonga Sabola:

CHILUNGA—Risk management critical

The country’s financial market dealers have been urged to put in place proper strategies that would help hedge against various risks on the market.

FDH Financial Holdings Head of Risk and Compliance, Sammy Chilunga, was speaking when he made a presentation titled ‘Risk Management an Essential Ingredient to Sound Financial Market– International Best Practices and Emerging Issues’ during the 2018 Financial Market Dealers Association (Fimda) Annual Conference.

Chilunga said dealers should change the risk culture and look at risks as part of the business on an on-going basis.

He said, globally, markets have evolved, giving rise to a new financial landscape, increasing complexity, and integration.

Chilunga said the new financial landscape is defining a more competitive beauty contest among countries and markets with greater rewards for good policies and projects but also greater punishments for mistakes.

He said financial institutions use a number of techniques to achieve leverage, including the use of repurchase agreements (repos) and swaps, options, futures and other structured products.

“There is need for sophisticated risk management systems. Increased volatility, greater interdependence and new risks have also made the structure of the risk exposure of banks and other financial institutions more complex.

“The implementation of risk management systems requires the adoption of a proper risk accounting framework. This will require more sophisticated investment guidelines based on sound risk management standards that take into account the unique characteristics of pension funds and other institutional investors,” Chilunga said.

Chilunga said continued expansion of the breadth and depth of regulation, changing customer expectations, technology and analytics as a risk muscle are other structural issues that will change the financial market.

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