Risky business AS BANKS become subject to more financial pressures, they may be tempted to cut corners in order to avoid transparency and disclosure. In reality, "a good banking management will do the opposite. It is important to stay true to sound corporate governance principles in times of crisis," said Michael Higgins, senior banking specialist of financial markets at the International Finance Corporation (IFC) during a seminar titled "Managing Bank Risk in a Changing Environment", recently hosted by the IFC in cooperation with the Egyptian Banking Institute (EBI). The IFC, a member of the World Bank Group, is working closely with banks across the Middle East and North Africa region to assist in structuring robust risk management systems, while helping train key banking staff on the subject. A greater focus has been placed on risk management since the current financial crisis unfolded. The aim of the meeting was to bring together regional and local bank executives from Egypt and the region to share experiences about risk management in a turbulent and rapidly-changing financial environment. "The current financial crisis and credit crunch have been blamed on poor risk management practices. Action is needed to win bank investors' trust and more effective management strategies and governance are essential to improve the financial services business performance," said Hala El-Said, executive director of EBI, a non-profit institute with an extensive network of 42 public and private sector bank members. EBI has operated under the sponsorship of the Central Bank of Egypt (CBE) since 1991. Although regional financial corporations have grown dramatically during the past 10 years, risk management departments have not kept up with the pace of the growth in business. "There is still need for further improvement in this respect. For example, most of the risk management departments in the region are sub-scale compared to Western banks while many of the key risks, including overall portfolio to capital are not addressed seriously or effectively," said Evren Ucok from Oliver Wyman Financial Services. According to Jean Pierre Lacombe, head of financial engineering at IFC, no expert can tell when the current crisis will ease. "Banks will continue to have sporadic crises. Some degree of stabilisation due to package solutions by the government may provide some relief. Recovery, however, is not imminent," said Lacombe. Funding hope THE UNITED Nations Industrial Development Organisation (UNIDO) recently established an equity fund to provide financial support for a number of innovative agro-business solutions presented by many countries during the organisation's last conference held in Cairo in November. Geared towards reducing the impact of the food crisis, previously described by UNIDO as complicated and severe particularly in developing countries, the equity fund is meant to help create long-term and sustainable improvement in the quality of life and to reduce poverty in these countries. In Egypt, UNIDO and Delta Rasmala, a leading Egyptian asset management firm, are joining forces to address the disadvantaged regions in Upper Egypt as well as other areas in the country. These efforts are in line with the Egyptian government's plans to help prevent future food crises. During the Cairo conference, UNIDO helped provide additional know-how for a number of Egyptian projects in the farming industry that will ultimately add tangible improvement on the quality and quantity of agricultural produce of these projects. According to Nermine El-Tahri, chairman and partner of Delta Holding for Financial Investments, the establishment of the food and agro-business equity fund will serve to raise the domestic enterprise capacities of local firms. "Moreover, the fund will assist in establishing new enterprises to produce a broader range of products, thus adding value to Egypt's agricultural wealth," she said. UNIDO assumes the role of defining the projects suitable for the fund. It will also provide feasibility studies and business plans. Back to basics A 150 MEMBER-strong Turkish businessmen's delegation recently met some 200 of their Egyptian counterparts in Cairo during an Egyptian-Turkish bilateral trade and investment forum. Attended by Turkey's Minister of Trade Kèrad Tèzmen and Egyptian Minister of Trade and Industry Rachid Mohamed Rachid, the forum was a matchmaking opportunity for businessmen from both sides. "The current economic crisis means that both Egypt and Turkey have to increase their economic and trade cooperation in order to strengthen their economies," Tèzmen told forum participants. The cooperation of both countries was also seen as a means of facing up to the global financial crisis. "We need to coordinate our efforts with our close trade and investment partners in order to jointly reduce the impact of the crisis," Rachid stressed. A free trade area agreement signed in 2005 but enforced in 2007 binds Egypt and Turkey. This has led to an increase in bilateral trade from $954 million in 2005 to $1.58 billion in 2007. And end of October 2008 figures show bilateral trade reaching $2.03 billion. More is needed to push these figures up further. Rachid pointed out the "need to concentrate on transportation facilitation," he said, by increasing the number of flights and marine lines between Egypt and Turkey. Rachid added that "one of the keys to growing trade and investment over the next period will be through the facilitation of the moving of persons and goods between the two countries." During the forum, the Cairo Chamber of Commerce and the Turkish MUSIAD signed an agreement to hold an international business forum in Cairo in October 2009. Turkish investments in Egypt amounting to around LE743 million are in the textile, foodstuff, services, chemicals, pharmaceutical, mining, tourism and consulting sectors. Meanwhile, Egyptian investments in Turkey currently come to $5 million and are mainly in the services sector.
