- A breakfast meeting will be organized by the Mauritius Institute of Directors in early March, which will focus on Directors Duties and the importance of Corporate Governance in Banks and Financial Institutions, being one of the most important discussions reinforced especially after the crises period. What are your views?
The COVID-19 crisis has highlighted the crucial importance of strong corporate governance. A robust corporate governance framework focuses on implementing appropriate checks and balances between the key interest groups within a corporation to ensure its long-term success. These interest groups include a wide range of stakeholders such as shareholders, directors, managers, regulators and auditors. The crisis has placed unprecedented strain on the relationship between these interest groups. Decisions needed to be made quickly and often against a background of limited or imperfect information.
In general, the corporate governance framework of the banks and financial intuitions in Mauritius held up well during the crisis and this is backed up by the fact that, through the eye of the storm, critical customer services were protected and maintained. The key success factors were:
- Strong lines of communication between management teams and boards;
- Excellent support of regulators with unprecedented levels of access and discussion;
- Effective recovery plans; and
- Robust communication strategies to reach out to other impacted stakeholders (such as staff and customers).
Without a strong governance framework, it could have been a very different story for the banking and financial institutions sector. The sector, however, should not rest on its laurels and banks and financial intuitions should continue to work hard to fine-tune their governance framework based on the lessons learned during the crisis. Consequently, the Mauritius Institute of Directors organised this breakfast meeting and panel discussion with key stakeholders to share their experiences and opinions, focusing on Directors Duties and the significance of Corporate Governance in Banks and Financial Institutions.
2. It is difficult not stating the COVID-19 crisis that has wedged on the banking sector. Despite a recovery in the performance of banks, how did the outbreak impact the good governance of banks and Financial Institutions?
As a result of being regulated entities, banks generally have good governance structures in place to ensure that risks are properly managed for the ongoing well-being of the business. The COVID-19 pandemic really tested banks on their governance processes and structures.
Key areas of focus during the crisis were staff safety, emergency client support programmes, credit risk, liquidity and capital. Sound governance structures allowed the banks to address the crisis and weather the storm. In view of the central importance of the banking sector to the economy in Mauritius, this was a very important test to pass.
3.What can be improved in banks and Financial Institutions in Mauritius pertaining to Corporate Governance?
While, in general, the corporate governance processes and structures of banks and financial institutions held up well during the crisis, there is always scope for improvement. Some areas for consideration include:
- Fine-tuning of recovery plans;
- More regular testing of recovery plans;
- Improved communication channels using new media options;
- Further investment in cyber threat mitigation; and
- New working from home protocols;
- Staff and director training.
Being an agent of change, the Mauritius Institute of Directors will continue encouraging the highest business practices to directors and aspiring directors. Crucial to fostering high-performing boards, the MIoD also provides personalised in-house training and independent board evaluation services which clarify common objectives and ensures a cohesive team moving forward.
4.Corporate Governance in financial institutions is the set of standards and principles used to create a system of checks and balances over the management of banks and financial intermediaries. What has changed over the past years for Board members and what can be improved?
Over the past years, governance processes and structures within the banking and financial institutions sector have undergone considerable change. The key change has been a recognition of the need to move away from a shareholder-centric governance model to one that is more broadly based across a wider range of stakeholders including not only the more traditional shareholders, directors, managers and regulators but also customers, suppliers and the community at large.
It is this recognition of the sector’s wider community responsibility that has had a major impact on how banks are run today. While improvements still need to be made, there is definitely a sense in the industry of the impact that banks have across a much broader range of interest groups.
A number of possible examples include banks going carbon neutral, green lending and much better targeted corporate social responsibility programmes.
5.With your international experience, you have been able to observe and share experiences about good corporate governance. How do you think Mauritius can be inspired by what is being done globally to improve this segment?
Mauritius has actually made very impressive progress over the last five years on the corporate governance front and is ahead of many of the markets in which I have worked.
The new 2016 corporate governance code was an excellent piece of work and I have been impressed with the level of knowledge of the code that I have come across in the Mauritius market.
Developments continue to be made in the corporate governance space across the world and, while Mauritius will generally be a taker of some of the change taking place in the world’s largest markets, it has a huge role to play in helping to develop corporate governance in Sub-Saharan Africa. Good corporate governance is good for business.
I am delighted to see that the Mauritius Institute of Directors continues to champion corporate governance best practice in the market and I believe that, over the long term, this will help the country build and develop its competitive position.
6.Mauritius being on the grey list of the Financial Action Task Force and on the blacklist of the European Union, how can good corporate governance help in strengthening its financial services sector?
Being on the FATF “grey” list and the EU blacklist is certainly a challenge for the island. However, a lot of hard work has taken place and is taking place in both the public and private sectors to address the FATF recommendations. More specifically, I am directly aware of how hard the Bank of Mauritius is working alongside the banking sector to raise capabilities and bolster regulations.
The work being undertaken now will provide a long-term benefit to the island. Not only will it deepen corporate governance capabilities (which as I noted above is good for business) but it will also help build and protect Mauritius’ global competitive position. Strong corporate governance and excellence in this area will attract high quality new business to the island. This will directly boost the economy.