By Michael Eboh
Following the crisisÂ rocking the Nigerian financial sector, First Securities Discount House Limited (FSDH) has announced its plans to reinforce its risk management processes to ensure its stability and growth in the years ahead.
Speaking during its annual general meeting in Lagos, the Managing Director/Chief Executive Officer of the company, Mr. Rilwan Belo-Osagie noted that its decision to strengthen its risk processes is borne out of the importance of risk management to profitability and business growth and survival.
He said, â€œRisk management has acquired greater importance given the crisis in the global finance markets and the problems banks are facing in the country. It is against this background that we have decided to strengthen our risk management processes.
â€œWe manage our risk through an enterprise-wide risk management framework, which is supported by well established policies and frameworks, and we have consulted a Board Risk Management Committee, which will have oversight over the companyâ€™s risk management function.â€
He added that it is on the verge of modifying its business structures for effective coordination of risk management activities in order to make them more effective, making sure that operating units take true ownership of the management of the risks that affect their units.
He disclosed that the company will continuously seek ways to expand available options for its client to ensure that their funding and investment needs are met, tasking investors on the need to diversify their investment portfolios so as to be able to recoup the losses they incurred in the period of the meltdown in the capital market.
The company recorded a 64 per cent increase in its profit after tax in its 2008 financial year. Its profit after tax rose from N2.344 billion in 2007 to N3.84 billion in the year under review, while its shareholdersâ€™ fund grew by 35 per cent from N9.548 billion in 2008 to N12.933 billion.
The company is proposing a dividend of N0.35 to its shareholders, which is an increase of 40 per cent over the previous yearâ€™s dividend.
Belo-Osagie further stated that investors waiting for the early return of profitability in the capital market will still have to wait for a longer period time as recovery of the stock market both local and internationally is not achievable in the very short term.
According to him, the astronomical growth of 40 per cent in the major indices of the Nigerian capital market experienced in the last five years prior to the stock price meltdown in 2008 is abnormal compared to the realities on ground.
Belo-Osagie noted that the current reforms in the nationâ€™s banking sector by the Central Bank of Nigeria (CBN), and the attendant decline of investorsâ€™ confidence in the equitiesâ€™ market, activity in the capital market is expected to continue on a downward pattern.
According to him, the outlook for the industry in the immediate future will still be dominated by the problems of non-performing credits noting that despite the clean up exercise by the CBN, the negative effect on the industry is likely to linger.
He said, â€œBanks will continue to look for every opportunity to sell off their positions in the stock market, in an attempt to write-back some of the provision. Therefore, recovery in the capital market may still take some time. On the wider economy, the bitter lessons of the current problem coupled with the unfriendly business climate is likely to restrict the flow of credit in the economy as financial services providers become more risk averse.â€