A brand new report by skilled companies agency Kreston Pedabo says tightening regulation is forcing Nigerian organisations to undertake extra structured and disciplined approaches to danger administration, as regulators transfer away from casual and fragmented practices.
The report famous that Nigeria’s enterprise surroundings has grow to be considerably extra complicated as a consequence of macroeconomic volatility, overseas change pressures, excessive inflation, cyber dangers, and rising scrutiny of environmental, social and governance (ESG) practices.
In response to the authors, these pressures are actually compounded by stricter regulatory oversight throughout key sectors, with regulators demanding clear proof of enterprise-wide danger administration frameworks which are totally embedded in governance and decision-making.
The rise of Enterprise Danger Administration (ERM)
“Regulators are now not glad with danger administration insurance policies that exist solely on paper. They now count on demonstrable, efficient Enterprise Danger Administration (ERM) techniques that actively information strategic and operational choices,” mentioned the report authored by Albert Folorunsho, the managing advisor; Killian Khanoba, senior accomplice, tax compliance and advisory; Tyna Adediran, Lead, Administration Consulting; and Farida Danjuma, assistant supervisor, administration consulting.
Enterprise Danger Administration supplies a scientific method to figuring out, assessing, managing and monitoring dangers that might have an effect on organisational targets. In contrast to conventional danger administration, which is usually siloed throughout departments, ERM integrates danger concerns into technique, operations and efficiency administration.
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In Nigeria, regulators are more and more insisting that ERM frameworks align with worldwide requirements equivalent to COSO ERM and ISO 31000. Regulatory evaluations now focus much less on whether or not organisations have danger insurance policies and extra on the standard of governance, effectiveness of controls and robustness of danger reporting.
Regulatory evaluations rocus on governance and controls
Regulators throughout monetary companies, capital markets and insurance coverage have additionally adopted risk-based supervision fashions that place better accountability on boards and senior administration. This method is mirrored within the governance frameworks of the Central Financial institution of Nigeria (CBN), the Securities and Alternate Fee (SEC) and the Nationwide Insurance coverage Fee (NAICOM).
Typical regulatory expectations embody clear board accountability for danger oversight, outlined danger urge for food statements, consideration to rising dangers, sturdy inside controls and steady monitoring and reporting. The report warns that failure to fulfill these expectations more and more ends in regulatory sanctions or reputational harm.
AI and automation introduce new dangers
The report additionally highlights synthetic intelligence and automation as a rising supply of enterprise danger. AI instruments are actually broadly utilized in Nigeria throughout monetary companies, telecommunications, healthcare, skilled companies and the general public sector for actions equivalent to credit score scoring, fraud detection and predictive analytics.
Whereas these applied sciences provide effectivity and strategic advantages, the authors warning that they introduce complicated dangers regarding information privateness, bias, explainability, ethics, regulatory compliance and third-party dependencies.
“Within the absence of devoted AI regulation, Nigerian organisations should handle these dangers via present governance and sector-specific guidelines,” the report mentioned, including that boards and administration have to explicitly combine AI dangers into ERM frameworks.
Drawing on international advisory views, together with McKinsey, the report pressured that AI needs to be handled as a strategic and resilience difficulty relatively than a purely technical matter.
Sector-specific regulatory expectations
It outlines how regulatory expectations are driving ERM adoption throughout sectors. In monetary companies, the CBN requires banks and different monetary establishments to keep up complete ERM frameworks masking credit score, liquidity, market, operational and cyber dangers, with a powerful concentrate on governance, stress testing and capital planning.
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Within the capital market, they famous that the Securities Alternate Fee views enterprise-wide danger administration as a core ingredient of fine company governance, requiring market operators to reveal efficient controls, common danger reporting and audit-ready documentation to guard investor confidence.
NAICOM, in the meantime, is strengthening the hyperlink between ERM, solvency and capital adequacy, requiring insurers to reveal clear understanding and energetic administration of underwriting, funding and operational dangers.
Though the Nigeria Income Service doesn’t mandate particular ERM frameworks, the report famous that organisations with mature ERM techniques are inclined to carry out higher throughout tax audits as a consequence of stronger governance and documentation.
Donors are additionally putting better expectations on non-governmental organisations, making formal danger administration processes a prerequisite for funding and long-term credibility.
In response to those traits, Kreston Pedabo has launched its DAPM™ ERM Framework, designed to align regulatory necessities with worldwide requirements. The framework follows 4 levels: Uncover, Analyse, Shield and Monitor.
The Uncover stage focuses on figuring out and profiling dangers via workshops, regulatory evaluations and the event of board-approved danger urge for food statements.
Analyse prioritises dangers utilizing impression assessments, warmth maps and situation evaluation. Shield centres on designing and embedding efficient controls, whereas Monitor emphasises steady oversight via key danger indicators, dashboards and board reporting.
Efficient ERM is now not non-compulsory
“Efficient ERM is now not non-compulsory in Nigeria’s regulatory panorama,” the authors mentioned, including, “Organisations that undertake structured frameworks might be higher positioned to handle uncertainty, meet regulatory expectations and maintain long-term worth.”
