As EFG Hermes’ product portfolio continues to grow and the Firm penetrates new markets, it is confronted with a growing number of unique rules and regulations. This has made the need for sound and prudent compliance and risk policies increasingly important to help guide the decision-making and day-to-day operations of the entire Group. To this end, the Risk and Compliance Department has developed a solid set of frameworks to govern EFG Hermes’ compliance and risk strategies in accordance with global best practices.
The department’s 38 compliance officers continued to ensure that each of the Firm’s new and existing business lines adhered to appropriate statutory provisions, official regulations, and internal policies. In parallel, the 45-member Risk Management team worked to ensure all operational, market, credit, and liquidity risks were identified, assessed, and accordingly mitigated using adequate controls. Both teams report to the Group Chief Risk & Compliance Officer.
The Internal Audit function, an independent function that reports directly to the Audit Committee, covers the entire EFG Hermes Group including its subsidiaries, business lines and support functions. The team is made of eight auditors and a CIA covering investment banking and NBFI activities, in addition to 35 auditors in Tanmeyah Microfinance. In line with the Audit Committee’s pre-approved strategy for the year, Internal Audit is in charge of carrying out systematic reviews and periodic spot checks. To make the review process as efficient as possible, the frequency of reviews is based on the function/department risk level and the previous review’s internal audit score. As such, high- and medium-risk departments are reviewed annually and low-risk departments with effective scores are reviewed every other year. In parallel, the division also performs quarterly follow-ups on previous audit findings to ensure they have been adequately addressed and corrected. It also provides a multitude of services ranging from in-depth assessment of operations, adherence to regulatory requirements, and monitoring of corporate governance.
During 2020, the Risk and Compliance team was instrumental in ensuring that the Firm’s business continuity was not at risk. With many offices working on rotational schedules, 100% of staff working from home during the first five months of lockdown, and 50% doing so following the easing of restrictions, the division had to ensure that the situation on the ground in each country was continually assessed to ensure the safety of all staff and the continuity of operations.
highlights for the year include:
Completed the full compliance monitoring annual program despite the logistical impediments.
Established a full-fledged disaster recovery site in Saudi Arabia.
Early adoption of IFRS 9 new accounting standards.
As the Firm’s NBFI platform continues to grow and add to its product offering, the Internal Audit Department has been working alongside the new subsidiaries to establish adequate reporting lines and build monitoring programs, providing the necessary frameworks to enhance the Group’s oversight of both new and existing operations. The team’s scope is to ensure effective monitoring of new products and subsidiaries particularly in the early phases of launch in addition to assessing compliance with regulatory requirements. During 2020, the full annual plan laid out for the NBFI platform in terms of compliance, risk, and audit standards was complete despite overarching challenges posed by the year. As for Tanmeyah, a new head of Internal Audit was hired, who was instrumental in revamping the entirety of the team. At the same time, intensive training for the company’s field auditors took place to communicate changes and challenges posed by the pandemic. Additionally, a full review of branch operations was conducted during the year.
TeamMate continued to enhance the Internal Audit team’s processes. The move was particularly important in light of the COVID-19 pandemic as more and more systems and processes necessitated a shift to digital channels and automated functions. The new digital tool also helped the division store, analyze, and process the vast quantity of financial data related to various Group operations across its footprint to allow for a more accurate and efficient auditing process. The introduction of TeamMate is in line with the wider digital transformation strategy the Group has embarked on to ensure it remains at the forefront of an increasing digital financial services industry. As the Group transitions to a fully digital system, the internal audit scope has also been extended to assess potential cyber-security and data protection risks ensuring all client and EFG Hermes internal data is stored safely and well protected against possible cyber-attacks.
Communicating the Group’s strategy, policies, and procedures to all employees continues to be the core element binding various geographies and lines of business as the Firm grows. To guarantee that all new staff are promptly integrated in the Group’s operating framework, the team takes part in the HR onboarding package to orient new employees on key audit, compliance, and risk issues at least once a year or on as-needed basis if a high-risk situation arises. As business partners, the Internal Audit function continues to serve the Firm as a consultant by suggesting ways to improve the business, add value by providing advice when needed, and enhancing current procedures to help improve the organization’s daily operations.
The Firm, under the monitoring and guidance of the Compliance division, continued conducting five mandatory training courses on Anti-Money Laundering (AML), anti-fraud, General Data Protection Regulation (GDPR), cybersecurity, and sustainability awareness. To ensure employees reach the required level of understanding on various subjects, staff members must pass all courses with the results reflected in end-of-year appraisals. The year saw us introduce a new ESG training module in the arsenal of development tracks for employees as ESG comes into increased focus, particularly by responsible investors.
In the coming year, the Risk and Compliance department as well as the Internal Audit division will continue to work on streamlining operations in light of growth in the digital sphere, particularly with current market dynamics associated with the pandemic still in question. As the Group continues to expand into new lines of business and geographies, the departments will continue to work with other divisions to ensure new products, business lines, and subsidiaries are promptly integrated into EFG Hermes’ control framework and that new regulations and laws related to these expansions are accurately reflected in operating policies.
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