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.
During 2019, the department played a key role in supporting the Group’s expansion into Nigeria as well as EFG Hermes’ venture into the securitization and short-selling spaces. The department’s 32 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 39-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.
Internal Audit
The Internal Audit function covers the entire EFG Hermes Group from its subsidiaries and business lines to its support functions. The team is made of seven centralized auditors covering investment banking and NBFI activities, in addition to 33 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 set 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 are reviewed every other year. In parallel, the division also performs 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.
Two years ago, EFG Hermes rolled out TeamMate. An internationally recognized internal audit management software that allows for more effective internal audit processes through the automatization of auditing procedures. During 2019, the new system continued to enhance the division’s processes across the entire Group as the team completed its rollout across all the Firm’s 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 asses potential cyber‐security and data protection risks to ensure all client and EFG Hermes internal data is stored safely and well protected against possible cyber-attacks.
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 reporting lines with field auditors and build a monitoring program, providing the necessary frameworks to enhance the Group’s oversite of both new and existing operations. In turn, the NBFI Audit team has two members in addition to the 33 members that cover Tanmeyah. The team’s scope is to ensure new products and subsidiaries are adequately monitored particularly in the early phases of launch in addition to assessing compliance with regulatory requirements.
2018 Highlights
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Integration of operations in Nigeria within the wider Group; enforcing Group policies and ensuring operations adhere to the Group’s risk and compliance framework.
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Successfully obtained FRA license for the Firm’s new securitization venture.
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Obtained a short-selling license for brokerage in Egypt, one of the first in the market.
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Successfully renewed the Firm’s ISO certifications.
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Implemented the Group-wide business continuity strategy.
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Evaluated and mitigated risks facing the Group’s new business lines especially in the NBFI segment.
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Completed the Group’s proxy voting policy.
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Completed audits on all new NBFI platforms and frontier market operations.
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Completed the annual update for existing risk and compliance policies.
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Extended audit to cover Nigerian operations.
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Announced the merger of EFG Hermes Leasing and EFG Hermes Factoring.
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Launch of a mortgage finance company with TMG and GB Capital.
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Restructuring Tanmeyah’s audit team.
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valU won the “Fintech Innovation of the Year” award.
Employee Awareness
Communicating the Firm’s strategy, policies, and procedures to all employees has always been key to guaranteeing EFG Hermes’ ability to comply with the various regulations and laws in the geographies it operates. This has become increasingly important as EFG Hermes’ footprint grows and new products and services are added to its portfolio. To guarantee that all new staff is 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 an as-needed basis if a high-risk situation arises.
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, all courses must be passed by all staff members with the results being reflected in end-of-year appraisals.
Market Developments
With the Firm having officially entered the Nigerian market at the start of 2019, the division played a fundamental role in integrating the new subsidiary into the Group’s wider operating framework. The team drafted a dedicated policy document to govern the Firm’s Nigerian operations taking into account country-specific risks and regulations.
On the new products front, the division also played of crucial part in ensuring that the new products’ and business lines’ respective regulations and guidelines were reflected in the wider Group’s operating framework and policies.
During 2019, the division worked to obtain the Firm’s short-selling and securitization licenses. In parallel, the division also supported the continued expansion of the Firm’s NBFI platform as it added more products and services to its already wide-ranging roster.
2020 Outlook
In the coming year, the department will focus increasingly on its digital audit function in light of the growing threat posed by cyber-attacks. As the Group continues to expand into new markets, the department will continue to work side by side with other divisions to ensure new products, business lines, and subsidiaries are promptly integrated into EFG Hermes’ operating framework and that new regulations and laws related to these expansions are accurately reflected in operating policies.