New market entrants should develop a clear risk appetite: Ecobank - CNBC Africa

New market entrants should develop a clear risk appetite: Ecobank

Special Report

by Trust Matsilele 0

Ecobank's Group CEO says, new market entrants need to develop a clear risk appetite: PHOTOS: Ecobank

Ecobank group chief executive, Albert Essien, made the remarks when giving a keynote address in Munich at the 4th Conference on Managing Risk in Africa.

(READ MORE: Investors should reassess their risk appetite for 2015)

“Whatever risks are identified, they are best viewed holistically rather than in isolation. New market entrants will need to develop a clear risk appetite and weigh the opportunity against the cost of risk mitigation, which can be expensive,” Essien said.

He said the setting up of a risk review board would help ensure the right level and scope of ongoing risk monitoring

Essien offered strategies for managing risk in Africa’s growth markets.

Against the backdrop of what he outlined as a generally positive outlook for Africa, he advised investors against viewing Africa as one, but rather 54 countries with different growth prospects, different infrastructure, trade agreements, tax regulations, culture and levels of technological development.

He also urged investors to be prepared to engage with African countries on a long-term basis and avoid abrupt changes in investment focus because of perceived instability in certain markets.

Essien encouraged managing risks associated with doing business in Africa, including fiscal and monetary policy issues such as foreign exchange restrictions, transparency and compliance, political instability and corruption and resource and infrastructure challenges.

He also offered executives overseeing market entry strategy in Africa six key considerations that they would have to contend with.

(READ MORE: Time for risk taking has passed, says leading financial manager)

He said these, were: understanding the local business culture; assessing which markets represent the best balance of risk and reward; finding and vetting appropriate local partners; understanding local market regulations; local environmental factors; and levels of technological development.

Essien highlighted several market entry risks, which he enumerated as: political risk, reputational risk, operational risk and physical risk to staff and assets. He encouraged scenario planning as a good way to anticipate what future trends might emerge and what their impact and probability might be.