— August 28, 2014
As part of their capstone project, a group of students in Stern’s Master’s in Risk Management (MSRM) program joined forces to develop a robust risk framework for funds investing in Africa.
The group members spanned multiple countries and time zones and averaged about 15 years of multinational work experience in risk management, corporate and investment banking, corporate finance, financial and industry consulting, and compliance: Aliyu Ahmed, a Bank of America assistant vice-president from Nigeria, based in Los Angeles; Eneni Oduwole, a veteran risk management executive from Nigeria; Gerald Mudzamiri, a Zimbabwean working in Toronto and Dubai as an independent consultant in business transformation and risk management; William Adjovu, a Ghanaian native who is currently CEO of the Liberty Group of Companies in Ghana; Omoatama Isenalumhe, a Nigerian operations and compliance manager based in New York; Mokgadi Magoro, a South African treasury analyst responsible for asset and liability management at the Barclays Africa Group in Johannesburg; and Augustine Emeka Uzoh, a Nigerian credit risk manager with Diamond Bank plc in Nigeria.
Aliyu persuaded the team to pursue a project on sovereign wealth funds (SWF) that would work for African countries. Gerald explains, “It was easy for us to believe in this project because we had a common heritage and experience of the African continent. Our confidence in pursuing it despite all odds stemmed from the fact that we had varied and rich careers, work experiences and contacts.”
Indeed, the group’s deep experience and professional networks enabled them to work at a level that added legitimacy and dimension to their result. “We took stock of those amongst us who had contacts with senior people in government, organizations of interest and relevant SWF institutions globally,” says Aliyu. An added benefit, he adds, was the expansion of the members’ contact lists: “The horizon of our professional network has expanded both in breadth and depth.”
The team divided up tasks based on areas of expertise and access to information, and the entire project was organized into three phases. Included were a rationale for SWFs and review of existing best global practices, a survey of the regulatory and legal landscape, and an intensive investigation into the applicability of the SWF framework in Africa. MSRM faculty assigned NYU Economics Professor Yaw Nyarko, a leading Ghanaian economist, to provide feedback along the way.
Given the continent’s challenges with recursive and unstable growth, the team undertook a deliberate review of the counterproductive factors that have impeded Africa’s progress, including poor infrastructure and outdated technology, corruption and poor governance, lingering civil disturbances, a weak educational system and a dearth of skilled professionals. “Given this complex outlook, it is crucial that a fit-for-purpose framework is developed and implemented by African countries to ensure that issues of strong governance and effective risk management are adequately addressed and processes required clearly defined,” says William.
Eneni describes, “Our recommended governance structure has very useful tenets that can be adopted by SWFs in Africa. It recommends a three-tiered oversight, evaluation, monitoring and reporting cycle across the three key stakeholders of a typical SWF – namely the Ministry of Finance, the Legislature and the Central Bank. The adoption of this model is critical in Africa because of the level of corruption and project disruption. As a result, we intend to share our approach with stakeholders in academia, government and SWFs, especially in Africa and similar developing countries.”
Emeka expresses the group’s cautiously bullish outlook: “We are positive that the gains accruable from Africa’s immeasurable natural resources can be plowed back into the development and growth of socioeconomic structures of these countries, if an appropriate and well-managed savings and investment system such as an SWF exists,” he says. For this talented group, that would be a dream come true.