There are no shortcuts to sustained economic development, said Governor State Bank of Pakistan (SBP) Yaseen Anwar. “We need to develop the right strategies and then translate these strategies into action,” the governor told the 12th Management Association of Pakistan (MAP) Convention on ‘Leadership Challenges for Business Success’ held here at a local hotel. He said the country’s economic and political leadership was faced with multiple challenges of trade imbalance, inflation, unemployment, power crises and security situation and added that the challenges for making good decisions on these fronts required political will and a clear long term vision. Similarly, Anwar said, the challenges for business leaders, though at a micro level, were by no means less critical. “Management of human resources is extremely critical to the success of any business across the globe,” emphasised the SBP governor. He underscored the importance of women, representing almost half of the country’s population, in the work force. “How can we, as a nation, progress if 50 per cent of our work force is in a non-productive capacity?” SBP governor also urged the corporate leaders to take into account their corporate social responsibility so that profit seeking was balanced against the objective of social service and well being of the society. Anwar said central bank desired a more active role of the Board of Directors in setting the strategic direction of a bank as well as to bring it under accountability. He said, to be effective the concern and tone for risk management must start at the top. “You would agree that while the management may get influenced by business targets and short-term profitability, the board, representing owner’s perspective, always targets for long-term viability and sustained growth of the bank.” “That is why SBP has always emphasised the involvement of the board and made it accountable for establishing enterprise wide risk management framework,” he added. Anwar said the formulation of policies relating to risk management only would not solve the purpose unless these were clear and effectively communicated down the line. “CEO as a leader must ensure that these policies are embedded in the culture of the organisation,” he said, adding for the value of risk management to be realised, integration was essential. “Therefore, the emphasis should be on integrating risk management into the existing management structure and processes rather than operating as an appendage,” he observed. “Today we meet at a challenging time with many headwinds going forward,” the governor said and added that the global economy was on a downhill path and financial turbulence continued to affect the masses across the globe. All this, he said, had started in 2007-2008 as the private debt sub prime crises related to the US housing market transformed into a systemic financial crisis that spread from the US to the euro area. “More recently, this has turned into a sovereign debt crisis. The crisis, now in its fifth year, has morphed into a new phase of a political crisis,” he said adding in the euro region, important steps had been taken to address the current problems. However, political differences within economies undergoing adjustment and among economies providing support had impeded achievement of a lasting solution; he said adding that “what we have seen is a complete transformation resulting from the worst crisis of modern times.” SBP governor pointed out that there were four key areas that had contributed to the crisis and remained relevant for both financial and non-financial firms; weaknesses in corporate governance arrangements; excessive risk taking for short-term gains, inadequate accounting standards and regulatory requirements in some areas, and mismatch between the remuneration systems and strategy and risk appetite of the company. “Most of the multilateral agencies and financial regulators have now increased focus on building a more resilient financial framework including developing new standards for addressing the above challenges,” he added. He stressed that elevating corporate governance should not be confined to banks, but commercial concerns must also do the same. “We all know the pace of globalisation has accelerated, resulting in increased domestic and global economic integration,” he said adding “Our visionary business and political leaders must be alert to the challenges they face now and are likely to face in the future due to developments in other parts of the globe.”
