Two years into the outbreak of the pandemic, each one of us has been affected in one way or the other. Around the world, countries have taken harsh measures to combat the virus, including lockdowns that have caused huge disruptions to work, life, and the economy.

The restrictions imposed by many governments all over the world in handling the Covid-19 outbreak have raised significant challenges with regard to corporate governance.

The Covid-19 pandemic, however, is not the first nor will it be the last crisis that we will endure as a financial system. Therefore, what we should be asking ourselves is;

· What lessons have we learnt from this crisis in terms of governance and risk management for financial institutions?

·  What lessons can we learn from other past crises that affected the financial sector?

· What are the potential crises the financial sector could face in future – climate crisis? Cyber crisis? Global outage of information system infrastructure?

· How prepared are we at board and executive management level to deal with such crises?

Even though the recent Covid-19 crisis did not emanate from the financial sector, it has already had and is expected to continue having adverse effects on the financial sector.

Incomes of individuals, households and firms declined as businesses remained closed during lockdowns or revenues declined due to capacity constraints on premises.

Global supply chain interruptions and travel phobia associated to the pandemic are affecting how quickly businesses are recovering. These issues have heightened credit risk in the financial sector.

Employees contracted the virus and there were fears of contagion to other employees and some lost loved ones to the pandemic. Employees were forced to work in confined spaces in their homes. All this elevated concerns about emotional health and empathy in the workplace.

How do you effectively lead a team that is dealing with loss? Or a team working remotely in separate locations under different circumstances? Service providers were also affected by the pandemic impacting how effectively they provided support remotely- posing business continuity risks.

The pandemic also leapfrogged the uptake in digital financial services. This has opened new opportunities for the financial sector but also poses significant IT and cyber-related risks. How can we better protect our customers? Our institutions and our economy at large?

The pandemic also emphasised the importance of insurance and boosted the uptake of medical/health and life insurance products. How can insurers leverage this high level of interest to raise awareness and sell other insurance products? Or demonstrate their value to society and the economy at large?

In a crisis, so many pieces of a complex jig-saw puzzle change at a very fast pace at the same time. Executives and Boards need to be able to act fast and decisively. Good decision-making is therefore crucial in a crisis. It is therefore imperative that financial institutions build empowered, strategically focused, data-driven, and well-functioning executive teams and boards as well as systems.

The pandemic has reminded us of the benefits of a strong, flexible, and responsive corporate environment hinged on sound risk management and access to contingencies in an emergency. Now, more than ever, the Corporate Governance Framework embedded within an organization needs to support organizational resilience through effective leadership and oversight, enhanced stakeholder engagement and communications and clear and transparent decision-making processes.

Moving forward, a lot needs to be done to support strategies, protect vulnerable stakeholders while continuing to ensure organizational business continuity, sustainability, and resilience. There is a need to align strategy and capital allocation with drivers of long-term value creation: Boards must align their strategic and particularly capital allocation priorities with key drivers of long-term value creation.

As companies adapt to a new economic context, changed workplace conditions, and raised expectations following the pandemic, alongside ongoing environmental constraints and acceleration toward digital transformation, they must intensify their focus on intangible drivers of value.

Boards must also strengthen preparedness and resilience to crises and systemic shocks: To improve preparedness, Boards must undertake more regular and sophisticated scenario analysis and horizon-scanning activities, stress-test the company’s resilience against shocks that may have system-wide implications, and put crisis response and emergency succession plans at both the executive and operational levels.

I would like to reiterate the importance of innovation and the development of financial products that are tailored to the needs of the consumers. The 2020 Fin Scope Survey indicated that formal credit was still low – at 22 percent driven by borrowing from mobile money and SACCOs while only 8 percent of the adult population borrowed from banks.

Insurance uptake was also shown to be low with only 17 percent of the adult population having insurance products driven by medical insurance, with affordability and lack of awareness raised as the main barriers to uptake. Increased credit, insurance, and pension penetration will only be realized when most of the population takes up insurance and contribute to pension schemes. Financial institutions, therefore, need to invest in research, innovation, and development of products and delivery channels that meet customer needs at the right price points and convenience.

There is a greater need for partnerships with FinTech that are more agile and could help deliver more convenient products and user experiences. There’s also a greater need for industry collaboration for shared infrastructure and systems that will improve efficiency, promote transparency and information symmetry which will, in return, reduce costs to Financial Service Providers and, ultimately, to financial customers.

I would like to remind you (Directors of Financial Institutions) of your primary objective which should be to safeguard stakeholders’ interests in conformity with the public interest on a sustainable basis. While shareholders’ interests are important, you should always remember that the interest of the financial customers - depositors, policyholders, or pensioners are paramount and should always be given top priority. Uphold that as you make decisions in your boardrooms, and you will be assured of the long-term sustainability of your respective businesses.

Having said all that, despite the increased risks to the financial sector in the past two years, the Rwandan financial sector remains resilient with healthy capital and liquidity buffers above the minimum prudential requirements.  This resilience portrays an industry that has taken the worst a global pandemic can throw at it and is still standing – and it is in such trying times that the benefits of working together are more pronounced.

I can’t emphasise enough the need for good corporate governance as a key pillar for the resilience of the financial institutions – and even more in times of crisis when uncertainty is high. It requires good communication, both within financial institutions and with external stakeholders, as well as proper accountability for risks and sufficient transparency at all levels.

Looking ahead, the tide seems to be turning in this crisis. However, let us not fold our hands and be too optimistic because the pandemic is not yet behind us.

The writer is the Governor of the Central Bank of Rwanda. 

The opinion piece is drawn from the Governor’s speech delivered at the opening of Financial Sector Corporate Governance Workshop in Kigali on 7th December