Forum Views - Oct 2024
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n the dynamic and complex landscape of financial
services, the board plays a pivotal role in steering
Iinstitutions through uncertainty, safeguarding
stakeholder interests, and ensuring long-term
sustainability. This is especially true in emerging markets,
where the challenges of governance are magnified by
factors such as regulatory volatility, political instability, and
the varying maturity of financial markets.
Emerging markets are characterized by rapid economic
growth, evolving regulatory frameworks and diverse
financial ecosystems. While these factors offer significant
opportunities, they also present unique governance
challenges that require careful navigation.
Financial services are heavily regulated throughout the
world, but in emerging markets regulation tends to be
simpler but less risk based. Whilst many countries have
The Unique Governance Landscape of Emerging
Markets
1. Regulatory Volatility and Uncertainty
moved to a Basel III type approach for banks, local
requirements still vary and, in many markets, insurance is
still regulated with a Solvency I ratio type capital
requirement rather than Solvency II, which is more risk
based. There is, therefore, more uncertainty as it is not
clear how and when new solvency requirements may be
implemented. In many cases regulators actually require
more information from financial services companies than
they would in mature markets, such as having to get
permission for premium increases or send budgets to the
regulators. This means that the regulatory burden is often
high and can create uncertainty for financial institutions
where strategic choices may be limited by factors such as
exchange controls or lack of sophisticated financial
instruments, making it difficult to manage risk effectively.
GOVERNANCE CHALLENGES IN FINANCIAL
SERVICES AND EMERGING MARKETS -
INSIGHTS FROM THE BOARD ROOM
Susan Holliday
Independent Board Director
Acrisure Re
By definition, financial services regulations are behind the
reality of the markets, with crypto currencies being just one
example of this. However, in emerging markets it is
common to see more gaps which can be exploited in both
positive and negative ways. For example, some countries
only recognize the concepts of insurance companies and
brokers, with no explicit rules for price comparison sites,
underwriting agents (often called Managing General
Agents or MGAs) or they mandate business to go through
brokers which in other countries can be sold directly to
consumers online. This adds to regulatory uncertainty, and
may stifle innovation, whilst also allowing in potential bad
actors outside of the regulatory regime.
In the dynamic and complex
landscape of financial services, the
board plays a pivotal role in steering
institutions through uncertainty,
safeguarding stakeholder interests,
a n d e n s u r i n g l o n g - t e r m
sustainability. This is especially true
in emerging markets, where the
challenges of governance are
magnified by factors such as
regulatory volatility, political
instability, and the varying maturity
of financial markets.
Philadelphia, Pennsylvania, United States
10
FORUM VIEWS - OCTOBER 2024
Global Insights
®
QRD (Qualified Risk Director)
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