1. All Rights Reserved. The Iclif Leadership & Governance Centre Official Launch of FIDE Forum 12 June 2012 Presentation by Youssef A Nasr Corporate Governance ….. Should I take it seriously?

2. All Rights Reserved. The Iclif Leadership & Governance Centre Presentation by: Youssef A Nasr Corporate Governance ….. Should I take it seriously?

3. All Rights Reserved. The Iclif Leadership & Governance Centre The tale concerns a shepherd boy who repeatedly tricks nearby villagers into thinking a wolf is attacking his flock. When a wolf actually does appear, the villagers do not believe the boy's cries for help, and the flock is destroyed. The moral at the end of the story shows that this is how liars are not rewarded: even if they tell the truth, no one believes them. The Boy and the Wolf

4. All Rights Reserved. The Iclif Leadership & Governance Centre  IFRS  Basel 2  Y2K  The internet Recent Occurrences of “Scare Tactics”

5. All Rights Reserved. The Iclif Leadership & Governance Centre So, is the focus on Corporate Governance and Risk Management just the latest fads, which will pass away soon?

6. All Rights Reserved. The Iclif Leadership & Governance Centre  The public and governments are extremely angry. No more tolerance.  Heightened risk of personal liability.  Bad news travels much faster.  Correlations among global markets.  Generally, people at large have become more cynical and skeptical. Certainly Not !

7. All Rights Reserved. The Iclif Leadership & Governance Centre  Leverage  Volatility of assets  Accounting leeway  Good banking is very good.  Bad banking is very bad. What about the Banking Business?

8. All Rights Reserved. The Iclif Leadership & Governance Centre  Understand the basics of the business.  Engage in robust but constructive debates.  Apply common sense.  Ensure checks and balances exist.  Prioritize which issues you address in depth.  Focus on strategy and reasonableness.  Ensure minutes are sufficiently detailed.  Set the tone from the top What is being asked of Directors?

9. All Rights Reserved. The Iclif Leadership & Governance Centre  Fide program is a start.  Continuing education is critical.  Networking with other directors.  Devote sufficient time.  Actively manage board agendas and papers.  Engage external advisors when necessary.  Create a healthy dialogue with auditors and regulators. How best to do this?

10. All Rights Reserved. The Iclif Leadership & Governance Centre  Do not emaciate your CEO and management teams.  Do not become micro-managers.  Trust but verify.  KPIs and compensation programs.  Reliance on formulaic tools. Potential Pitfalls

11. All Rights Reserved. The Iclif Leadership & Governance Centre  Bluntly, there is no choice.  But there are also financial incentives for investing in improved CG and Risk Management: -Lower deposit insurance premia. -Lower wholesale funding costs. -Premium valuation of equity. The ROI Issue

12. All Rights Reserved. The Iclif Leadership & Governance Centre 'Those who cannot remember the past are condemned to repeat it.' George Santayana, Philosopher

13. All Rights Reserved. The Iclif Leadership & Governance Centre  Rapid growth in a business  Investment portfolio valuations  Counterparty risk: now and what it might become  Other assets  Simulation for when things go wrong  Duplication of risks in the same company  Dominant player for MTM  Consolidated liquidity numbers v/s access to cash  Location of offices  Incentive plan of executives AIG Takeaways

14. All Rights Reserved. The Iclif Leadership & Governance Centre  Rapid growth in a business  Investment portfolio valuations  Counterparty risk: now and what it might become  Other assets  Simulation for when things go wrong  Duplication of risks in the same company  Dominant player for MTM  Consolidated liquidity numbers v/s access to cash  Location of offices  Incentive plan of executives JPMorgan v/s AIG Takeaways

15. All Rights Reserved. The Iclif Leadership & Governance Centre  If you annoy the markets, they will extract their revenge.  Do you have the right directors on your Risk Management Committee?  How are you managing your liquidity?  Do you have a central financial control function ensuring common accounting standards?  Are you still relying on VAR? …and some additional lessons

16. All Rights Reserved. The Iclif Leadership & Governance Centre The Iclif Leadership & Governance Centre (625729-W) Level 24, Main Block Dataran Kewangan Darul Takaful No. 4, Jalan Sultan Sulaiman 50000 Kuala Lumpur, Malaysia T +603 2263 3888 F +603 2263 3855 www.iclif.org