Page 46 - Capricorn IAR 2020

FINANCIAL DIRECTOR’S REVIEW STRATEGY AND MATERIAL MATTERS GOVERNANCE REPORT
Credit risk management and mitigating losses due to bad debt
The shock of the COVID-19 pandemic, on top of three years of prolonged economic stagnation in the region, drought, electricity supply constraints, low business confidence and rising unemployment, led to a substantial increase in credit risk and subsequent rise in non-performing loans and provisions for bad debt. This is despite economic stimulus and relief packages to support businesses, households and government service providers during lockdown periods. Relief measures included interest rate decreases and loan repayment moratoria (repayment holidays).
In the risk report, we address the potential impact and mitigating actions. These include:
• Measures taken by our banks to prevent non-performing loans through selective lending and active provision management
• Improved collections by developing supporting tools
• Forward-looking risk management through early identification of accounts at risk and pre-emptive
customer engagement with signs of distress
In response to the COVID-19 pandemic and the impact on our customers, we responded as follows:
• We engaged the top 100 borrowing clients proactively in the most affected industries (tourism, transport, retail) to determine how Bank Windhoek can assist them
• Extended reviews for two months where information was still outstanding
• Determined the potential consequences of Force Majeure/Acts of God on our loan agreements and
facility letters
• Determined the possibility of deferments, refinancing and extensions of credit agreements
In the financial director’s review, we elaborate on the impact of non-performing loans on financial performance for the financial year. This includes a section on investor concerns and outlook.
STAKEHOLDERS THAT HAVE AN INTEREST IN THIS MATTER
Shareholders Customers
Government and regulators
RELATED STRATEGIC CHOICES
Building our foundation Win through operational excellence
RELEVANT PRINCIPAL RISK
Credit
Capital Liquidity Market
Finance and tax
BOARD OVERSIGHT
BARC BCC
Financial director’s review from page 31
Risk report from page 69
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Namibian risk managers affirm Capricorn Group material matters
Capricorn Group partnered with the Ministry of Finance to carry out a two-day risk management workshop in March 2020. The workshop, attended by 30 security and risk management services personnel from seven ministries, was designed to meet a need identified by government to acquire more knowledge on risk management and governance, as risk management divisions are becoming key in all ministerial offices.
At the event, we asked representatives to provide us with feedback on our engagement with them, how the Group impacts them and what their information needs are.
For many participants it was their first engagement with the Group, and the start of a journey of collaboration. Capricorn Group is seen as a partner in upskilling people in risk management, with the potential to share more in areas of common interest such as customer service and cybersecurity. Participants appreciated the Group’s knowledge, good coordination and assistance.
We used the opportunity to test the robustness and relevance of our eight material matters with this stakeholder group. Feedback indicated that participants regarded all material matters as either important, very important or critical.
CASE STUDY