NICA urges business leaders to strengthen credit risk management oversight
National Institute of Credit Administration NICA
Nike Popoola
As part of its unwavering commitment to promoting best practices in credit management, the National Institute of Credit Administration (NICA), chartered, has reminded the Board Credit Committee of business credit granting organizations in the country to recognize that any complacency in the discharge of their responsibilities is a luxury they cannot afford.
A statement signed by the Rector/Chief Executive Officer, NICA, Prof. Chris Onalo, on Friday said, that as guardians of their organization’s credit risk management framework, their vigilance, expertise, and proactive engagement in their roles are essential to ensuring the integrity of credit processes and protection of organization’s assets.
The statement said, “As Nigeria democratise the economy to reflect credit culture in other to empower various economic growth components for job creation, entrepreneurship and improved living standards of the people, the stakes in credit management governance are high, and the consequences of inaction or indifference are severe.
“The Board Credit Committee members are expected to demonstrate unrelenting passion for upholding the highest standards of credit risk management in their oversight functions. Flowing from its observation of an alarming trend of poor Board Credit Committee performance which poses a significant threat to financial stability and organizational sustainability, NICA urges the Board of Directors’ of Credit granting business organizations to conduct thorough reviews of their Board Credit Committee performances with a view to identifying areas of improvement and implement corrective measures to ensure effective credit risk management and compliance with regulatory requirements.”
To optimally discharge their responsibilities, the Institute strongly advocates for the continuous training and development of Board Credit Committee members, ensuring that they possess the necessary skills and knowledge to perform their duties effectively. In addition, a clear, unambiguous credit policy standards and procedures are recommended to support a comprehensive credit management decision-making and efficiency.
NICA stated that Board Credit Committee members can do well only if their terms of reference which outlined roles, responsibilities, and authority, are clear. Providing regular training and development opportunities for Board Credit Committee members to ensure they possess the necessary skills and knowledge must top the agenda.Equally important for a successful performance is the need for open and transparent communication between the Board Credit Committee, the organization’s top management, and other stakeholders to ensure that credit information is shared timely and accurately.
In a fragile and sensitive economy, the deliverables task expected of Board Credit Committee Members can be a daunting challenge. Given the peculiarity of Nigeria’s credit business operating environment, it is pertinent to emphasize that the composition of Board Credit Committee should respect the inclusion of experienced professionals with diverse skill sets, including credit risk management, credit and financial analysis and industry expertise. Regular meetings and reporting at least earlier than quarterly is recommended to review credit portfolios, discuss credit risks, and make decisions.
The Board must ensure that its findings are accurately and timely communicated to the Board of Directors, highlighting the credit portfolio performances, risk assessment and exposure, making sure that credit approval and review processes are in compliance with the regulatory and industry requirements; collateral management, provisioning and write-off policies and processes, to mention but a few, totally aligned with the Board of Directors’ expectations.
As a national professional body established by law to control, supervise, and regulate credit management profession in Nigeria, the National Institute of Credit Administration (NICA), chartered, is responsibly committed to promoting best practices in credit management across industries, including enhancing the efficiency of Board Credit Committees of the credit granting organizations for optimal credit processes, minimize credit risk, and support business growth. We urge the Board of Directors’ of business organizations to take immediate action to address any performance gaps in the Board Credit Committee’s role and ensure that their credit management oversight functions are in compliance with both regulatory and industry requirements.
