Interview: Abdul Hakeem Mostafawi
How has the Covid-19 pandemic shaped the banking system’s approach to risk mitigation, and what factors will be key to recovery?
ABDUL HAKEEM MOSTAFAWI: The pandemic demonstrated the importance of non-financial risk (NFR), especially resilience risk, in the banking sector. In particular, the swift adoption of technologies to minimise disruption to services was crucial during the health crisis, as was ensuring that controls were in place to mitigate cybercrime and transaction processing risk. Success was dependent on the effective adoption of NFR-management processes.
Over 70% of HSBC Qatar’s employees were able to work remotely during the pandemic, and 100% of non-branch employees were operational at home within a week of the implementation of lockdown measures. The bank quickly established guidelines and scenario analysis to manage exposure in our operations, as well as physical interactions within our offices. These enabled operations to continue with few interruptions to customer services. The bank’s customers also quickly adapted to digital services, helping to ensure business continuity.
Sustainability and technology will be key to companies’ recovery. While the pandemic exposed difficulties in cross-border trade, opportunities around the world will ultimately drive the recovery. Diversified supply chains can boost local and regional economies and support this trend.
To what extent can banks evolve to be less dependent on interest rates?
MOSTAFAWI: Banks can adopt business models that are less dependent on interest rates through several measures. These include the internationalisation of local and regional players, as well as the use of equity, initial public offerings and partnerships to increase companies’ capital base. Indeed, we are witnessing a need for capital among businesses in emerging markets that were particularly impacted by the pandemic, as seen in the slowdown of their economies. Highlighting its potential, the MENA region raised $14.5bn in 42 equity offerings in 2021, a 193% increase in value from the previous year, and a 13-year high in terms of the number of deals.
What role can banks play in the transition to a more sustainable future, and which areas have the greatest potential for growth?
MOSTAFAWI: The banking sector plays a leading role in mobilising the transition to a net-zero global economy – not just by financing it, but by helping to shape and influence the global policy agenda. The journey towards net zero has begun, and innovation to help scale up climate change solutions for sustainable projects is key. We work with partners and industry players around the world to develop relevant common standards to help to tackle climate change. In this regard, HSBC is a founding member of the Net-Zero Banking Alliance and the Glasgow Financial Alliance for Net Zero, the latter of which commits financial institutions around the world to align their lending and investment portfolios with net-zero emissions targets by 2050.
As sustainability and technology are key growth factors, these should take precedence in investment decisions. Qatar has already taken positive steps in this regard, with most government entities developing and enhancing sustainability targets and disclosures. Furthermore, the role of natural gas as a transition fuel allows Qatar to play a central role in global energy markets by supplying this alternative source of energy, and helping to address concerns regarding supply. Other growth areas include the establishment of new businesses under the auspices of the Qatar Free Zones Authority and the Qatar Financial Centre, which contribute to Qatar’s drive to be self-sufficient and economically diversified.