Learning From the Crisis to Assure a More Secure Future

From the moment it was made public about a fortnight ago, the BAI-Bramer related financial crisis has become the centrepiece of news and monopolised public attention.

This situation has been fuelled by the daily news blitz on the issue by the press who are having a field day and politicians of every hue or shade driving their own vested agendas. The string of press communiqués and press conferences of the main protagonists as well as the diverse actions taken by worried investors and insurance policy holders have added to the general angst gripping the country.

Every day, more and more disquieting information are being rummaged and revealed in (sensational) breaking news mode on every aspect of the crisis and in particular in respect of the alleged substantial haemorrhage of funds from the investment pot contributed by savers, through various questionable out payments into unproductive assets or holding companies or accounts domiciled in offshore havens. Those held responsible for such underhand out payments and the beneficiaries thereof are being pilloried.

The opposition parties bent on drawing political mileage from the crisis are striving to resuscitate their dented credibility through parliamentary questions and their weekly press conferences of old, with a vengeance. Have they not learnt the message of the people that it is high time to put an end to this futile and vexing weekly rigmarole? All this is done with scant regard or consideration for their impact on the common objective of above all safeguarding the interests of the investors and insurance policy holders trapped in the midst of the financial turmoil. What is expected of the political class is to act responsibly without unnecessary hype and demagogy to help pull through measured decisions the country and the multitude of worried savers out of the present mess.

Intelligent crisis management

When facing a crisis of such magnitude with the potential risk of damaging fallouts and distress on tens of thousands of investors and insurance policy holders and pervasive impact on the country and its standing as a well regulated and robust financial centre of excellence, it is crucial that, we collectively as a nation, keep a cool head and demonstrate judicious crisis management acumen to tide over it.

As pointed above, this is far from being presently the case. The objectives to be attained through an intelligent management of the crisis are simple enough:

– Accurately map out the financial situation and ins and outs of the BAI-Bramer warren of companies.

– Safeguard the interests of investors and insurance policy holders and ensure that the commitments made to them are adequately honoured.

– Ensure that there are no fire sales of the assets of the conglomerate detrimental to the exercise of harnessing the maximum funds to cover the commitments made to investors and insurance policy holders.

– Administer and rehabilitate where possible loss making but potentially viable companies in the group through proper management, the injection of working capital and the pruning of crippling fees and massive out payments to related parties, into going concerns.

The general aim should be to maximise the value of the assets of the Group so as to, if need be, maximise revenue from their sales in order to minimise any deficit in meeting the liabilities towards investors and insurance policy holders.

It must be underlined that there is a direct correlation between the sum that can be recovered and mobilised from the sale, if required, of the assets and companies of the BAI Group and the extent to which those who invested in the high return insurance policies can be fully paid or otherwise. The paramount consideration of all parties concerned and the nation must be to safeguard to the fullest extent possible the interests of these policyholders. Any irresponsible action to rock the boat because of narrow short-term interests will be detrimental to the holders of such policies.

The government’s prompt decision to guarantee the investments of savers in the Bramer Bank, now assumed by the newly opened National Commercial Bank, seems to have calmed fears of investors and stemmed the rush of clients to redeem their investments. Similarly, the guarantees given by government to holders of standard contributory insurance policies have allayed the apprehensions of the latter. A similar government assurance must be given to savers who have invested in the Bramer Asset Management Company of the Group, bearing in mind that the higher returns promised have so far been diligently paid to all investors.

It must be remembered that we would be shooting ourselves in the foot in respect of the country’s attempt to harness all possible funds, if press reports and public statements were to give the impression that any funds purportedly siphoned away from the investment pot of holders of high benefit insurance policies are irrevocably lost. Every effort must be made to retrieve these funds. All this represents a daunting task which would take time and require patience and unswerving focus.

Keeping financial governance on track

The overall picture being progressively exposed with each revelation on the accounts and modus operandi of the companies of the BAI-Bramer set up raises legitimate questions about how could such licence been allowed unchecked under the watch of regulators and auditors? It also raises questions about the role of the top management of the incriminated companies.

Moreover, in accordance with International Standards of Auditing, auditors have to comply with ethical requirements and plan and perform their audit to obtain reasonable assurance as to whether the financial statements are free from material misstatements before issuing their opinion that the financial statements ‘give a true and fair view of the financial situation and financial performance’ of the audited company. Any failings discovered in the prevalent regulatory framework and its operational system of oversight as well as internal and external audit systems must be addressed and swiftly corrected if we are to firmly ground the repute and standing of Mauritius as a clean, transparent and robust international financial centre of excellence.

The multiplicity and sophistry of alleged financial crimes since the beginning of the year requires the setting up of a dedicated financial crime investigation institution manned by able specialists in financial forensics and financial crime lawyers, etc. Such an institution can also provide oversight and advice on strengthening the regulatory framework to assure a clean and transparent financial services sector. The police are not equipped to adequately assume such pointed investigative responsibilities and build the related legal case to bring any identified culprit to book.

The present crisis has also brought once again to light the immense propensity to save of Mauritians of all walks of life evaluated in the context of the investments made by the saving public in the investment products offered by BAI-Bramer at tens of billions of rupees. Is it not time to set up appropriate higher earning capital protected investment instruments or investment Funds professionally manned by Fund and Asset managers to help harness and invest these savings in potentially very profitable ventures for the development and growth of the country?

When all is said and done and the dust of the present financial forensic investigation has settled, what will matter is whether we have as a nation demonstrated the judicious crisis management acumen to conjure the current dire situation and safeguard the interests of the multitude of investors and to the best possible extent those of high benefit insurance policy holders. And also, whether we have drawn the seminal lessons to promptly effect the systemic reforms required to assure a more secure future. What better way to live up to and honour the mandate entrusted to government by the people?

 

* Published in print edition on 17 April  2015

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