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Thursday, 18th April 2024
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Never too late Back  
The Central Bank might be accused of jumping on the bandwagon too late by requiring banks to carry out independent assessments of their risk system controls, and to report back on their findings, in the wake of the Allfirst debacle.
Never too late
The Central Bank might be accused of jumping on the bandwagon too late by requiring banks to carry out independent assessments of their risk system controls, and to report back on their findings, in the wake of the Allfirst debacle.
However, it is never too late, and, had such an exercise been carried out in AIB at the appropriate time, the problem would have been nipped in the bud. It is never too late however to impose robust risk management. Therefore it is entirely appropriate for the Central Bank to issue a missive to all reporting banks to look into their risk management systems - the banking system will emerge better for the exercise. As an aid to this exercise we publish a Special Report in this issue - ‘The Risks Companies Face’, in which several leading consultants in the sphere elaborate on the issues arising in the wake of the Allfirst debacle. The process of balancing risk and reward is an art, and it is at the core of what financial services is about. In these more demanding times in the global economy the pressure may be felt by some to achieve high rewards - possibly by reference to the more buoyant patterns of the 1990s.
The lessons of Allfirst should serve as a warning to us that risk management should not be sacrificed at the altar of targets, perhaps unreasonable and unattainable, for rewards that are more appropriate to a few years ago than to 2002.

Let’s hope it gets better
As for that subdued economy of 2002, this month’s Finance contains an unique document - the advice of Ireland’s leading financial sector economic analysts on economic policy offered to the political parties in the run up to the general election. It is offered free of charge - or perhaps more accurately for no more than the price of this copy of Finance - to whatever political party wishes to take it up. We in this publication will not be formally backing any political party. However, we do find ourselves in agreement with the overall thrust of the recommendations of the panel. That should not, when one thinks about it, be a difficult call - for these economists are professionals - they should know what works best to the benefit of the economy, and they ply their trade by getting it right as best they can in the tricky day to day business of risk and reward management. Their recommendations will be ignored at our peril.
It is striking that all of the panel, without exception, foresee no scenario in which it will be beneficial to raise taxes. If we are to regard the next five years as starting in 2002, then we have got off to a bad start - VAT has been raised by 1 per cent - disadvantaging Ireland as an e-commerce location seriously - at a time when we should have been targeting a cut not a raise. Secondly, as a perusal of the lead article in this month’s KPMG Tax Monitor shows, there have been some really ominous developments on the corporation tax front, contained in the fine print of the Finance Bill. This will lead to a rise in the tax burden on corporations, to add to the Employer PRSI move of the previous Budget. To add insult to injury, companies are being unreasonably asked to do impossible things in paying this extra tax imposition - making forecasts of income before it is earned, in particular. This is an outrageous, unfair, impracticable and negative proposal, and it unfortunately could be interpreted as reflecting an ‘anti business’ sentiment by the Irish Government - not the kind of message that this country should be sending out to the outside world, at this of all times.

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