PRE-CONFERENCE TRAINING
"Enterprise Risk Management - Building Risk Intelligence in Today's Dynamic Landscape"

Monday 17th November, 2008

8:15 - 8:30 AM

Welcome Remarks - Mrs Patricia Hamilton, CEO - Caribbean Association of Indigenous Banks Inc. (CAIB)

Enterprise Risk Management: Overview to Implementation

8:30 - 9:10 AM

Strategic Overview - An Introduction to Enterprise Risk Management
Keynote Presenter: Mr. Geoff Kates, Chairman - Professional Risk Managers International Association

SUMMARY OF PRESENTATION:

ERM's purpose covers such areas as (1) Aligning an entity's risk appetite and strategies, (2) Creating a single language for discussion of risk issues, (3) Reducing the frequency and depth of operational shocks and losses, (4) Identifying and managing risks from different business lines, and (5) Improving the effectiveness of capital allocation. To be effective, there must be a corporate-wide commitment to ERM aimed at providing valuable information to senior management to facilitate informed decision-making.

Though many ERM frameworks focus on Market, Credit and Operational Risk, ERM must go beyond these risks to provide a framework for the management of liquidity risk (a unified assessment of the bank's liquidity position), as well as less tangible but just as important risk factors such as Reputational risk, Organisation risk and Compliance risk.

The technology implications of ERM are complex and burdensome, involving the integration of numerous data sources and cross-functional processes. Furthermore, enterprise risk visualisation involves converging disparate systems, data, processes and people. Through it all, it is critical that underlying data retains its integrity.

9:10 - 9:50 AM

The ERM Process - Negotiating the Challenges of ERM Implementation
Keynote Presenter: Ms. Ohna de Bruin, Partner - KPMG Risk Advisory Services, Bermuda

SUMMARY OF PRESENTATION:

Recent ERM programme failures have lead to the criticism of ERM in general. The criticism is: if the banks had it right all along, why did the massive financial crisis occur. Many also question if ERM - being biased toward risk control and audit - will slow down the growth of enterprises. In order for ERM to be successful, however, the components of its framework and elements of such a programme must be carefully understood and structured. Certainly, the elements of a sound ERM programme must include all 5 of the following: Risk Governance; Risk Assessment; Quantification & Aggregation; Monitoring & Reporting; and Risk & Control Optimization.

Key considerations for sound ERM programmes: Don't over-complicate the programme; Understand the needs of stakeholders and link them back to business processes; Identify key controls that address multiple objectives; Fix roles and responsibilities & ensure the right level of communication between these; and establish a strong risk and control awareness within the organization.

9:50 - 10:00 AM

Discussion (Questions & Answers)

10:00 - 10:20 AM

Health Break & Networking

10:20 - 11:00 AM

ERM & The Basel Capital Accord: Special Implications & Considerations
Keynote Presenter: Dr. Howard Haughton, Managing Director - Holistic Risk Solutions Ltd.

SUMMARY OF PRESENTATION:

ERM is the framework by which companies identify, measure, manage, and disclose all key risks to increase value to primary stakeholders while satisfying other stakeholders. Existing approaches to risk management in financial institutions generally manage risk in silos and contain significant inefficiencies. As companies grow the "silo approach" leads to a combinatorial increase in complexity of risks.

ERM facilitates the making of important business decisions based on cost & capital efficiency resulting from risk-adjusted performance measurement, and facilitates the making of multi-dimensional risk decisions based on a coherent, unified view of risk.

The basic elements of an effective risk management programme must include Senior management and board level commitment, clearly defined responsibilities for managing and controlling risk, monitoring of all programmes and procedures; and regular reporting (including independent audits) to senior management and board directors.

Many ERM services can work to support Basel II, through a process which includes the identifying, capturing updating and applying key credit risk components in everyday business situations and assessing risk/return criteria through an effort for continuous process improvement.

11:00 - 11:40 AM

ERM & Internal Controls - The Dovetailed Relationship
Keynote Presenter: Mr. Ravi Varadachari - ?Principal Consultant' and ?Practice Head - Risk Management & Compliance - Oracle Financial Services Software

SUMMARY OF PRESENTATION:

Financial institutions are exposed to a variety of risks, and as such the ERM mechanism should be designed to holistically views of all the risks that a financial institution is exposed to. Keys to effective ERM, therefore, must include: Risk measurement and management and Internal controls and mechanisms (Strategy; Governance; Organization structure; Processes, Policies and Procedures).

There are two categories of capital: Economic Capital and Regulatory capital. Regulatory Capital is the capital that banks are required to hold by their regulator, and under the Basel II framework is computed based on a prescriptive formula for credit risk

Economic Capital, on the other hand, is capital that is required commensurate with the risk profile of the bank ("The amount of capital a bank should have"). Various models exist to estimate economic capital, and the aim is to use it for business decisions.

11:40 - 12:20 PM

International Financial Community: Thoughts on Risk Management Deficiencies - Caribbean Financial Sector & Environment
Co-Presenters: Mrs. Lakshmi Shyam Sunder, Director, Corporate Risk Management - International Financial Corporation (IFC); Mr. Rodrigo Navas, Investment Officer - Inter-American Investment Corporation (IIC)

SUMMARY OF PRESENTATION (Lakshmi Shyam Sunder):

Understanding the background to the current financial sector crisis involves examining such issues as Basel I & II; accounting standards related to off-balance-sheet vehicles; the separation of risk management functions from risk takers; market-oriented macro policies; and the impact of globalization. In looking at what went wrong, focus is placed on the quantitative techniques of capital models, on history-driven data being used for new products, and on the model's increased complexity and implicit assumptions.

A contributing role was played by non-bank-regulated participants such as insurances, rating agencies and hedge funds - risk was being shifted but was still in system, creating Counterparty risk (risk not necessarily with the entity best able to bear it.)

In terms of regulation and policy, the following considerations / changes are necessary: More principles vs. rules ; Less procyclical need for buffers; Broader and more integrated coverage of institutions and instruments; Balance between innovation and stability; Recognize / Respect purposes of risk standards and accounting standards; Information aggregation: institution-specific vs. system.

SUMMARY OF PRESENTATION (Ravi Varadachari):

The IIC is a regional multilateral institution mandated by its member countries to provide financing to private enterprises in Latin America and the Caribbean, particularly those that are small and medium in size. The IIC provide direct financing to companies and indirect financing through financial intermediaries.

In light of the presence of Environmental Risk, IIC's Environmental Training Course has been made available to the Financial Sector. The workshop focuses on the following, among other things: (a) Assisting financial institutions in minimizing environmental and social risks and maximizing the rapidly evolving opportunities associated with sustainability; (b) Building real commitment to sustainability and the capacity to develop and carry out environmental strategies and risk management systems; and (c) Promoting the exchange of information among financial institutions in Latin America and the Caribbean and disseminates new market opportunities (such as green credit lines and the market for certified products).

12:20 - 12:50 PM

Roundtable Discussions: Ohna deBruin, Howard Haughton, Ravi Varadachari, Lakshmi Shyam Sunder, Rodrigo Navas
Moderator: Geoff Kates

12:50 - 2:00 PM

Lunch & Networking

2:00 - 4:00 PM

CAIB's Annual General Meeting (CAIB General/Associate Members ONLY)

6:00 PM

Conference Opening Ceremony / Republic Bank Cocktail & Live Entertainment
Needham's Room & Pre-function Area, Hilton Hotel

CONFERENCE
"Safeguarding Our Future in the Face of Global Economic Challenges"

Tuesday 18th November, 2008

* DAY 1 *
Turbulence in World Financial Markets:
Impact On & Opportunities For the Caribbean Financial Sector

SUB-THEME I - "The Regulatory Framework: Creating an Enabling Environment"

8:30 - 9:15 AM

Global Financial Regulations: Trends, Risks & Opportunities for the Caribbean
Keynote Presenter: Prof. Avinash Persaud, Chairman - Intelligence Capital Ltd

SUMMARY OF PRESENTATION:

The global financial crisis - as defined by its scope, size and spread - is a failure, first and foremost, of regulatory policy. While noting the various international reforms occurring to avoid and minimize the spread of the crisis, there is a need to fully understand this crisis and why it occurred so that mistakes can be corrected and/or avoided in the future.

Fundamental failures included the placement of markets at the centre of financial regulations, and the creation of complex regulations founded not on banking or economic principles, but legal principles that promoted the unrealistic ideal that all banks and all assets should be treated the same way.

Financial liquidity and systemic liquidity are not about market size, but rather are about diversity. Diversity isthe key to liquidity - yet regulations were geared towards reducing diversity in the name of best practice and common standards. "We must make sure that regulations don't destroy the diversity that creates liquidity."

Key lessons to be gleaned from the crisis: (1) Increased transparency is not the solution, for transparency is not a defense against systemic risk. What is needed are better regulations. (2) The national tax-payer plays an important role, for they are the ones who will facilitate bailouts when needed. With this in mind, one must question the structure of IFCs and cross-border banking - who are the national tax-payers in this instance? (3) Before the collapse, everyone worried about the shadow banking system - the hedge funds. But the collapse did not start there. It started in the regulated banks, not the unregulated fringes. This taught us that banks are central and are the creators of liquidity. They must be our principle concern.

9:15 - 10:15 AM

Caribbean Regulatory Framework & Infrastructure - The Governors'/Regulators' Perspective
A Round Table Discussion

• Dr. Marion Williams, Governor - Central Bank of Barbados
• Dr. Gobind Ganga, Deputy Governor - Bank of Guyana
• Mr. Carl Hiralal, Inspector of Financial Institutions - Central Bank of Trinidad & Tobago

Moderator: Mr. Brian Wynter, Caribbean Technical Assistance Centre (CARTAC)

SUMMARY OF ROUND-TABLE DISCUSSIONS:

The Caribbean has long appreciated the role of a strong financial structure, and as such has not departed too much from the basics of sound risk management. As such, there are several arrangements in the Caribbean as relates to regulations. Global thought is tending towards the idea of a single regulator (as being done in Europe). This, however, would necessitate the central bank having the requisite skills to regulate a wider scope of financial institutions.

One challenge of operating within a global process is that rules are set by BAS, the US and the UK, with little consideration of how they apply to smaller, island-state economies such as ours. It is, however, becoming increasingly clear that the guidelines set must have an input from developing countries.

In order to strengthen the regulatory situation one needs to look at cross-border information sharing. Efforts must also be made to review regulatory objectives and to promote the financial infrastructure on a system-wide basis.

Added to this, strong prudential mechanisms need a number of pre-conditions, chief among these being an accommodating legal framework. Regulatory reform also needs the support of the private sector for usually the market is ahead of regulations in terms of innovation.

Nothing can substitute for regulation, and regulation is best executed when frank and open communication exists between the regulators and the supervised companies - which indeed is the case most prevalent in the Caribbean.

10:15 - 10:30 AM

Discussion (Questions & Answers)

10:30 - 11:00 AM

Health Break & Visits with Sponsor & Exhibitor Booths

11:00 - 11:30 AM

Review of the Sub-Prime Crisis: Emerging Opportunities for the Caribbean Financial Services Sector
Keynote Presenter: Mr. Eric-Vincent Guichard, Chief Investment Officer - GRAVITAS Capital Inc.

SUMMARY OF PRESENTATION:

The financial sector damage to date includes: Citigroup's declaration of billions in value wiped out from its balance sheet (about to cut 50,000 jobs); Merrill Lynch, Lehman, AIG, Bear Stearns no longer exist as independent going concerns; In total about US$1+Trillion lost (corporates, hedge funds, insurance companies, pension funds, endowments)

Housing pulls the economy, in that the housing industry provides for millions of jobs through hardware, electronics and utilities. However, the mortgage market of today is a lot more complicated than it used to be. Loans are no longer straight-forward transactions between a home owner and a community bank, but instead now involve multiple lenders, intermediary institutions / loan packagers, and rating agencies. When home prices plummeted and the mortgage sector collapsed, this had a devastating effect on the economy. Security collateral for mortgage loans lost value; this led to a credit freeze; corporate layoffs therefore rose; consumption dramatically shrank; and recession set in.

The North American housing / economic collapse has had a far-reaching, global impact, and as the Regional Financial Market evolves, the Caribbean should support and put forward calls for G20 Initiatives for Reform. The Region must also look to implementing both macro and micro responses, and in so doing, consider the coordination of regional oversight in the banking sector, consistency across jurisdictions, and genuine cooperation between the private and public sector. While difficult times are ahead, the Region's regulators should seek balance in control and regulatory mechanisms.

11:30 - 11:50 AM

Discussion (Questions & Answers)

11:50 - 12:20 PM

European Economic Partnership Agreement (EPA): Realizing Benefits for our Financial Services Sector
Keynote Presenter: The Rt. Hon. Owen Arthur, Former Prime Minister of Barbados

SUMMARY OF PRESENTATION:

The European Economic Partnership Agreement (EPA) is an opportunity for Caribbean banks and other economic and commercial entities to embrace change, trust their abilities, and forge new successes. In negotiating the structure of the EPA, trade in services was deemed a priority as the vast majority of Cariforum countries are steadily becoming or have become service-oriented economies.

The EPA - as a comprehensive new arrangement to cover trade in goods and services - provides Cariforum with duty-free, quota-free access to the European market in a manner which puts them beyond the challenge of the WTO.

The Caribbean financial market - especially in relation to banking - is already relatively open. Under the EPA, however, those countries that were behind in liberalisation agree to match the rest of the Group in respect of standard banking activities such as acceptance of deposits, lending of all types and payment and money transmission services. Barbados and the OECS also made commitments to liberalizing advisory and other auxiliary financial services, while Jamaica, Trinidad & Tobago and the OECS made commitments to support investments in back office operations and financial data processing. The European Union has already made liberal commitments, yet its offer to liberalise under the EPA with Cariforum is even more generous - granting full and free market access to Cariforum countries for the entire banking and financial services sector.

The EPA is not a "perfect" instrument, but it is an effective, beneficial and "modern" instrument of economic engagement crafted to afford the region great benefits. Under the EPA, Europe has offered Cariforum more advantageous access to its markets for services than it has offered any other trading partner under any other agreement. But these benefits will only best be realized from a unified CSME - an initiative which is still progressing too slowly.

12:20 - 12:40 PM

Discussion (Questions & Answers)

12:40 - 2:10 PM

Lunch & Networking

2:10 - 2:30 PM

Platinum Sponsors

• KPMG
• Jack Henry & Associates

CONCURRENT WORKSHOPS

2:30 - 3:45 PM

(A) Enterprise Risk Management: A Closer Look at the Issues
Workshop Facilitators: Ravi Varadachari, Howard Haughton, Lakshmi Shyam Sunder
Moderator: Geoff Kates

(B) International Financial Centres - A Regional Approach Structured to Include Onshore Players
Workshop Facilitator: Mr. Lyndon Guisseppi, CEO BB Holdings Ltd
Moderator: Mr. Michael Archibald, Chairman - Caribbean Association of Indigenous Banks Inc

Wednesday 19th November, 2008

* DAY 2 *
Building our Capacity to Capitalise on
Regional Cross Borders & Global Financial Opportunities

8:15 - 9:00 AM

Leadership In Times of Crisis
Keynote Presenter: Ms. Marguerite Orane

SUMMARY OF PRESENTATION:

Everything we have heard leaves us no doubt that we are in a time of serious crisis. Further, the prognosis is that we have just begun to feel the effect and that it is likely to broaden and deepen and last at least 2 to 3 years. While the economic crisis looms large we need to be reminded that that we are also in an environmental crisis - global warming, intense and unpredictable hurricanes and storms for us here in the Caribbean; and a social crisis - crime, health, increasing poverty and desperation; and a political crisis.

At the best of times, the Caribbean was insignificant in the scheme of things, and most of us experienced marginal growth. These are the worst of times - now what for us in the Caribbean?
Panic and Fear are the common responses, but one must be able to see and think clearly during these times,and see the opportunity therein.

Now is the time for leaders to step up. For the fundamental job of leadership is to make tough decisions in tough times. A leader must both give hope and provide forward momentum.

9:00 - 9:50 AM

Automated Credit Scoring: The Necessary Next Step
Keynote Presenter: Howard Haughton, Managing Director - Holistic Risk Solutions Ltd.

SUMMARY OF PRESENTATION:

Credit Scoring is a quantitative technique used to determine whether to extend credit (and if so, how much) to a borrower. Application Scoring is one type of credit scoring, and covers mechanisms used to determine whether or not credit should be extended to an applicant

Behavioral Scoring, on the other hand, is more analytical and involves mechanisms used to predict different types of behavior on a credit account. Unlike application scoring, which is a one-off event, behavioral scoring provides a regular, up-to-date assessment of an account's likely future status.

Benefits of the Credit Score System include its ability to quantify risk as a probability to default, its removal of subjectivity, and its facilitation of statistical analysis. However, various pitfalls also exist, among these the system's need for a large amount of historic loans, and the fact that that incorrect capture of data can skew statistical results.

Scoring models need to be validated to ensure they apply to current demographics and macro economic circumstances. This requires the periodic "recalculation" of the credit scores and assessing whether any statistically significant divergences exist between the old and new scoring models and making the necessary updates. In addition, Automated scoring systems should be integrated into the business processes supporting the loan origination process.

9:50 - 10:00 AM

Discussion (Questions & Answers)

10:00 - 10:15 AM

Health Break & Visits with Sponsor & Exhibitor Booths

SUB-THEME - "Innovative Marketing Strategies, Product Development & Services"

10:15 - 11:00 AM

Financing The Tourism Sector - How to Stay Ahead of the Ball
Presenter: Senator The Hon. Allen Chastanet, Minister of Tourism and Aviation, Saint Lucia

SUMMARY OF PRESENTATION: (currently unavailable)

11:00 - 12:15 PM

Tourism Industry Analysis: Financing Opportunities & Portfolio Management Strategies
A Round Table Discussion:

• Ms. Charlene Lewis, Associate Director, Advisory, KPMG Corporate Finance Ltd, Bahamas
• Mrs. Sue Springer, Vice President, Barbados Hotel & Tourism Association
• Mr. Cecil Miller, Expert/Researcher/Author on Caribbean Tourism Industry

Moderator: Mr. Robert LeHunte, Managing Director - Barbados National Bank Inc

SUMMARY OF PRESENTATION (Charlene Lewis):

A May 2008 survey showed regional bank lending against hospitality assets to be over US$4.5 billion. The survey also showed that developers registered a confidence level of just over 7 (on a scale of 1 to 10 - 10 being bullish), and banks a confidence level of just over 5.5. The survey also noted a tightening of credit in the market and increased conservatism on the part of lenders.

Since the survey, the worsening global financial crisis has resulted in increased travel costs and lowered airline capacity to the region. This has resulted in lower-than-normal Fall tourism figures. There has also been a noted delay in tourism project starts, fewer new project starts, and a slow-down in pre-sales.

November 2008 survey figures show that bank confidence has fallen from 5.5 to 4.5, likely reasons being falling arrival figures, falling visitor spend capacity and airlift cutbacks. In light of the current trends, developers should pursue available opportunities while: (1) Focusing on fundamentals; (2) Reducing reliance on pre-sales; (3) Increasing reliance on regional lenders;(4) Preparing for tighter borrowing terms; and (5) being more strategic in the timing and target of buyers.

SUMMARY OF PRESENTATION (SUE SPRINGER):

The Caribbean region relies heavily on tourism, and as such should be encouraged by the WTTC's continued prediction for world wide growth in travel and tourism over the next 5 years.

However, this particularly difficult span has seen tourism results dip significantly in each island - Atlantis hotel in Bahamas recently laid off 800 staff; Barbados recorded a 4% decline in long stay arrivals for October; and while projection by FTO bookings is up 15% for 2009 at the present time, these dynamic times make for no guarantees.

Given the bleak economic conditions facing the region's major tourist markets, banks and the Caribbean's tourism industry players should work together to survive the challenges by investigating options such as (1) short-term (12 - 18 months) moratorium on loan principal; (2) Governments creation of a guarantee system for hotels in trouble (along the lines of a bail-out); (3) Additional facilitation through soft loans and lower overdraft interest rates; and (4) the possibility of a Tourism Specialist to be on staff at each bank to lessen the disconnect that seems to exist.

SUMMARY OF PRESENTATION (CECIL MILLER):

The recessionary economic situation existent in worldwide is having a detrimental impact on the tourism sector of the Caribbean. Jamaica expects a 30% drop in stop-over winter arrivals; lay-offs in the tourism industry of Bahamas are already significant; and the current economic condition is expected to last well into 2009.

However, the tourism industry has a historical track record of rebound. Governments should therefore provide a supportive policy framework to help stimulate demand within the sector and ensure that travel and tourism continues to generate employment. Furthermore, given that Long-haul travel worldwide is projected to grow at 5.4 % per year over the period 1995-2020 and international tourist arrivals worldwide are forecast to reach 1.6 billion by 2020, Governments may seek to marketing the Caribbean as a single destination, further diversify the Tourism product, extend marketing thrusts to non-traditional regions such as Asia and South America, and review and strengthen the regulatory framework for investment.

Governments should also prepare and implement Tourism master Plans to guide the development of the sector and re-focus efforts on tourism public education and awareness.

12:15 - 12:45

Credit Risk Management: Managing the Loans Portfolio in Crisis Conditions (Part 1)
Presenter: Mr. Keith Checkley, Managing Associate - Keith Checkley & Associates

SUMMARY OF PRESENTATION:

"The credit crunch came because . people tried to wrap up debt in more and more complicated ways, in search of that unachievable Nirvana of higher returns without higher risks." Scottish Banker (Aug/Sep 2008)

A comprehensive banking report (released March 2008) examined perceptions of risk in the international banking world. It found that liquidity is the top risk facing banks today, and that the overall key level of risk is currently at an all-time high. Liquidity risk is defined as the risk that a bank will be unable to meet obligations as they fall due, at a reasonable cost. The recent and ongoing crisis has brought the question of liquidity to the forefront of banks' risk management, and it is clear that new standards and regulations are needed to strengthen the financial system's defences to liquidity risk.

Funding shortages - due to the credit crunch and the inability to dispose of assets - have resulted in immobilizing banks, in various cases to the point of collapse.

Also on the list of top risks facing the banking world are credit risk, macro-economic trends (threat of recession in the US, and spill-over effects) and regulatory risk.

12:45 - 2:00 PM

Lunch & Networking

2:00 - 2:15 PM

Premier/Platinum Sponsor

• INFOSYS

2:15 - 2:45 PM

Credit Risk Management: Managing the Loans Portfolio in Crisis Conditions (Part 2)
Presenter: Mrs. Faye Jacobs, Executive Director - Caribbean Integrated Financial Services Ltd.

SUMMARY OF PRESENTATION:

The Jamaican Financial System Meltdown of a decade ago came about due to the combined impact of such factors as - high interest rates; unpredictable monetary policies and market conditions; unethical practices; poor underwriting standards; mismatched Assets/ Liabilities; poor monitoring of the portfolio; failure to recognized NPL's; limitation of the Central Bank to effectively regulate Banks; and varying standards by regulatory bodies for Commercial banks.

The creation of Non-Performing Loans is likely where (a) the portfolio is being grown at an uncharacteristically rapid rate, (b) internal policies and procedures are allowed to weaken, (c) underwriting standards are loose, (d) growth in interconnected borrowings, (e) there is poor performance within the business sector, and (f) the financial sector is expanding beyond the capacity of the central bank to effectively regulate and monitor.

Some characteristic of a Financial Institution likely to create excessive NPL'S include: weak underwriting standards, inadequate internal monitoring systems; highly decentralized lending decision, and ill-management of sectoral exposure. In addressing the NPL Portfolio, lending institutions should consider a lending freeze and a thorough examination of lending policies to counteract weak underwriting standards. The creation of a rehabilitation unit for marginal accounts with well-defined work-out strategies was also suggested, as well as a move away from decentralization towards the centralization of lending decisions.