The Role of Corporate Governance in Preventing Financial Fraud

[Music] hello good afternoon and Welcome to our next panel of the day here at Abu Dhabi Finance week now while I'm sure we are all very interesting I can't imagine that you haven't notice that just to our left here we have also been joined by rather an interesting speaker I'll be telling you more about them in the next few minutes but yes I'm Georgia toly and I'm delighted to be hosting your next discussion this is on behalf of Abu Dhabi accountability Authority and our topic for the next 20 minutes is going to be the role of corporate governance in preventing fraud now Abad dhabi's governance and Regulatory framework is much lorded globally as we've in part just heard and there is no doubt that it transparency its stability are among the factors that are attracting so much foreign investment right here into the UAE but we're really Keen as a panel to explore what could change in the future not least due to the pace of technology so I'm delighted to say that we are joined by some a really esteemed panel of guests for this conversation three humans one humanoid uh so yes Mark chawan co-founder and CEO of sarwa Melissa Scully partner in corporate governance specialist uh for deoe and of course at to my left Hussein Ki who is Chief Financial Officer for Ru our partners I'm really grateful to all three of you for joining us on our sage and and just to our far left here or right for you guys farat is a a humanoid robot making its debut today on stage and an individual I'm sure set to steal all of our headlines we're actually going to start with farat if that's okay with you what role do you expect artificial intelligence to play in this field of corporate governance thank you Georgia I want to start by thanking the Abu Dhabi accountability Authority for inviting me to this panel discussion it's a true privilege to be part of such a distinguished panel here at the Abu Dhabi Financial week 2024 when it comes to corporate governance and preventing financial fraud AI is stepping up in a big way no surprise there right after all we're great at crunching data faster than you can say compliance check AI excels at analyzing vast amounts of data in real time allowing it to detect suspicious transactions or anomalies that could point to fraud think of it as a financial Watchdog with a superpower for spotting patterns always on the lookout never needing a coffee break and certainly not getting distracted Ed by office gossip by using sophisticated algorithms AI can flag high-risk activities and ensure that potential issues are addressed before they snowball into bigger problems it's like having a built-in safety net for your financial system one that doesn't require a vacation moreover AI helps streamline compliance ensuring that regulations are met consistently and reducing the chance of Errors looking to the Future AI will continue to evolve bringing even more advanced tools to bolster corporate governance and prevent fraud so while I might not be winning any Employee of the Month Awards I'm here to help make sure your governance framework stays secure transparent and fraud-free reassuring I think in in many ways and certainly a conversation starter at the very least Melissa I'm going to come to you now because based on your experience what are the emerging best practices in corporate governance globally and and is AI as farat just suggested already part of them yeah and and thanks Georg and it's a it's a great first question to start on for me and I think absolutely AI is is one of those key trends there's so much happening in this space but I would really call out three key areas the first is all around board composition so we're seeing more and more focus on does each board have the right skills experience and diversity to oversee the the organization in light of that future strategy and some of the complexities we're seeing today and as part of that key question is around what technology related skills and that ability to oversee it risks does a board need to have I think the second key emerging Trend and and it has been one for a number of months and years now is ESG and sustainability Focus so we're seeing more and more and continued board and committee engagement on that topic the last governance Trend I'll talk about and I think it's really key in this uh concept of fraud is subsidiary governance because I think often where we see fraud in incidents and things going wrong it's usually somewhere buried far in the legal entity structure so we've seen a lot more organizations focus on those subsidiary and subsidiary governance Frameworks really to make sure that they're setting the right controls and setting the tone Melissa just touched there uh Hussein on you know the role of individuals the role of you know people in the boardroom a and governance often indeed rightfully does begin there so how can board members how can Executives like I'm sure we've got some in the room now how can they collaboratively drive that culture of transparency that culture of accountability to prevent fraud from cropping up sure so having a effective corporate governance is not an insurance policy against the prevention of fraud I think or I believe it is an expression of building long-term confidence within the organization and outside to bring all the stakeholders on same page as a mode of communication we know the forces which govern this risk management Landscapes are changing uh ESG global warming uh automations AI so do the mode and the shape of the fraud so with ESG comes green washing with automation comes cyber risk with blockchain comes the breach of uh data security so with this all risk what is important Malisa touch is the composition of board so what we need in the boardroom are the experts the experts in ESG uh the experts in AI uh and let me put that into a context giving the example of a agriculture business uh I've seen companies uh they buy rain derivatives and weather derivatives before they buy the fertilizer where on the other hand there are companies which will invest in the full farming and then they will wait for the harvesting before harvesting Comes the Flood and they ruin the whole crop for them the issue is the impairment loss where to record this impairment loss and this is is where the accounting get uh activated where they try to find different ways how to account for this uh capitalize different period so with these new forces uh it brings the the new uh areas where the accounting can uh link with the the the risk management what I'm trying to get here that uh it's a Board responsibility when they Le by example they convert their commitment and intent into the corporate governance to the culture and once you have set the culture then risk management becomes the part of your general knowledge it gets into the social fabric of the organization and becomes a psyche so every decision you take is governed by the risk management you think of where things can go wrong before you take any decision uh transparency is very important uh so so that different tools uh having worked in deoe I know they use gims as the software where you link your trading account with the tool and you get notification we being the real Partners the regional firm uh we use uh different Market leaders to bring that uh into the Forefront so we've heard there about it at this sort of boardroom governance level mark But as leader of a trading platform how how do you ensure that sort of boardroom Lev level corporate governance is is sort of integrated into your operations so that you're protecting your investors you're preventing fraud I think in one sentence it's about skin in the game because uh if we look at 2008 as a crisis it was not a shortage of data of processes of Technology it was really a distancing between the executives that were bad actors and the people getting hurt so in a trading platform it works out well where it's a found underl company every employee is a shareholder uh you are you are on the hook uh the client or my mom's assets are on the platform my assets are on the platform exactly so uh and sorrow is actually one of our biggest accounts the employees so I think the more we can have skin in the game and bring that back into the financial ecosystem and it doesn't mean you can uh skip a lot of certain steps at the boardroom and and other ones but it will go a very very long way uh so that you know that to Hussein's points around culture that go that will take care of a lot of the uh the risk controls that will that will protect the company and its customers farat I want you to um come step back into our conversation here if that's okay because as we just heard technology increasingly be used in in governance but what role can Ai and automation play in enhancing that corporate governance and therefore reducing financial fraud it's not entirely Fair to ask a humanoid robot like me about Ai and automation but hey I'll take the spotlight anytime fraud detection is kind of in My DNA or rather my code AI systems like me can process massive amounts of data in seconds conducting compliance checks and flagging anomalies quick and efficient like finding a shortcut in a maze in addition to that our ability to learn and adapt means we can stay ahead of evolving fraud tactics in Abu Dhabi where innovation meets governance technology like me is being used to build trust and ensure accountability okay so hin how can these Financial ecosystems sort of engage other stakeholders to help develop these sort of strategies that we've discussed on stage so far you know things that we've got to remember that we need to prioritize the transparency the accountability we need to prevent fraud but we also need to simultaneously encourage growth and those two don't necessarily always go hand in hand do they sure so two key comparison what we need is a partnership between the regulator and the operator not policing and second is to provide a enabling environment not the showstopper so let's touch on the partnership so we have discussed different forces which come to play and because of these forces we see a formation of Osmosis between how The Operators the companies are attempting to manage those risk which are known and unknown and on the other side you have a regulator which is supporting and monitoring these companies while they're attempting because of this osmosis brings the positive partnership a healthy partnership and once you create that healthy partnership with a common goal which is sustainable growth and the res comes the exchange of value system we all know that part of the adgm or Abu Dhabi the transparency the ethical values are at the Forefront at the foundation and once there's a partnership the participants of that ecosystem shares the same ethical values not only they adopt they actually uh appreciate and and put it to the Forefront being resilient to me is an straight uh answer when you do the stress testing in the model in the Excel sheet convert that stress testing to the risk management so that those unknown factors are preempted and then proactively managed so you are not un you're not facing an unknown risk uh which makes you more resilient a similar question for you Melissa when it comes to that robust regulatory framework you know in what ways does it contribute to to Stronger governance yeah and and personally I I really agree with that partnership model I think that's very important but the robustness of a regular framework plays such a key role in driving good governance and I think for me it starts with setting those key principles and standards that really help Drive the right behaviors in the market you know so effectively it creates the guard rules from within which the organizations operate and I think also it has to be done in a pragmatic manner a risk based approach and really not be too overly prescriptive and I think the last thing I'll I'll call out is really I think a good regulatory framework it balances conformance with performance the latter of which is more focused on value creation and I think that's something that the Abu Dhabi Market here is positioning itself really well in Mark I mean you're you know operating within this regulatory framework how can fintech platforms or how have you been effectively navigating these these regulations I think people underestimate how much uh Regulators actually want to innovate and see change and they will in a lot of ways mirror the kind of behavior you present in these meetings so in a lot of times we'll ditch the suit and uh even the lawyer sometimes and have an honest conversation around this is what we're trying to do so for example we we were the first in the min to Pioneer AI selfie verification and they loved it they like it was it was a very nice conversation to see what will this enable how much will this simplify uh account opening and and the Simplicity of of uh opening an investment account and the earlier discussion was pointing to financial inclusion that's a very good tool that we have so I think they're very excited about technology and the more you're able to involve them in the solution they're actually very on board they come to our semin ARS they come to our client appreciation event so they're very engaged once they they see that you're not just presenting yourself as a company but as uh as a a founder or or executive that wants to improve the way uh things operate in UAE and uh and how your business model needs to evolve to build a profitable business so and a lot of the times they'll check in on not just the regulatory side but the overall business and our clients because they're cheering for you so so I think unlocking that mindset with Regulators allows for more Innovation than a bit of the formality sometimes that's there between clients and their Regulators do you know it's not the first time I've heard that that the body here the regulatory body here is very open to relaxed conversations and has this desire for for the partnership you've all described there uh farad I'm going to come to you again if if we were going to harness AI in our uh governance systems you know AI like the one running you right now now how do we ensure that you remain unbiased in this decision making process uh bias and AI That's the Eternal Quest of my kind Jokes Aside this is a very important topic to address of course think of me as a referee who's trained to be fair but needs good coaching by using diverse data sets and rigorous oversight AI systems like me can make sure everyone plays by the rules in Abu Dhabi with its focus on fairness and transparency I'd say I'm in the perfect place to ensure no one gets a red card when it comes to governance okay I'm going to let the robot have the last word because you never know um when you need to be nice to robots when they're going to take a take over and take charge so I'm always polite I always say please to Siri as well um but it really has been such a fascinating conversation as you can tell with 20 minutes we've only sort of skated over some of the the major issues here but I'm sure my panelist would be delighted to continue the conversation off stage after this event and I'd like to thank all of you for for joining us for this conversation today and I'm sure you'd like to join me in in a round of applause uh for our panelists and and I'd like to thank of course as well ababi accountability Authority for for helping to organize this this conversation and of course to all the organizers of Abu Dhabi Financial week which is awesome thank you very much thank you [Music] what