It is therefore time for us to reflect on these situations and try to be a step ahead. That is what saves financial markets – being a step ahead! I remember in February 2007, our Central Bank introduced an additional 1% provision for all performing loans of banks, because we realized that there was bubble that was forming. But, the public and media reaction to that policy action was somewhat rough. The next day’s newspaper headlines said that Cabraal has delivered a kidney punch to the banks; some claimed that we were killing the industry; others lamented that we are making it difficult for the banks unnecessarily. Today, one year and 2 months later, people realize that our anticipation has saved the day. We don't want everyone to get up and shout and acknowledge it. But perhaps those of you who are directors of finance companies, as persons who are responsible for about 5% of the financial system of this country, would now realize that, there are certain steps that need to be taken early in order to safeguard the entire industry. Sometimes, some people tell us, “our shareholders have been the ones who have made us. Our depositors have been continuously supported us. Therefore, we are responsible to our shareholders and depositors, and nobody else”. Perhaps, there is some truth in that statement. But, think about this a little more deeply. What would happen if one finance company fails?
Remember that your personal liability, will also be at stake in case of failure and such loss can be quite substantial if you have not taken the right steps. So, take the interest; take the time to study, and, be diligent in your activities. Actually, if you do that, you will find that it is much better for your Company, much safer for yourself, much easier for the regulator, and much easier for the market. My dear friends, risk can be a sudden occurrence. Risk can, at the same time, be slow in coming. You don’t know which risk is there, but you have to be alive to risk. Today, management is all about risk management. What are the risks in doing something? What will be the repercussions? What will be the dangers? You have to think-safety first, just like how it is said at some of the modern construction sites. When you go to some construction sites, you see a large sign that says “safety first”. Why? Because you have to survive before you are able to construct, and accidents can be both painful and costly. In looking at safety, in the case of financial institutions, the important factor is to focus on liquidity management. You may be profitable. You may be having a very good plan for the future. But if you do not have liquidity, i.e., if you do not have cash to meet your obligations, you cannot survive. It is like a very fit athlete who can run very fast.