As the Corporate Governance Advisor (CGA) with over 20 years in Ghanaian banking, including roles at institutions like Ecobank Ghana where I oversaw compliance during the 2017-2019 cleanup, I draw on the Bank of Ghana’s (BoG) Corporate Governance Directive 2018 and the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) to address these risks. Conduct risk involves behaviors that harm customers or markets, while reputation risk arises from negative perceptions eroding trust. Post the banking sector cleanup (e.g., UT Bank’s collapse due to insider lending misconduct) and the 2022-2024 Domestic Debt Exchange Programme (DDEP) impacts, boards must prioritize these for resilience. Below, I address the sub-parts separately for clarity.

i) Essential Areas of Conduct and Reputation Risks the Board Should Consider (10 marks)

The board must consider the following key areas, explained with practical Ghanaian context and regulatory ties:

• Mis-selling of Products and Services: This involves pushing unsuitable financial products (e.g., high-risk investments to retail customers), leading to customer complaints and fines. In Ghana, BoG’s Consumer Recourse Mechanism Directive (2017) mandates fair treatment; failures, like those in the microfinance sector pre-cleanup, damaged reputations and led to license revocations.
• Insider Trading and Conflicts of Interest: Using privileged information for personal gain or favoring related parties. Per BoG Directive Section 4.3 on fit-and-proper, boards must enforce disclosures; examples include Capital Bank’s downfall from insider loans, eroding public trust and triggering systemic risks.
• Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) Non-Compliance: Failing to conduct due diligence on customers, especially Politically Exposed Persons (PEPs). Ghana’s Anti-Money Laundering Act, 2020 (Act 1044) and BoG’s AML/CFT Directive require robust KYC; non-compliance risks FATF grey-listing, as Ghana exited in 2021 but remains vigilant, impacting reputation globally.
• Data Privacy and Cybersecurity Breaches: Mishandling customer data, violating the Data Protection Act, 2012 (Act 843) and BoG’s Cyber and Information Security Directive 2020. With rising digital banking (e.g., mobile money post-DDEP), breaches like the 2023 hacks on some Ghanaian banks led to reputation damage and customer attrition.
• Unethical Employee Behavior and Culture: Including bribery, nepotism, or discrimination. The Ethical Perspectives in BoG’s governance framework emphasize integrity; poor culture, as in Meridian BIAO’s historical failure, amplifies conduct risks, affecting stakeholder confidence.
• Environmental and Social Governance (ESG) Lapses: Ignoring sustainable practices, per BoG’s Sustainable Banking Principles (2019), such as funding polluting projects without mitigation, leading to reputation hits from NGOs or regulators.

These areas interconnect; unmanaged conduct risks often escalate to reputation damage, as seen in global cases like Wells Fargo’s fake accounts scandal, adaptable to Ghana where BoG fines (e.g., up to GHS 1 million per violation) underscore prevention.

ii) Practical Information the Board Should Use to Manage Conduct and Reputation Risks (10 marks)

To manage these, the board should leverage the following practical information sources and tools, discussed for implementation:

• Internal Risk Assessments and Reports: Use quarterly compliance reports from the Chief Compliance Officer (per BoG Directive Section 5.2), including Key Risk Indicators (KRIs) like complaint volumes or AML alerts. Discuss: In practice, at Stanbic Bank Ghana, these inform board dashboards for proactive remediation, ensuring timeliness and accuracy to avoid surprises like DDEP-related liquidity strains.
• Regulatory Guidelines and Returns: Reference BoG’s BSD returns and directives (e.g., Notice No. BG/GOV/SEC/2023/05 on recapitalization), plus FATF recommendations. Discuss: Boards can benchmark against peers via GAB forums, using this data to prioritize risks; for instance, post-cleanup, GCB Bank used such info to strengthen whistleblowing mechanisms under Act 930.
• Customer Feedback and Market Intelligence: Gather via surveys, social media monitoring (e.g., X or Facebook sentiments), and Net Promoter Scores. Discuss: Practical in Ghana’s digital era, this helps detect reputation issues early; Ecobank Ghana’s post-2020 cyber directive implementation included sentiment analysis to manage breach fallout, integrating into board agendas.
• Audit Findings and External Benchmarks: Internal/external audit reports (per IFRS and BoG’s Risk-Based Auditing), plus global benchmarks like Basel III’s operational risk standards. Discuss: Boards should discuss these in Audit Committee meetings, actioning remediation plans; historical cases like Enron highlight the cost of ignoring audits, while in Ghana, voluntary disclosures enhance transparency.
• Training Records and Culture Metrics: Employee training completion rates on ethics/AML, and culture surveys. Discuss: Link to performance appraisals per HR guidelines; practical enforcement via incentives (e.g., bonuses tied to compliance scores) fosters accountability, as adopted by Barclays Africa operations in Ghana.
• Incident Logs and Whistleblower Reports: Maintained under BoG’s whistleblowing framework. Discuss: Anonymized data allows trend analysis; in stressed times like DDEP, this prevented escalation of conduct issues in surviving banks.

By discussing these in board meetings (minimum quarterly per Directive), the board ensures integrated governance, reducing risks through a risk-based approach. This not only complies with Act 930 but boosts profitability via trust, as evidenced by resilient banks post-cleanup.