Legal Risk Management
1 Legal risk concept in FirstBank
In line with international best practice, FirstBank continues to ensure that its policies and operational guidelines are not only geared towards the effective management and control of identifiable legal risks but are also designed to enable the Bank and its officers to appreciate legal constraints upon business activity.
Legal risks may arise as result of failure or inability:
- to mitigate the likelihood of an adverse claim being made against the Bank;
- to act appropriately or diligently in response to a claim against the Bank;
- to successfully defend a legal action against the Bank;
- to take action to protect the legal rights of the Bank in the law courts; and
- to take prompt action to preserve the right of recourse to insurers in the event of any claim against the Bank.
2 Legal risk management structure
The Bank has a dedicated global legal function responsible for the effective management of legal risks Bank-wide. This includes the provision of legal advisory services, legal and security documentation, management of Bank litigation and debt recovery among others.
The Legal Services Department at Head Office oversees the Bank's global legal function and reports directly to the Chief Risk Officer.
For smooth and effective performance of its duties, the Legal Services Department is sub-divided into four hubs each of which is headed by a senior officer, who reports to the Head, Legal Services. The respective hubs are as follows:
- Corporate and Contracts: ensures the proper documentation of transactions between the Bank and its corporate customers as well as the preparation and vetting of contracts between the Bank and its customers/ third parties in appropriate cases
- Litigation: responsible for the management and monitoring of all legal actions involving the Bank and the rendition of legal opinions in all relevant matters. The hub also has responsibility for evaluating options for out-of-court settlement of Bank's cases with a view to decongesting the Bank's litigation portfolio and reducing contingent liabilities to the barest minimum
- Retail and Securities: has responsibility for the documentation and perfection of the various securities used to secure credit facilities extended to Bank customers
- Regional Coordination/Administration: its responsibility is to coordinate and supervise all our area legal managers in the discharge of their duties in some of the Bank's Business Development Offices (BDOs) and to oversee the proper administration of the Legal Department
- There is however a sub-hub known as Bonds and Guarantees sub-hub which is responsible for the vetting and engrossment of all bonds and guarantees issued by the Bank or accepted as security by the Bank.
3 Legal risk policy and reporting
It is the responsibility of the Head, Legal Services to draw the attention of management to all known potential incidents of material legal risks at an early stage with a view to ensuring that mechanisms are put in place for effective and proactive management of same.
For effective implementation of this major policy, it behoves the various departments/units of the Bank to promptly alert the Legal Services Department of any potential, actual or threatened litigation that may constitute a significant legal risk to the Bank.
In order to keep the Board of Directors abreast of details of cases involving major potential liabilities against the Bank, the Legal Services Department submits quarterly reports on pending litigation to the Board, while management is regularly updated on such cases.
