Major impacts, risks and opportunities of the Orabank Group

The Orabank Group is committed to reducing risks, especially those related to the health crisis and climate. We are mobilized around the SDGs according to the expectations of our stakeholders and innovators to contribute to their targets.

Conjuncture

African context
In a context of strong population growth, where 40% of the population is under 15 years of age and 84% of the economy is informal, the Orabank Group seeks to identify and understand both the major expectations of its ecosystem, the various risks it faces in its activities and the opportunities its profession and territory presents to it. Like all companies, the Orabank Group, through its activities, interacts with its societal environment. The identification and analysis of the Group’s impacts on its environment is part of its sustainable development approach to orient its actions towards reducing negative effects and valuing positive effects, both for itself and for its stakeholders.
The health crisis of COVID-19 remains the event that could have an impact on the group’s performance. In response to COVID-19, the group quickly took the necessary measures to continue serving our clients while ensuring their safety and that of our employees, in compliance with the recommendations of the authorities. Against the Covid-19 crisis, Africa must develop an inclusive strategy that considers its economic and social constraints. Two major factors in health-care systems will complicate Africa’s response to Covid-19. For starters, the continent suffers from a double disease burden: that of endemic infectious diseases and that of Covid-19 which has just declared itself. Second, its capacity to provide intensive care is the lowest in the world. Social distancing seems difficult to implement on the continent, where the majority of the population lives on less than two dollars a day and the weight of the informal economy is considerable. In 2019, the sector employed 86% of jobs, according to an ILO study. This means that the vast majority of the inhabitants do not have formal employment with a salary that allows them to support themselves on a regular basis.

Source: 2021 Report “The Long Shadow of Informality” – WORLD BANK

Informality
The informal sector in West Africa is one of the main drivers of economic activity. In Sub-Saharan Africa, 89% of female employees work in the informal sector, which accounts for 80% of the region’s total employment and 55% of GDP. The irregular and low incomes of informal workers make them particularly vulnerable to economic shocks, such as the COVID-19 pandemic, locust epidemics or forced displacement. Informal workers are often excluded from existing social protection programs. And while the sector encompasses a variety of occupations at different skill and income levels, many workers are not financially, digitally, or otherwise educated.
In 2010-2018, informal economy in Sub-Saharan Africa accounted for 36% of official GDP, and informal employment (measured by self-employment) accounted for 62% of employment. 90% of the workforce is not covered by pension plans. Over the last two decades, output and informal employment in Sub-Saharan Africa have fallen 5 and 6 % points, respectively. Informality is higher in low-income countries, fragile states, and exporting countries. Informal employment exceeded 85% of total employment, on average, in Benin in 2010-18. Among the subregions, the highest average proportion of informal workers was in Central and West Africa, with 80% and 84% respectively, compared to 50% in Southern Africa.
Weight of the informal economy in GDP

Source: 2021 Report “The Long Shadow of Informality” – WORLD BANK

Outlook 2021
After a catastrophic 2020 marked by the most violent recession in half a century on the African continent, due to the Covid-19 pandemic, the outlook for growth today seems slightly less degraded. Africa should even return to economic growth in 2021, but poverty will continue to increase, and public debts will increase, according to the African Development Bank (BAD) in its latest report published in March 2021. The continent’s GDP is expected to return to 3.4% growth in 2021.
Despite the return of growth in 2021, the social consequences of the pandemic will continue to be felt: by 2021, 39 million Africans could fall into extreme poverty, at an income level of $1.90 per day. In 2020, the BAD estimated that 30 million people were displaced. In total, extreme poverty could affect 465 million Africans, or one third of the continent’s population, even though poverty had been declining steadily for two decades.

Source: “African Economic Outlook 2021 Report” – AFRICAN DEVELOPMENT BANK

Orabank Group Risks

Governance
The Risk Director of the Orabank Group is responsible for supervising ESG risks and opportunities. The members of the Board of Directors and the CEO of the Group are regularly informed about the deployment of the Group’s strategic actions in this field.
SYMRES
SYMRES (Environmental and Social Risk Management System) is the approach of the Orabank Group to manage its ESG risks. This system aims to identify and mitigate potential societal risks associated with any new investment project submitted to the bank. The objective of SYMRES is to prevent the bank from financing projects or activities that would have a significant negative social or environmental impact, which could turn into financial or reputational risk.
It was developed by the Legal and CSR Head of department and deployed in 2017 in all Group entities. It has been formally approved by the Board of Directors of the holding company Oragroup. This approach includes a manual of environmental and social risk management procedures, a list of exclusion of funding applications, a context on the ESG risks of each Orabank Group host country, an ESG risk rating tool for companies and an analysis file to be incorporated into contracts.
The Risk Director of the Orabank Group also serves as Secretary of the Board of Directors’ Risk Committee and is responsible for the supervision of ESG risks and opportunities. The members of the Board of Directors and the CEO of the Group are regularly informed about the deployment of the Group’s strategic actions in this field.
Redesign of SYMRES
To respond, on the one hand, to a strong expectation of the governance of a better application of the ESG risk management system and, on the other hand, to the evolution and increase of potential reputational and image risks for the ORABANK group, without counting the risks of regulatory non-compliance, it has appeared necessary to strengthen the current system, in particular to support our clients on the path of sustainable development. Indeed, risks are regularly identified on ESG aspects (non-compliance with social or environmental regulations, non-compliance with administrative procedures, etc.) and it is necessary to reinforce the understanding of these risks and their impacts by our customer representatives. Moreover, there is a lack of education among business leaders because they have very little awareness of CSR issues.
In 2020, the Orabank Group undertook a review of its mapping of non-financial risks with the aim of aligning and putting in perspective its CSR strategy with its strategic development orientations with its customers. To this end, the ESG risks that the Group may potentially face have been clearly identified by the Group and addressed in a manner that minimizes their scope and occurrence. A complete list of potential extra-financial risks has been drawn up on the basis of the different themes addressed in the international benchmarks recognized for their relevance (TCFD, GRI/SASB, COSO ESG-ERM, WBSCD, UN-PRI, SDG, etc…). COSO and WBCSD have published a guide for the implementation of ESG risk management systems. This methodology is applied in the context of the ESG risk revision project of the Orabank Group.
To improve its climate reporting, Orabank has decided to follow the recommendations of the TCFD (Task Force on Climate-related Financial Disclosures). Climate and energy policy is an integral part of the Group’s CSR strategy. This 2020 integrated report includes a review of the implementation of the program and progress towards achieving climate targets, including green growth.
ORABANK has initiated a comprehensive study of its current system and context. This analysis includes a description of the impact of these risks and opportunities on Orabank Group’s strategy as well as the resilience actions put in place by the Group to address these risks. The Group’s portfolio is 44% represented by large companies and 29% by SMEs, making a total of 73% for companies that are the priority target of the SYMRES redesign. A steering committee consisting of 35 members of the Group’s directorates (Executive Directorate, Risk Management, Treasury, Commercial and Marketing, Legal and Litigation, Credit and External Communication) was set up and assembled to implement a 3-step action plan:
  • Analysis of opportunities related to the United Nations Sustainable Development Goals
  • Study of the exclusion sectors of the portfolio
  • Prioritize the ESG risks of the Orabank Group and the main business sectors of its corporate clients.