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EFG Hermes Holding upholds the highest levels of corporate governance on the group and subsidiary level, with rigorous processes, policies, and procedures in place that ensure transparent and ethical running throughout the organization. The Firm’s prudent management and governance frameworks that have been at the heart of its success over the years will continue to play a central role as the Group evolves and further cements itself as a universal bank in Egypt with a leading investment bank franchise across the entire FEM space and a dedicated commercial banking arm.
The Firm’s Board of Directors is committed to providing EFG Hermes Holding with the needed guidance and support acquired over decades of cumulative experience. This expertise has helped EFG Hermes Holding grow sustainably while delivering value to all its stakeholders.
The Group’s Corporate Governance Framework addresses country-specific policies and works to blend EFG Hermes Holding’s group-wide strategy with the more focused subsidiary development programs. The framework provides the grounds for efficient decision-making across the entire organization and guarantees a high degree of accountability to ensure that all shareholders and clients have their investments handled in a responsible and professional manner. The framework sets out the minimum standards expected Group-wide while complying with local laws and regulations for an even higher level of stringency.
Based on the mandate of this framework, the Board of Directors continues to comply with the Egyptian Financial Regulatory Authority’s (FRA) corporate governance regulations released in 2016 and updated in 2020, stipulating the appointment of a majority of non-executive board members half of whom should be independent for all regulated Egyptian subsidiaries. EFG Hermes Holding is fully compliant with FRA regulations and Egyptian Exchange (EGX) listing rules.
The Firm complies with FRA regulations requiring all FRA-regulated companies in Egypt and companies listed on the EGX to have 25% female representation on their boards or two female board members as per the FRA Decrees No. 109 and 110 for the year 2021.
Moreover, the holding company and its subsidiaries comply with the FRA Decrees No. 107 and 108 for the year 2021 pertaining to the disclosure rules for ESG practices related to sustainability and the financial impact of climate change for FRA-regulated companies and companies listed on the EGX.
Management and Control Structure
Board of Directors
EFG Hermes Holding’s Board of Directors is responsible for providing the Firm with strategic leadership, financial soundness, governance, management supervision and control. The board is comprised of 12 members, 11 of whom are non-executive.
Without exception, all EFG Hermes Holding’s Directors possess a broad spectrum of experience and expertise, directly related to the Group’s expansive lines of business and divisions, with a strong emphasis on competence and integrity. Directors are selected based on the contributions they can make to the board and management in addition to their ability to represent the interests of shareholders.
The Firm’s Annual General Meeting (AGM) continued to be held virtually. The Firm was one of the first listed companies to comply with Law No. 13 for the year 2022 that introduced amendments to the Capital Market Law No. 95 for 1992 (CM Law) and its Executive Regulations issued by Decree No. 135 for 1993 (CMLER), requiring all listed entities to provide electronic systems that allow shareholders to attend and vote in general meetings virtually. Most committees and executive committee meetings were held virtually in 2022.
The following principles govern the conduct of the Board of Directors and the Firm:
Compliance with Laws,Rules and Regulations
Adherence to the law is the fundamental principle on which the Firm’s ethical standards are built. All directors must respect and obey all applicable laws, rules, and regulations. The board complies with the international best practices, rules ,and regulations of the Firm in addition to laws and regulations of the markets in which the Firm operates.
Conflicts of Interest
All members of the board declare their outside business interest and board directorships annually. They also abstain from participating in any discussions and decisions that might affect their own personal interests or those of a loosely related person or company. Business relationships between the Firm and any of its board members must be approved by the Firm’s AGM.
Safeguarding and Proper Use of Company Assets
All directors endeavor to protect the Firm’s assets and ensure their efficient use. All assets must be used for legitimate business purposes only.
Fair Dealing
Each director should deal fairly with the Firm’s clients, competitors, providers, and employees. None should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair dealing practice.
Code of Conduct
The Code of Conduct defines core values, principles, and other requirements that all the Firm’s directors and employees are required to follow while conducting their regular daily duties.
Standars and Policies
The Firm’s standards and policies comply with Egyptian as well as international corporate governance guidelines.
Data Protection Policy
The data protection policy sets out the obligations and requirements for protecting customers’ personal data and provides guidance on how and when the Firm can process their data. In addition, the policy covers regulations introduced in different jurisdictions in the Firm operates.
Confidentiality
Directors and officers must ensure the confidentiality of information entrusted to them by the Firm or its clients, except when disclosure is authorized or legally mandated. Confidential information includes all non-public information that might be of use to competitors, or harmful to the Firm or its clients if disclosed.
Corporate Opportunities
Directors are prohibited from taking personal advantage of potential opportunities that are revealed through corporate information, property, or position without the consent of the board. Directors are obliged to advance the Firm’s legitimate interests when the opportunity presents itself.
Audit
Auditing forms an integral part of corporate governance at EFG Hermes Holding. Both internal and external auditors play a key role in providing an independent assessment of the Firm’s operations and internal controls. Furthermore, to ensure independence, Internal Audit has a direct reporting line to the Audit Committee, a subcommittee of the board.
Corporate Governance Committeess
Audit Committee
The Audit Committee is comprised of five members, all of whom are non-executive. The committee meets at least once per quarter or as required. In 2022, the meetings were held virtually till Q32022. The committee is responsible for oversight of financial statements and financial reporting, internal control and governance systems, compliance with laws and regulations, whistleblowing and fraud, conflict of interest, the internal audit function and compliance with the Code of Conduct established by management and the board. The committee ensures free and open communication between the committee members, internal auditors, management ,and the external auditor on a quarterly basis.
Risk Committe
The Risk Committee is comprised of five members, all of whom are non-executive. The committee meets at least once per quarter or as required. In 2022, the meetings were held virtually until 3Q2022. The committee oversees risk, legal, and operational issues across the Group, assisting the board in fulfilling its duties with regards to the oversight of the identification and management of risks, adherence to risk management policies, and compliance with risk-related regulatory requirements, advising the board on risk appetite and tolerance in accordance with its strategic objectives. It is responsible for advising the board on risks associated with strategic acquisitions or disposals and reviewing reports on Group Enterprise Risk Management, including reports on credit, investments, market, liquidity and operational risks, business continuity, and regulatory compliance.
Remuneration and Compensation Committee
he Compensation Committee is comprised of five nonexecutive board members. The committee meets once a year to study compensation within the Group as a whole (and for senior management in particular) and to assist the board in fulfilling its duties with regards to strategic human resources issues and the remuneration policies of EFG Hermes Holding. This not only safeguards shareholder interests but also ensures that management’s interests are fully aligned with those of the Firm. The committee directly manages the allocations within the Management Incentive Scheme for Senior Management as approved by the General Assembly. In 2022, the meeting was held virtually.
Corporate Governance Committee
The Corporate Governance Committee is comprised of three non-executive board members and holds one meeting per year. The committee’s responsibilities include periodically evaluating the Firm's corporate governance structure, reviewing and monitoring the implementation of the company’s corporate governance framework, documenting and following up on the board’s performance evaluation reports, reviewing the regulators observations related to the implementation of corporate governance, and ensuring they are appropriately handled and addressed. In 2022, the meeting was held virtually.
Nomination Committee
The Nomination Committee is comprised of one executive and three non-executive board members. It assesses and oversees the appointment, at the level of the Holding company, of board members, the Group Chief Executive Officer, and Group Executive Committee members. It is the committee’s responsibility to make sure appointments, which must be approved by the Annual General Assembly, align with the Group’s strategic directives and ensure the independence of directors in accordance with applicable laws, regulations, and international best practices. The committee also Our Controls conducts regular assessments of the structure, size, and composition of key executive positions at the Group level.
The committee also conducts regular assessments of the structure, size, and composition of key executive positions at the Group level. The committee helps to ensure a smooth succession of Board Members and, where appropriate, the Group CEO and Group Executive Committee members. Meetings are scheduled and held on an as-needed basis.
Executive Committe
The Executive Committee is appointed by EFG Hermes Holding’s Board of Directors and is comprised of eight members, who are strategically selected to ensure all divisions are represented. Moreover, the Executive Committee is entrusted with the implementation of the policy decisions of the board and overseeing the Firm’s risk management structures and policies.
Its purview includes:
Its purview includes:
The Executive Committee meets once a month to discuss and follow up on day-to-day operations of the Firm and address any pressing issues that may arise. In 2022, most meetings were held virtually.
Shareholder Information
Shareholderd
EFG Hermes Holding’s shares are listed on the Egyptian Exchange (EGX) and the London Stock Exchange(LSE) in the form of USD-denominated GDRs.
Significant Shareholders
EFG Hermes Holding is required by law to notify the EGX and the FRA of shareholders whose holdings reach or exceed 5% of voting rights. Further notification is made once a multiple of the 5% is exceeded or reduced by a shareholder.
Shareholder Structure
As of 31 December 2022, a total of 11,609 shareholders were listed in the Firm’s share register
Executive Holdings and Management Transactions
Share Ownership Information
All information relating to EFG Hermes Holding’s Securities held or transacted by members of the Board of Directors and other insiders are promptly disclosed and reported without fail in accordance with relevant local and international regulations.
As the world continues to witness unprecedented challenges and rapid changes in regulations and mandates, the ability to implement and maintain sound risk and compliance frameworks is growing in importance. This helps navigate downside risks with agility and drive effective decision-making processes and day-to-day operations with efficacy and transparency. As such, EFG Hermes Holding, with its expansive and fast-growing geographic presence, houses a Risk and Compliance department that manages the Firm’s global compliance frameworks and adherence to the same in line with international best practices.
While different, both risk and compliance functions within the department work closely together to monitor trends and changes in regulations in all jurisdictions in which the Firm does business. The functions also develop and put into action firmwide and divisional policies and procedures that manage compliance, regulatory, and reputational risks to ensure proper governance across the Firm, all while safeguarding client and employee information.
At present, the department boasts 58 compliance officers, collectively working to ensure the full adherence of the Firm’s lines of business and subsidiaries to the applicable statutory provisions, regulations, and internal policies. Alongside the Compliance team is the Risk Management team, boasting 69 professionals who are responsible for identifying, overseeing, and mitigating the Group’s liquidity, market, and credit risks. Together, the teams advise the Firm’s businesses, manage audits and inquiries, educate staff on policies and procedures, as well as surveilling and testing the Firm’s risk management infrastructure under the supervision of the Group Chief Risk and Compliance Officer.
Operational Highlights Of 2022
In 2022, EFG Hermes Holding’s Risk and Compliance department conducted extensive regulatory reviews and inspections to ensure Group-wide business continuity and to mitigate related risks. A cornerstone of these efforts included consistently updating compliance manuals and policies, in addition to implementing a proactive approach in reviewing and monitoring EFG Hermes Holding’s adherence to country-specific regulations to ensure the continuity of the Firm’s expansive operations given the macroeconomic challenges that the world continues to face. To enhance its data safe guarding measures and to cover its obligation of protecting employees and clients, the department drafted a Group-wide Data Protection policy, which was approved by EFG Hermes Holding’s Board of Directors during the year. 2022 also saw the Risk and Compliance division mark the major milestone of being the first Egyptian financial institution to achieve ISO 31000:2018 Enterprise Risk Management Conformity by the British Standards Institution (BSI), providing guidelines for managing any form of risk in a systematic, transparent, and credible manner within different scopes and contexts.
Highlights for the year included :
Highlights for the year included :
Internal Audit
Internal Audit is an independent assurance function, authorized by the Board of Directors and the Audit Committee to provide reasonable assurance about the company control environment. Boasting a roster of competent and multilingual industry professionals ,the team is responsible for monitoring, evaluating, and advising on the adequacy of the Firm’s operational, financial, and administrative controls, as well as the efficacy of its information systems. It also evaluates the effectiveness of risk management practices and internal control and corporate governance processes across the Group’s subsidiaries, lines of business, and support functions, ensuring the full protection of the Group from both conventional and emerging risks.
Reporting to the Group’s Audit Committee, the Internal Audit function conducts intermittent inspections and systemic evaluations in alignment with the committee’s pre-approved annual plan. To ensure the reviewing process is at maximum efficiency, the function carries out frequent reviews with the Firm’s departments in accordance with each function’s risk level and the internal scores awarded in the previous review. Accordingly ,high- and medium-risk departments are reviewed on an annual basis, and low-risk departments are reviewed every other year. Additionally, the division conducts follow-ups on previous audit findings, to ensure they have been appropriately addressed and corrected. It also provides a wide array of services including in-depth operational assessments, evaluations of departmental adherence to regulatory requirements, and monitoring of corporate governance, as well as strategic consultation to the business without compromising the function’s independence.
At present, the Group’s Internal Audit team is made up of nine centralized auditors covering investment banking and NBFI activities, and 43 auditors covering Microfinance services.
2022 saw the Risk and Compliance division mark the major milestone of being the first Egyptian financial institution to achieve ISO 31000:2018 Enterprise Risk Management Conformity by the British Standards Institution (BSI).
Operational Highlights Of 2022
During 2022, the Internal Audit function successfully completed its annual audit plan. At the same time, and in coordination with the division, Ernst and Young’s (EY) regional office concluded the full audit of EFG Hermes Holding’s systems, applications, networks, and infrastructure, with the results of the audit to be reported to the Group Audit Committee.
To be aligned with the Group’s ESG policies and strategies, the Internal Audit Department has included controls related to ESG-related policies and practices into each business line’s audit program to ensure full conformity.
The division continued to use Team Mate — a bespoke digital tool introduced as part of the EFG Hermes Holding’s wider digital transformation strategy — to solidify EFG Hermes Holding’s leading position as a digitally integrated financial services group. It is used across the Firm’s various functions to enhance processes and to effectively store, analyze, and process the vast quantity of financial data related to various Group operations across its footprint to allow for a more accurate and efficient auditing process.
By the end of 2022, EFG Hermes Holding conducted five mandatory training courses for 895 employees, disseminating 4,475 hours of trainings during the year.
Employee Awareness
As EFG Hermes Holding continues to achieve significant growth and expansions across its core operations, subsidiaries, and geographical footprint, it is integral to communicate Group-wide strategies, policies, and procedures to employees, and to foster transparency and integrity across the board. In alignment with this, the Risk and Compliance department is committed to taking part in Human Resources (HR) onboarding processes and conducting orientation sessions for new recruits on audit, compliance, and risk related issues, to ensure consistent alignment with the Group’s operational frameworks.
To guarantee that all employees develop a comprehensive level of understanding on key subjects, the Firm conducts mandatory training courses that delve into key issues, such as financial crime, fraud prevention, general data protection regulations (GDPR), cybersecurity, and ESG awareness, under the supervision of the Compliance function. By the end of 2022, EFG Hermes Holding conducted five mandatory training courses for 895 employees, disseminating 4,475 hours of trainings during the year.
Forward-Looking Strategy
Looking ahead, 2023 will see the Risk and Compliance department and the Internal Audit division work on further streamlining operations and bolstering operational efficiencies across the Group. On the Compliance side, the function continues to obtain licenses that enable the department to support the Firm’s expansions. As such, and as the Group continues to tap into new markets and new lines of business, the Risk and Compliance department will continue to work together with other divisions to ensure new products, business lines, and subsidiaries — particularly in the Investment Bank and NBFI platform — are seamlessly integrated into EFG Hermes Holding’s control frameworks, and that any new laws and regulations regarding these expansions are accurately reflected and addressed.
