Sustainability of Stock Exchanges -The Governance, Risk and Compliance Interrelation

On Monday, October 21, 2019, I treated avid readers of this column, including you, to four focus areas with four other fundamental considerations on how stock exchanges can implement sustainability practices across their businesses. The issues are about the comprehensive sustainability blueprint which was officially launched in September 2019 by the United Nations Sustainable Stock Exchanges (SSE) Initiative and the World Federation of Exchanges (WFE).

With reference to the facts, one of the four focus-areas is that stock exchanges should integrate governance, risk management and compliance in their structures and mandate. To advance discussions on this particular focus area, today’s script gives attention to these elements.


This requires top management of stock exchanges to demonstrate a commitment to the integration of sustainability practices in their operations. In this regard, the global authorities’ recommendation is that commitment toward sustainability should permeate the composition of governing boards or executive leadership; their orientation or ongoing education(training); active oversight in terms of target-setting and monitoring of progress; approval of policies; financial management; compensation and/or remuneration.

For instance, about the composition of leadership, it is suggested that stock exchanges should not only consider members’ mix of skills or expertise, but also diversity with their gender, age and ethnicity. In Ghana, it is noteworthy that the current council of the Ghana Stock Exchange considers gender. The council is composed of nine (9) distinguished professionals, one of whom is a woman – Mrs. Leticia Osafo Addo (see It is my fervent hope that they embrace other aspects of the sustainability agenda if not already doing so, in light of the Sustainable Development Goals (SDGs).

Concerning regular training (educational) activities for members of a governing body to make them aware of sustainability trends and developments, stock exchanges can help them through a number of visible actions – which should include, for example, establishing a standing agenda item on sustainability; taking responsibility for signing-off on initiatives; being accountable for overseeing progress and providing feedback to key stakeholders; and seeking opportunities to publicly discuss the exchange’s approach to sustainability.

Risk Identification

To note, the cornerstone of any sustainability programme is risk management. As a result, Stock Exchanges have been advised to integrate sustainability into their risk identification and management. In extenso, the blueprint states:As financial services organisations, exchanges are familiar with the typical risk categories used by the sector: such as financial risk, credit risk, market and liquidity risk, operational risk, reputational risk and regulatory or compliance risk. The financial sector is already required to address risks with potentially systemic implications.

“Sustainability considerations are potentially large in scale and consequence; and although generally viewed as long-term, some impacts could manifest themselves in the short-term. The related risks could be systemic in nature, especially where disruptive social or environmental impacts lead to changes across economic sectors and industries which have implications for the global financial system. Sustainability risks can manifest in isolation (such as environmental risk or risks concerning human capital or societal matters) or fall under a broad risk category, depending on the issue’s potential impact on the exchange.”

Recommendation on Risk Identification

In the World Federation of Exchanges (WFE) and Sustainable Stock Exchange’s (SSE) view, effective integration of sustainability into risk identification and management should include the following practices:

a.) Detecting any risks that may arise from the impacts of sustainability trends identified during the strategic landscape scan. For example, climate change is causing an increase in the intensity and frequency of extreme weather events which may pose operational risks to an exchange; new or enhanced environmental or social regulations could pose compliance or regulatory risks, and increased financial risk may arise from the introduction of new tax policies (such as a carbon tax). Meanwhile, emerging risk categories – such as transition risk in relation to climate change, technological risk around data, cybersecurity, privacy protection and business continuity – are becoming increasingly significant.

b.) Assessing whether existing risks or risk categories have any embedded sustainability implications. For example, inadequate labour policies could pose compliance or regulatory risks and impact the attraction and retention of talented staff, which could in turn pose financial, reputational and operational risks.

c.) Prioritising risks – according to likelihood and impact to determine appropriate mitigation strategies for the most significant risks.


Regarding this interrelated issue, stock exchanges should comply with relevant regulations. This is because sustainability-related developments may also impact on the legal (regulatory) and contractual obligations of the exchange. Non-compliance with these requirements can be costly, considering the potential impacts of fines or liability for breach of contract, damage suffered as a result of business disruption, and productivity and revenue losses – not to mention reputational damage. Sustainability themes that are often regulated include:

  • Governance structures and systems, including anti-corruption measures;
  • Operational requirements around topics such as environmental management (covering, for example, emissions, energy, water and waste management) and social aspects (such as human rights and employment);
  • Data management (including governance, cybersecurity, privacy and data quality and integrity); and related reporting and disclosure obligations.

To conclude, it is a considered view that standard practices in respect of the interrelated issues will contribute to economic efficiency, sustainable growth and financial stability, while ensuring fair treatment of all stakeholders.

Thank you for reading, I welcome your feedback or comments on this script.


This script was written by a Chartered Banker with a flair for feature writing. He works for a company that provides financial services. Apart from his work schedules, he edits or proof-reads corporate material for his colleagues, executive managers – including distinguished professionals working in various fields outside Banking. Through this column, his articles feature on third-party online media platforms in Ghana and outside. Email:

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