Bank of Jamaica Governor Richard Byles is recommending that boards play a more central role as companies focus on increasing their profitability. 

The drive for greater profits, he said, should be done in the context of the creation of improved governance structures and greater risk management. Byles was speaking to Chief Financial Officers (CFOs) at the Caribbean CFO Conference on March 24. The event was held online over two days and brought together regional and diaspora stakeholders to explore financial leadership, innovation and resilience in the face of evolving global challenges.

The BOJ Governor emphasised that traditional measures of economic performance, such as growth and profitability, must now be complemented by the capacity to withstand shocks and adapt to an increasingly volatile global environment. Noting that uncertainty and shocks are now constants, Byles said resilience must be embedded at the firm, sector and national levels. He outlined key pillars necessary for the building of resilient systems, including strong financial buffers, effective risk management, cyber security, climate preparedness and sound governance. 

“Profitability is critical but, it is sustainable, risk-adjusted profitability that is the true foundation of resilience. In today’s environment, CFOs operate under real pressure with compressed margins, heightened competition and increasing performance expectations,” Byles noted. The central bank governor underscored that it is during such times that more disciplined governance matters most, as short-term earnings that exceed an institution’s risk capacity, may appear attractive but erode stability over time.

He encouraged company boards and management to evaluate performance not only through headline returns, but also through risk-adjusted returns, capital and liquidity adequacy as well as careful assessment of their institutions’ stated risk appetite. He recommended that boards should include a strong presence of independent directors who are free from conflicts, as well as have members skilled in accounting, finance, technology, and law, among other professions. Byles reminded that boards should be supported by effective committees, particularly in the areas of risk, audit and governance, headed by independent members.

He noted that weak corporate governance leads to the erosion of public trust, higher funding costs, capital strain, and, in some cases, regulatory intervention. Pointing out that the Caribbean financial system is interconnected, with conglomerates operating across multiple jurisdictions, business models, and cultures, he reminded that weaknesses in one institution can transmit across markets.

In addressing the conference’s theme of “Redefining Economic Leadership: Building Resilient Financial Ecosystems in Emerging Markets,” the Central Bank Governorsaid resilient ecosystems require alignment in regulatory frameworks and supervisory expectations, strong cross-border coordination and collaboration, as well as a shared commitment to prudence and stability across companies, national institutions and countries. He said this responsibility rests with boards, management and regulators.

Pointing out that resilience is now multidimensional and shocks structural rather than episodic, Byles recalled recent global and local challenges, including the COVID-19 pandemic, and Hurricane Melissa, as clear reminders that volatility is now a permanent feature of economic life. However, he said Jamaica’s building of its foreign reserves to record high levels, reducing the national debt, and entrenching a well-coordinated financial system stability framework, have improved the country’s ability to respond to shocks.

He added that legislation is being advanced to facilitate the resolution of failing financial institutions without recourse to public funds and planning is underway for the introduction of a more robust “Twin Peaks” architecture for the supervision of financial institutions. “At the macroprudential level, the message is clear: financial stability and sustainable development are inseparable. Without stable institutions, growth is fragile. Without sustainable development, financial stability is incomplete,” Governor Byles said.