Could you provide a brief journey of how you arrived where you are today?
My pre-university gap year was at the actuarial department of The Equitable Life Assurance Society, unlike many of my contemporaries who made the reverse journey to the beaches of Goa for their gap year. And on to universities — Probability in Sheffield and then Economics in Southampton and London Business School some years later.
I had a series of banking, government and corporate jobs in treasuries as a strategist, analyst, dealer, asset/liability risk manager and financial product developer at the UK government actuary’s department, Barclays Bank, British Gas and Midland Bank. Prior to founding Delphi Risk Management I was on the board of a British merchant bank, Charterhouse Bank, as director, financial engineering, in the capital markets division.
What does your role involve?
I have an interesting blend of consulting, training and, in these litigious times, a lot of expert-witness work in financial product development and risk management
What is your greatest achievement to date?
I developed a genuinely new financial derivative product way back in 1986 when I was head of product development at Midland Bank. It was the Break Forward — reconstructing an option into a package of forwards — a precursor to the Participating Forward.
It resulted from a tax problem and a reluctance of corporate customers to paying an option premium. Oh! I say derivative product with ease now. Back then I did not know what a derivative was. This was a US term. In the UK we knew of forwards, FRAs (forward rate agreements), swaps and options as hedging or risk management instruments.
Then my book was launched in 2000 — “Key Financial Instruments: Understanding and Innovating in the World of Derivatives” (FT Prentice Hall). It includes an appendix on Islamic banking as a case study on financial innovation. The book was based on my course program at The Korea Banking Institute as professor of financial innovation. Many of my students had asked me to turn my lectures into a book.
And I have just been commissioned to write “Mastering Islamic Finance: A Guide to Sharia Banking, Investment and Insurance” for January 2010, also by FT Prentice Hall.
And last but not least, being appointed as an honorary governor of The Institute of Islamic Banking and Insurance by the late Muazzam Ali.
Which of your products/services deliver the best results?
I like to put back into training others what I have taken out as a practitioner. So when, for example, I train others in financial innovation I help them to create their own products rather than me creating specific financial products for them. Of course, I am more than happy to create financial products to meet a particular problem or demand.
What are the strengths of your business?
Delphi Risk Management is my business for innovation management, expert-witness or risk management. So if you contract Delphi, you get me doing the work.
It is a truism that in some very large consultancies you contract with a senior partner at maybe US$1,000 per hour and get a young fresh-faced recent MBA graduate. He or she will be very confident and articulate and may even have a PhD but with hardly any dealing room experience in the real world of finance.
What are the factors contributing to the success of your company?
The recession. There is a greater need to innovate, manage risks and, luckily for me, more disputed contracts providing me with quite a lot of expert-witness work unraveling complex financial products to establish if they have been mis-sold. Many financial products are indeed, as they would claim to be, “needs driven”. The trouble is, many of these products are a reflection of the salesman’s needs for a new Ferrari and not of the customer’s financing or investment needs.
What are the obstacles faced in running your business today?
With Delphi what you see is what you get. But some people prefer the “safe” option of hiring a large firm. It is easy for management to say we did it because the large firm XYZ said so.
Where do you see the Islamic finance industry in, say, the next five years or so?
Hopefully, ever less replication of conventional financial products to give them an Islamic veneer. After all, everything is possible using a package of Murabahah transactions to create a financing of a black box special purpose vehicle that can invest in anything whatsoever from gambling stocks to interest-bearing bonds or money market instruments. There needs to be more financing of real trade — Bangladeshi garments, Middle Eastern oil or motor cars.
Name one thing you would like to see change in the world of Islamic finance.
I would like to see a lot more consideration of the Niyya. Niyya is Intention. It comes from the heart. See my opinion piece in Islamic Finance news 30th October 2009, “It’s the Niyya that Counts”.