The financial world is volatile. Everything in it can move quickly and without warning, plunging markets into crisis in a matter of minutes.
A healthy financial climate requires its players to be nimble, creative, and trustworthy. This is particularly true as business and financial sectors around the world are increasingly subject to regulations that focus on better risk management.
Against this background, the world has watched Hong Kong erupt in protest over the past few months, as its people filled the streets and called for the government to roll back its controversial extradition bill.
As uprisings peaked in June, commentators suggested that the catalyst for the protests—the Hong Kong government’s draft legislation that would have allowed fugitives to be extradited to mainland China—has damaged Hong Kong’s reputation and trustworthiness as an international financial center.
That concern is understandable if we look at the back-handed way the city’s government handled the draft extradition legislation and how it could reflect on its business climate especially for global institutions.
But Hong Kongers have shown the world—particularly the global financial community—why the city remains in the heavyweight class of international finance. Here’s how the city has passed a rigorous risk management stress tests with flying colors.
Much has been made of the leaderless nature of these protests, and how its participants managed to organize themselves with little oversight. Hong Kongers have demonstrated their ability to collaborate—creatively, efficiently, and effectively—in a remarkably unstable environment.
This is perhaps best exemplified in the widely-circulated footage of protesters opening up a lane for an ambulance to get through the crowds, “like Moses and the Red Sea.”
Such fast-thinking collaboration went well beyond photogenic moments. Take, for example, the daily protest logistics.
On most occasions, people turned up at protest sites with no particular strategy as to a scheduled plan of action. As the protests spread, Hong Kongers with healthcare expertise were alerted and arrived to set up first-aid supply stations. As tensions heated up, people in crowds displayed signs listing shortages of supplies so that the stations could stay stocked.
Added into the mix were white-collar Hong Kongers, many of whom were unable to attend weekday protests due to work or family commitments. So, they purchased supplies and delivered them to protest sites on their commutes to and from the office.
Then there were the full-page advertisements placed in leading world newspapers, asking G20 countries to stand with Hong Kongers and to support and protect their rights and freedoms during the G20 summit in Osaka.
Such a campaign might normally take months to plan. But within less than a day of launching an online fundraiser on June 25, over $850,000 was raised. According to friends of mine who assisted in the process, teams of netizens, none knowing each other personally, collaborated online and worked frantically to arrange the layout, text and placement of the advertisements. The ads were rolled out between June 27 and June 29.
Then there was the draft extradition bill itself. On its face, the Hong Kong government’s draft extradition legislation was arguably unobjectionable. It appears the rule of law and human rights in place.
It had various thresholds on the seriousness of different crimes that would be subject to extradition requests, and carve-outs for political crimes. The law did not necessarily look out of place compared to many extradition arrangements seen around the world.
But Hong Kongers were able to look beyond the letter of the legislation. By adopting a principles-based approach in considering its likely fallout from the city’s wider institutional, geopolitical, and commercial perspectives, groups ranging from human rights activists to business chambers decided to speak out against the legislation.
In doing so, Hong Kongers displayed the degree of skepticism expected of business and financial professionals when conducting due diligence and audits into areas of business and financial risks.
The protests were a rejection of a box-ticking approach to identifying risks, a failing commonly identified in poor business and financial compliance systems.
Another common shortcoming in organizations that make bad business decisions is fear and/or unwillingness on the part of stakeholders to report potential problems in a frank and timely manner.
Hong Kong has no such shortcomings. After adopting a strong, principles-based approach to identifying risks associated with the extradition legislation, Hong Kongers took steps to report their concerns to those with the power to act on them. Indeed, in its most recent report on Hong Kong, credit agency Moody’s saw these protests as an important part of checks and balances in the city, and a display of its institutional strength.
A common pitfall of mass protests movements (and, by analogy, financial markets sentiments) is falling prey to herd mentality. Hong Kong social media and message boards, such as lihkg.com, have been plastered with reminders from protest participants to be sensitive to wider public perceptions of their actions.
Through in-depth and constant debates and discussions of events as they unfold, Hong Kong ensured that potential shortcomings and concerns about where protests were headed were fully considered before taking action.
Effective risk management also requires an ability to learn from mistakes, to admit to shortcomings, and adjust accordingly.
In 2014, protesters blocked roads in Hong Kong for 79 days as they demanded genuine democracy from the government. They stubbornly stayed put, even as the protest became increasingly unpopular, eventually leading to a backlash against the democracy movement.
As a result, Hong Kong’s 2019 protesters have sought to give great consideration to public inconvenience resulting from the protests, often keeping their protests confined to set periods of time. When their actions have disrupted public life more than they anticipated, protesters have apologized, and have promised to take steps to adjust their actions.
All this is not to say that the protest movement did not take risks. On July 1, a group of protesters used force to break into Hong Kong’s legislature. They caused physical damage in the form of graffiti and broken items associated with the legislature acting as the government’s rubber stamp.
These actions were clearly precarious in that they risked alienating members of the public that advocated peaceful protest actions. Protesters took to social media to ensure that no one damaged books or other valuable items. They also were sure to pay for drinks taken from the legislature’s canteen.
Public support for the protest movement has since held up despite the public having reservations about the physical damage to the legislature.
While the draft legislation has now been shelved, continued frustration from the international financial community about the government’s approach is understandably still a concern.But Hong Kongers do not deserve to be abandoned because of the follies of their political leaders. They have shown that the city still has what it takes to be a leading international financial center. Thy have also shown that as a culture, Hong Kong fosters accountability and foresight that can only bode well for its markets. What Hong Kong needs now is for the international financial community to continue to work with them in maintaining their status.
The views expressed in this article are the author’s own and do not represent those of his employer or any organizations to which he may belong.