Commentary

The impact the global financial crisis had on financial services has been well documented; however one of the most interesting insights it revealed, was the power of analytics on the industry. When you look at the companies that have emerged the strongest from the crisis, they owe a great deal to the astute use of real-time predictive analytics. These firms had the systems and organizational structures to capture and act upon early warning signals, monitor a changing environment and adjust responses accordingly. They not only understood what happened in the past, but what it meant, and what they needed to do next.

Now, more than ever, there is a greater call for Asia to step up and play a bigger role in international financial institutions and along with this greater role will come the challenges of regulation. United States Deputy Secretary of Treasury, Neal Wolin, on a recent address to the Singapore Exchange, said global coordination on financial regulation will create strength in the international market in averting a future crisis.

Despite a lack of confidence in US and European markets and economic activity, Asia remains a relatively positive environment for investment banks and the talent pool continues to remain tight. Hiring senior bankers to capture this growth remains challenging with execution risk being a significant factor. Far too many processes fall over in the closing days, right at the decisive moment. Some of the seeds of a failed senior recruitment are sown early; others come out of the blue. Unfortunately, many hiring managers still do not pay enough attention to mitigating against ‘deal failures’. Here are the top five ways to mitigate against deal failures in senior IB hires. 1. Ensure a clear understanding of candidate motivations It seems almost obvious to point out that the identification and analysis of the lead candidate’s motivation to move is critical to a successful recruitment, yet it is frequently overlooked and interest itself is taken as a sufficient indicator of motivation. Surface motivations may be very obvious and are as varied as they are numerous – excitement at the potential of the role; a desire to join a superior franchise or platform; dissatisfaction with their current position due to a change in leadership, reporting, resourcing, strategy or compensation issues; feeling complimented by getting the call, to be entertained, to find out competitor information – yes, candidates do this too! - or just boredom and the need for a fresh challenge. It is often the more subtle motivational factors that can be harder to tease out: A desire to leave that is born out fear of declining relevance, or success, or a need to move location for personal reasons. It takes the superior skills to get under the skin of the individual and to identify candidates who have compelling reasons to move and who satisfy the bank’s unique hiring proposition. The motivations should be thoroughly explored ad documented by the search firm and then specifically tested by all on the interview panel. 2. Appropriately manage compensation expectations The compensation mix between basic salary, bonuses, long term incentives and compensation models can be radically different or geared to different time horizons, but at some level, there must be parity or upside. Some hiring managers hope to bridge any gap through force of argument, but success is rare. It is useful to understand the compensation priorities of the candidates and their stage in life or personal circumstances. Presenting an offer without a convincing understanding of the qualitative and quantitative components of the candidate’s best alternative to a negotiated agreement (BATNA) is a clear mistake, and remains too common a reason for late stage collapse of senior hiring processes. If one bank is in the market paying above market packages candidates often think this is their market value it isn’t unless that particular bank is offering them a role. Also candidates will try and trade on their last significant bonus year even if it is not the previous year. In these instances the search firm must be helping their client manage expectations. 3. Adequately and realistically consider competing bids Demand for senior investment bankers who can monetise relationships is very high, and understanding and discussing the complete panoply of options in front of the candidate and their opinions of them is vital. Try to be objective for them rather than just market your own opportunity. Ongoing dialogue with the candidate does not end with their resignation from their current employer. Especially in Asia, other institutions may be happy to attempt to attract candidates away with other opportunities through the gardening leave period. All bankers have their price, either financially or through the changed position, that would convince them to stay. It is also critical to understand, ahead of resignation, the capability of the candidate’s organisation to address his or her professional concerns, and to engage on these issues head on with the candidate. If the candidate’s mindset is not firmly out the door already when they go into resign, the risk of successful counter-offer is always high. For the hiring manager it is very important that they have a line of communication to the candidate while they go through the process, to encourage, react and offer supporting argument where required. As resigning candidates can be bombarded by calls from colleagues looking for explanations and frequently switch off their phones, it can be helpful to supply them with a separate mobile. With the candidate tasked with returning calls to this phone at the earliest opportunity, it can prevent those long silences where the hiring manager is left in the dark about the progress of the resignation process. This is the time to welcome candidates and show them the ‘love’. They have just told their colleagues that they would prefer to work somewhere else and their current management will be making them feel guilty. The pull of their new team at a personal level is therefore important here. 4. Ensure momentum is maintained Banks need to insure against losing momentum by drawing up a checklist of internal requirements early in the process and addressing the easier components as soon as possible, even before completion of the interview stage. Maintain an awareness of the schedules of stakeholders with key signoffs, and brief them on upcoming approvals so that they can reflect and act more quickly when their signature is actually required. The capacity to react quickly can also be important particularly in counter or competitive bid situations. Key internal stakeholders should be informed ahead of time if they need to be on standby, whether it is to mark up an offer to persuade or to motivate, or just to offer advice on a last minute query. Banks are run using complex matrix management with natural tensions often occurring between the global headquarters and Asia regional management, within regions, between business divisions and within business divisions. It is crucial to get a consensus on what a successful candidate will look like and who needs to approve their hire. 5. Find internal consensus Not all internal interview processes are simple and there may be inescapable diversity of opinion or internal complexity. The key here is to make sure that the candidate is clearly briefed on what to expect. Lack of broad consensus from all relevant stakeholders can lead to inconsistency of messaging to candidates, confusion and credibility issues. Shared agreement on what is being sought is the bedrock on which all successful searches are completed. Candidates process the information they receive during interviews as they occur and by the end come to a quick conclusion. Rightly or wrongly they expect potential employers to give them feedback equally quickly. Delays in feedback, or other delays in the recruitment process that are perceived to be within the control of the potential employer may send the wrong message and put candidates off pursuing opportunities. Hiring transformational talent in Asia is not going to get any easier, indeed the challenges are only likely to increase exponentially. Having an integrated business and human resource strategy is still a challenge for some organizations, but even where this is in place there should be a significant focus on hiring plan execution and risk mitigation. Paying appropriate attention to the above areas is critical and will help to mitigate execution risk. However, hiring managers should also be aware of the following: counter offers; changes in candidates’ personal circumstances; missing details in documentation; inadequate referencing; and leaks.  

Heroes of the first decade!

Whenever I read about the apparently imminent arrival of the cashless society, I smile quietly to myself, knowing that the global facts tell a completely different story, one which should see cash surviving beyond the 21st century. Take the latest press release from London-based Retail Banking Research, for example: “The total number of ATM cash withdrawals worldwide is expected to increase at an average of 8% per year between 2010 and 2016, compared to an average of 6% per year in the number of [ATM] installations.”[1]

While there is a sense of uncertainty for some banks, others have made no changes to their hiring plans and good talent remains in high demand. Christine Wright, Managing Director of Hays in Japan, discusses trends and current opportunities across Asia from the latest Hays Quarterly Report. Despite the global economic caution which has seen some banks, particularly European banks, introduce more stringent headcount approvals and recruit only for essential hires, other banks, often Australian and Asian banks, are still hiring in many areas and we expect this to be the pattern for the remainder of the year.

Comparing Hong Kong with Singapore: Which one is larger? Hard to tell

ATM cards, especially those using magnetic stripes, are increasingly being exposed to sophisticated fraud attempts during transactions. Fraudsters are getting more intelligent and creative in devising methods to obtain users’ Personal Identification Numbers (PIN) and data stored in the ATM cards’ magnetic stripe.

Only 17 percent of Asian consumers expressed confidence in financial providers in Q2 based on the Corporate Executive Board’s (CEB) quarterly poll of 5,000 consumers in six Asia-Pacific countries. With markets exhibiting roller coaster like volatility, it is no surprise tha wealth management firms across Asia Pacific see an opportunity to rebuild client trust by demonstrating the value of their advice. Indeed, wealth management firms know they will struggle to meet their aggressive revenue growth goals without client confidence in their advisory propositions.

Islamic Finance Industry: Alpha & Omega The enactment of the Islamic Banking Act in 1983 spawned a new paradigm of banking in Malaysia. The establishment of the first Islamic bank (namely Bank Islam Malaysia) in 1983 and subsequently Takaful Malaysia in 1984 provided an alternative means for Shariah compliant fund placements and management. Since its inception, the industry has gained staggering momentum and Malaysia is currently regarded as a leading contributor in the Islamic finance industry. This development has mainly been driven by the government’s efforts in promoting the industry and providing incentives to boost growth. The Islamic finance industry has various components but the most notable is Takaful, which makes Islamic finance unique. Currently there are 12 Takaful operators in Malaysia (with four new licenses issued since 2009) and 4 re-Takaful operators. Bank Negara Malaysia (BNM) indicates the Takaful industry has been growing rapidly, appealing to both Muslims and non-Muslims. The industry is expected to grow by 15-20 percent annually, with contributions expected to reach USD7.4 billion by 2015.1 Speaking in Kuala Lumpur in April 2011, the former deputy governor of BNM, the late Datuk Mohd Razif bin Abd Kadir, indicated the Takaful industry had a compound average growth rate of 27 percent in terms of net contributions between 2005–2010, with family Takaful driving growth at 28 percent for the same period and dominating more than 80 percent of the total Takaful market in 2010.2 Takaful & Re-Takaful: The Basis of Shariah Compliant Insurance The prevailing needs of the Muslim community looking for a Shariah compliant alternative to conventional insurance accelerated the development of the Takaful industry in Malaysia. This, in addition to the uprising of the Islamic banking sector, boosted the Takaful industry to its present more refined and matured form. In 1982, the Malaysian government set up a task force to study the feasibility of creating an Islamic insurance company. The move was triggered by the Malaysian National Fatwa Committee’s decree, which ruled the current form of life insurance a void contract due to the presence of the elements of Gharar (uncertainty), Riba’ (usury) and Maisir (gambling).3 This was further strengthened by the introduction of the Takaful Act enacted in 1984 and the incorporation of the first Takaful operator in Malaysia in November of the same year. Takaful is a form of Shariah compliant insurance. The word originates from Arabic and is defined as ‘joint guarantee’. A Takaful fund is a fund in which participants contribute a sum of money to be used to assist participants against a defined loss or damage. The operator entrusted to manage these funds on behalf of the participants usually earns a fee known as the agency or Wakalah fee. However, depending on the variations of the Takaful fund’s operations, some operators may also earn profit from the investment of its shareholders' funds, or receive a share of the investment profit or any surplus of the Takaful funds based on an agreed contract.3 In all instances, the operator is usually indemnified of any loses that the investment may incur. The Takaful industry is broadly divided into family Takaful business (Islamic "life" insurance) and general Takaful business (Islamic general insurance). In Malaysia, Takaful operators have flexibility in choosing either the Mudharabah (profit-sharing) or Wakalah (agency) operational models in compliance with Shariah principles and prudential requirements. The Mudharabah model, more commonly used in Malaysia and the Asia Pacific region, provides an incentive for the operator to perform careful underwriting, to manage claims judiciously and to limit selling expenses so as to increase its return on management/shareholder capital and efforts. The Wakalah model, used in the Middle East, is seen to be relatively more transparent since fees are clearly related to an operator’s operational costs.

You are probably exposed to it already even if you did not invest in it intentionally. From holding on to some Singaporean dollar for that weekend getaway to Malacca to owning the stock of a multinational corporation, it is nearly impossible not to be involved in some way in the US$4 trillion (S$4.85 trillion)-a-day global foreign exchange (forex) market.

In a rapidly evolving place like China, it is important that any investment strategy reflects the conditions on the ground; frequent visits to check on the progress being made on infrastructure and industrial development in various regions is a crucial component of Urdang’s approach to investing in global property securities.

How you perform in job interviews is arguably the most important factor in determining whether or not you secure the job you want. This is particularly true for junior banking professionals, whose limited job-specific experience can mean interview performance is the key differentiator between candidates competing for the same role. In our experience at Robert Walters, there are five key mistakes commonly made by junior banking professionals in job interviews that instantly disadvantage them. If you can avoid these mistakes, you’ll be well on your way to interview success. 1. Not adequately researching the organisation they are interviewing with While it seems like a basic step to undertake when looking for jobs, we still see a number of candidates who don’t properly do their due diligence on the company they’re applying to work for. It is vitally important for candidates to be able to talk confidently and intelligently about what their potential employer does. You should be able to recite specific facts about the organisation, including:

Asian-Pacific banks have made steady progress in closing the operational excellence (OpEx) gap and are determined to overtake their European rivals in the near future. Some industry commentators see this as natural side effect of the higher economic growth within the Asian region. We don’t believe that the region's growth is the only driver for OpEx improvements. We know that not all Asian banks are improving at the same rate; and that organisations that lack a structured improvement program as well as their senior management team's commitment to follow through will fall behind, quickly. Possibly more now than ever before, it's critical for leaders within the financial service industry to actively steer their organisations to master OpEx and emerge as “leaders’. Step change improvements are needed to offset increasing rivalry and the ever increasing regulatory burden. This inevitably mandates better process hygiene and efficacy to address the ever-present pressure to achieve acceptable margins whilst remaining compliant. The need to improve on operational excellence is indisputable. This year’s OpEx Survey recognises a number of key focus areas that can help determine the future success of financial service organisations in this region: · Strategy Alignment Innovation management, customer value management, and strategy implementation will be key factors to gain competitive advantage as bank customers become increasingly sophisticated. · Process, Organisation & IT Management Firms recognise the importance of building a broader BPM capability rather than focusing on point solutions in process improvement or throwing more money at technology. · Performance Management Measuring and reporting performance, and the ability to link it to an appropriate KPI system will be key to manage value drivers, which ties back into our first point on "Strategy Alignment". · Human Capital Management Leading employers will look to develop maturity in knowledge management and entrepreneurship, whilst also looking to reap the benefit of structural changes linked to outsourcing low end tasks. Defining and implementing an operational excellence roadmap might just be the key to stop the vicious cycle of constantly chasing one’s tail. 

Did you hear the one about the man who jumped from a burning oil rig? Come to think of it, you probably have. The story of the "burning platform" is well-worn in business circles thanks to what the hero is alleged to have said to rescuers after they plucked him from the frozen North Sea: "Better probable death than certain death". Presenters love the metaphor because it dramatically illustrates how, in business, standing still is often the riskiest option of all. That is a lesson that cannot be over-learned. However, most challenges we face in business -- even those with great destructive potential -- come in far less explosive forms. In fact, most companies are better equipped at managing a fast-moving crisis than they are at responding to the subtle shifts and undercurrents that pose the greater long-time threat. Risks emerge slowly, damage accrues over time, and certain death for most businesses comes after a thousand cuts. It may seem self-evident, but the first and most critical step if you find yourself on a burning platform is to acknowledge it is on fire. This is where a surprising number of companies fall down. And the dangers of missing the signs are real and manifold. An outdated, inefficient back office investment management system invariably leads to unpredictable and often steeply rising costs, while exposing the company to significant operational risk. Such systems also tend to inhibit growth because they lack scaleability and the ability to support evolving markets or accommodate unforeseen contingencies. Most investment managers I deal with tell me a version of the same story: they came to understand the dilapidated state of their IT infrastructure and processes only after it had reached a crisis point. Until then, they had made do -- showing McGyver-like ingenuity - with a combination of dated legacy software, customised spreadsheets and bespoke add-ons. This is a revealing insight because over-reliance on ad hoc solutions is itself a prime indicator that your technology platform has already caught fire. Here are six others: 1. Is your vendor's client base declining? 2. Is software maintenance and vendor support declining in quality and frequency? 3. Do you have slow time to market caused by the need to work around your software limitations and/or develop new spreadsheets? 4. Has your vendor shifted focus to different markets or products, or is there disruptive uncertainty around future ownership arrangements? 5. Did the vendor spend less than 15 percent of annual revenue on research and development? 6. Are you still running your core investment management software on a 32-bit platform rather than being 64-bit enabled? If you find yourself saying yes to these questions, chances are your platform is already sinking beneath your feet. And, since the process of modernisation -- from inception to completion -- is a 24-36 month journey for most businesses, this might be the moment to make the first step. Many in the retail banking sector have done the sums and concluded now is indeed the time. The case for modernisation was given fresh urgency after for example the DBS systems outage left customers frustrated and the banks themselves scrabbling to rectify the situation. It is therefore welcome news that five major banks in the Asia Pacific will increase their technology and systems investment by 49 percent over the next five year. They recognise – not a moment too soon -- that archaic legacy platforms are slowing them down and stifling growth. Investment managers can benefit from a similar self-assessment. Is our current system equipped to cope with future regulatory changes and market shifts? Or does it force us to make do with suboptimal, often manual, solutions? Is it geared to the future or stuck in the past? It's a tough call in the current climate to justify any kind of long-time investment of time and resources without the promise of quick revenue. In investment management, as elsewhere, growth is synonymous with survival. But if the 'burning platform' story taught us anything, it's that standing frozen in time is no way to grow – or survive. 

Numerous articles have explored the usage of social media and marketing in the financial industry. Although our feeling is that no institution has really perfected their social networking strategy, most would claim that their engagement brings them closer to their customer and enables them to offer the products and services that their customers are looking for.