Commentary

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.

Across Asia in recent years, consumer demand for credit cards, unsecured loans and mortgages has increased substantially. With positive demographic changes and favourable economic conditions, it is expected this growth will continue at pace.

While the Australasian banking and financial services job market has seen mixed levels of demand so far in 2011, as the year progresses we’re expecting to see continued demand in key areas and skills shortages to appear, putting pressure on employers to examine the way they recruit.

Global regulators have proposed new liquidity and capital rules, known as Basel III, with the goal of reducing the likelihood of another financial crisis. These regulations will affect European and North American banks far more than their Asian counterparts, for three main reasons.

Demand is rising for banking and finance professionals across most of Asia and here Emma Charnock, Regional Director of Hays, discusses trends and current opportunities across the region from the latest Hays Quarterly Report.

The impact of the last financial crisis continues to have a profound effect on the revenue streams, cost structures and profitability of the asset management industry.

While the fund industry witnessed a sharp fall following the financial tsunami in 2008, the impact of the global financial crisis (GFC) seems to have abated. In April this year, the custodian business recorded a historical high in asset under custody of about USD120 trillion, according to Global Custody. But beneath the promising signs of growth lurks mounting pressure on the industry with regulators tightening rules and both investors and regulators demanding greater transparency.

Cloud Computing is anticipated to reap potential revenue of USD 800 billion and the industry is being hailed by analysts as one of the most pervasive technologies to businesses since the widespread adoption of the internet.[1] China is seeking to capture around 19 percent of this market with anticipated revenues of USD 154 billion (or RMB 1 trillion).[2] The Chinese government views Cloud Computing as a great enabler for the future and has cited it as a ‘Strategic Emerging Industry’ within the 12th Five Year Plan. Across China, the level of investment from both state-owned and private enterprises is far outstripping the investments being made across the world. Cloud becomes an enabler for “virtualising a nation”.

Remarkable growth Between 2006 and 2010, Islamic Finance has seen a 19 per cent CAGR (compound annual growth rate) - bringing it to an estimated global value of USD 1 trillion. Future growth predictions are even more remarkable, with some forecasts suggesting Islamic Finance could continue to grow at more than four times the rate of conventional finance – and forecasting it to reach USD 5 trillion in value by 2016. Whilst approximately 80 per cent of this business is in the Middle East, Asia represents a significant market with Malaysia having a sizable 12 per cent market share and Indonesia witnessing strong growth (forecast to grow by 55 per cent in 2011). The Malaysian Islamic financial sector is seen as one of the most progressive and attractive in the world. Asia driving growth One of the main drivers for the rapid growth in Islamic Finance is an increasing Muslim population. As at 2009 the global Muslim population stood at 1.6 billion (October 2009 study by the Pew Research Center report of Mapping the Global Muslim Population). The majority – 62 per cent - is in Asia. This population is increasingly demanding Sharia compliant banking products. Global significance Perhaps because of this strong growth, there is increasing awareness of Islamic Finance in the non-Muslim world. · Governments are increasingly supportive with tax laws and regulations accommodating Islamic Finance (e.g. Australia, France and the UK) · In 2009, General Electric issued its first Sukuk, as Western companies are issuing the Islamic equivalent of bonds · The Vatican issued a statement of support in March 2009, commenting that the ethical principles on which Islamic Finance is based may bring banks closer to their clients and to the true spirit which should underpin every financial service · In 2010, the US White House appointed a Sharia finance specialist · Global financial institutions are increasingly active through the opening of Islamic Windows There are risks… but there is a solution There is much talk within the market about standards. This usually focuses on differences in interpretation of Sharia when related to finance, and the shortage of suitably qualified Sharia scholars to take up board positions at financial institutions. However, there is another aspect to standards that is crucial for a young and rapidly growing market: the standardization and automation of business processes. As the volume of Islamic financial transactions increases, so too do the risks associated with manual processing.

The Issue of Choice In February 2011, KPMG last wrote about the issues regarding the infrastructure and regulation of Islamic banking in Malaysia. In continuing this series on this topic, we will move on to examine Islamic banking’s challenges in differentiating itself from conventional banking in the already crowded market and where the opportunities exist in Malaysia for it to become a truly innovative market leader in certain sectors. Islamic finance at its heart offers a system of finance for both individuals and companies that are based on principles of Shariah law.

The economic landscape is not looking very promising and transfer pricing audits are escalating in both intensity and frequency. Developed nations are struggling with significant debts and deficits as their economic growth stagnates, while developing nations have now latched onto the idea that they should reap the benefits associated with their low cost bases and their large untapped markets.

Once upon a time, a typical job-search process involved simply browsing job advertisements in newspapers, writing a CV and cover letter and submitting them to the relevant organisation. However with ever-increasing technological advancements and the advent of social networking platforms, many job-seekers have ditched traditional methods of job-searching in favour of logging in to their social networks and trying to connect with potential employers. In fact, so overwhelming is the growth in social media that according to a recent blog post from their CEO Jeff Weiner, LinkedIn is growing at around one million new members each week, which equates to roughly one member per second. But are online networking sites really effective when it comes to finding your dream job in the banking and financial services industry, and what are the drawbacks to be aware of if you’re using social media in isolation? It’s public so your details are available to everyone One of the major limitations of relying on social networking to secure a job is that there is no filter on the people who can approach you. Your details are available to everyone, so you could find yourself inundated with queries from organisations you have no interest in working for, and regarding jobs that don’t nearly resemble the opportunity you are looking for. The end result: you waste valuable time and energy sorting the wheat from the chaff. It broadcasts your intention to being open to approaches from competitors even if you’re not – people make their own assumptions Something else to consider is the effect that the active use of platforms such as LinkedIn has on your standing with your current employer. If you’re not considered a ‘natural networker’ or it’s not a crucial part of your existing role to find new ways of connecting with other professionals, actively using these channels could potentially jeopardise your current work situation. You need to be vigilant about maintaining a professional presence While more casual social networks such as Facebook are intended to facilitate informal socialising between friends, they are also being increasingly monitored and used by employers to form opinions on job applicants. Some research even indicates as many as 44% of recruiters have eliminated candidates based on what they have found online (according to a survey conducted by ExecuNet).

The global financial crisis was a stark reminder for many companies that effective working capital management and strong counterparty risk management are important.

A new American tax law has the potential to shake-up not just the U.S. tax reporting system, but also the way financial institutions do business globally.