COVER FST EU8 viz3:sep08 15/12/2008 17:04 Page 1
www.fsteurope.com • Q4 2008
EASTERN PROMISES How Erste Group’s expansion strategy is building success one country at a time Page 98
THE LONG GAME Danske Bank’s Peter Schleidt on 20 years of banking evolution Page 36
PLASTIC SURGERY Barclaycard CEO Antony Jenkins on the changing face of payments Page 102
OF FIRE Credit Suisse CIO Karl Landert gives the lowdown on his turbulent first few months in the job Page 30
COVER FST EU8 viz3:sep08 15/12/2008 17:04 Page 1
www.fsteurope.com • Q4 2008
EASTERN PROMISES How Erste Group’s expansion strategy is building success one country at a time Page 98
THE LONG GAME Danske Bank’s Peter Schleidt on 20 years of banking evolution Page 36
PLASTIC SURGERY Barclaycard CEO Antony Jenkins on the changing face of payments Page 102
OF FIRE Credit Suisse CIO Karl Landert gives the lowdown on his turbulent first few months in the job Page 30
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EDITORS NOTE:nov08 15/12/2008 16:50 Page 7
FROM THE EDITOR
The age of the bailout There’s a new form of competition coming and financial services need to be ready
“We need to be respected our colleagues in the business and we need to speak in the same language. We walk the talk and what we say is what we deliver.” Karl Landert, CIO Credit Suisse (page 30)
“I don’t know whether it’s the brain or the heart of the bank, but there is a certainty that if the IT doesn’t work, then the bank doesn’t work.” Danske Bank CIO Peter Schleidt (page 36)
“The current environment for banks is not the best, but we believe we are in a very good position in our market. What we have to do now is concentrate on where we focus our investments.”
his isn’t just a financial crisis any more. What’s been happening on trading floors and bank boardrooms is now spilling out into the high street. People who previously may never have read the business pages are suddenly aware that something terrible is going on and they’re tightening their purse strings in response. The run up to Christmas, traditionally boom time for retailers, has been unusually harsh with stores slashing prices in an attempt to bring the shoppers in. The auto industry, too, is on the verge of breakdown. Sales of new cars are at their worst levels for decades and manufacturing plants are taking long Christmas breaks in an effort to avoid collapse. This is bad news whichever way you look at it, but for those in financial services it presents a particular problem. Since the crisis began, banks have received billions of euros in aid from governments across the region. The argument was that these institutions were too vital to the economies in which they operated to be allowed to fail. But as conditions worsen in every area of business, an increasing number of other industries are sticking their hands up for government money. The collapse of a major retail chain or car builder has the potential to be every bit as devastating as that of a bank. Aside from the jobs lost directly, suppliers will suffer and the wave of new unemployed will have severe knock on impacts for the entire economy. We are already seeing automakers approaching governments asking for their slice of the bailout pie and their case looks just as strong as anything the financial industry could make. The consensus is that the current downturn is going to persist until at least 2010. If beleaguered banks are going to survive this rocky patch and emerge fit for the future, they aren’t necessarily going to be able to rely on a helping hand from government. You can look at this in one of two ways: either the industry has to show that it is genuinely the most important and therefore the most deserving of aid, or it has to focus on not requiring this aid in the first place. After all, there’s no such thing as a free lunch. Greater regulation is already coming down the pipe. The more often the industry goes cap in hand to government, the more empowered governments will be to enforce further restrictions. Financial companies have to be able to take care of themselves. IT has a big part to play in this rehabilitation. Budgets are shrinking and headcounts are being slashed, but it is a simple fact that financial services rely too heavily on technology for it to cease to be a priority. Sure, there will be the challenge of doing more with less, but this is an industry built on innovation and independence. The crucible of the crisis should be seen as an opportunity to forge a stronger future. Before this downturn is over, there will be a chorus of calls for further aid. The financial industry should do all it can to avoid adding its voice to the cacophony. n
Erste Group COO Herbert Juranek (page 98) Huw Thomas Editor
CONTENTS:dec08 15/12/2008 18:16 Page 9
LEAD FEATURES Q4 2008 www.fsteurope.com
A change of heart If IT doesn’t work, the bank doesn’t work: why technology is the centre of modern banking, according to Danske Bank CIO Peter Schleidt
42 Making a drama out of a crisis?
Is the current downturn merely a blip? Anglo-Romanian Bank CEO Thomas Butler certainly thinks so
98 Taking flight
Karl Landert’s ﬁrst few months in the job at Credit Suisse have coincided with an unnaturally turbulent period for the ﬁnancial industry. How can we manage IT in an age of uncertainty?
How is Erste Group posting some of its best ever results in the middle of the worst financial crisis in years? Herbert Juranek lets us in on the secret.
CONTENTS:dec08 16/12/2008 10:23 Page 11
TECHNOLOGY MANAGEMENT RISK & COMPLIANCE
ASK THE EXPERT
86 David Kohn, CSC 108 Matthew Richardson, Deutsche Bank 118 Laurence O’Hagan, Pitney Bowes 120 József Nyíri, IND Group 46 Citi under siege? How Citigroup is coping with the effects of the credit crisis
52 Time to grow LBBW’s Thomas Zeler tells FST why concentrating on growth is key, even in the current climate
58 Inside job
"In blackjack you know the risks, in financial markets, you never know for sure"
Jim Murphy explains the deep art of enterprise content management
64 It’s not enough to manage content Doug Miles knows a thing or two about how the ECM industry is changing
INDUSTRY INSIGHT 50 Kevin Parker, Serena Software 56 Ken Leedham, Comset 60 Thomas Senger, Kofax 78 Rory O’Neill, Research in Motion
P L AT I N U M S P O N S O R
“We started as a small savings bank in Austria and now we are active in eight different countries”
S I LV E R S P O N S O R S
CONTENTS:dec08 15/12/2008 17:58 Page 12
PAYMENTS & CRM REGIONAL FOCUS 84 High stakes
Karel Janecek believes the casino and trading ﬂoor are not that far removed
74 Enterprise mobility communications
88 Payment plans
With Adnon Dow, Motorola Alain DeSouza, Resarch In Motion and Alan Giles, Sony Ericsson
Paul Styles explains that there’s still a way to go before SEPA’s goals are truly achieved
92 End of the line PayPal’s Michael Barrett explains why the war on phishing is winnable
102 The midas touch
54 Ian Masters, Double-Take Software 62 Peter Craik, Steadlands 72 Alan Giles, Sony Ericsson 90 Rupert de Ruig, Dow Jones 112 Scott Petty, Dimension Data 114 Mike Driver, LogiCRM
124 Turkish delight
The credit crunch hasn’t stopped Barclaycard CEO Antony Jenkins from investing millions in contactless payment technology
110 A SWIFT connection Paul Nicholls outlines the recent developments of Eurogiro – the younger brother of SWIFT
116 Customer satisfaction
In the midst of the global credit crunch, Turkey is positioning itself as a market leader in technology investment
128 Northern lights How Finnish banks are leading the way in e-invoicing
Bo Lykkegaard reveals his CRM predictions
68 Storage issues Maxim Samo details the challenges of managing two major data centre projects during an economic downturn
IN THE BACK
80 A dangerous game
132 Away on business 134 The knowledge 136 Backchat 138 Hot off the press 140 The onus on bonus 142 Face off 144 Final word
With its enthusiastic trade in credit default swaps, the ﬁnancial industry is playing a deadly version of pass the parcel
74 Alan Giles
74 Alain DeSouza
78 Rory O’Neill
108 Matthew Richardson
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CREDITS FSTEU:dec08 15/12/2008 16:48 Page 14
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UPFRONT FST EU9:12june
IN THE ZONE
P18 Top 10 P20 Credit Crunch Round-up P22 From the Vault P24 The Five-Minute Executive P26 Issue in Numbers
here can be no denying that the squeeze on ﬁnancial services has permeated into a wider economic crisis. Because of this French President Nicolas Sarkozy has stressed the need for European states to sustain a coordinated approach. “The crisis is here,” he said in his address before the European Parliament earlier this month. Although Sarkozy argued strongly for a uniﬁed response to the problem, he stressed that this didn’t mean every country needed to pursue the same policies. “We don’t all need to do the same thing, but we do need to coordinate amongst ourselves and
come to an agreement on certain issues.” The speech called for European states to set up sovereign wealth funds that would help prop up companies listed on European stock exchanges. “Otherwise, there is a danger that tanking stock prices will result in a massive sell-off of European assets to foreigners,” said Sarkozy. “I don't want European citizens to wake up in a few months and discover that European businesses are now owned in capitals outside of Europe.” He also lamented the absence of economic policies within the euro zone. “We don’t have an
UPFRONT FST EU9:12june
A POPULAR ECONOMY
Top 5 Sovereign Wealth Funds Abu Dhabi Investment Authority
US$875 billion in assets SAMA Foreign Holdings
US$433 billion in assets Government of Singapore Investment Corporation
US$330 billion in assets SAFE Investment Company
US$311.6 billion economic government worthy of the name. We can't go on like this,” implored Sarkozy. He added that the ECB must be independent but must also be able to hold discussions with an economic government. The euro zone’s 15 member states would work alongside the central bank in coordinating economic policy. He emphasized that such coordination would not have to interfere with an independent monetary policy. While the French President has long favoured an economic administrative arm for the euro zone, he has largely stood alone in this preference. Time will now tell how if he now has any allies.
in assets Government Pension Fund
US$301 billion in assets
ccording to a new study looking at web search activity, the only news story internet users really cared about this year was the economic crisis. Evidence from the study has placed the global economy as the biggest news story of 2008, driven by searches for economy-related terms such as ‘bankruptcy’, ‘credit cards’, ‘Lehman Brothers’, ‘bailout’ and ‘retirement planning’. The state of the global economy also led to an increase in searches for one of 2008’s most-searched fads DIY home improvement, featured on the list with a 600 percent increase in search activity. The economy may also be responsible for a large increase in search queries for medical treatments for depression and sleeping aids, both up by 500 percent in online interest throughout 2008.
wo of Europe’s major banks have revealed they have exposure worth billions of US dollars to a broker accused of a US$50bn Wall Street fraud scheme. Bernard Madoff, who founded Bernard L Madoff Investment Securities in 1960, has been charged with fraud in what is being described as one of the biggest-ever such cases. The huge case is now likely to fuel further uncertainty about the entire hedge fund industry. The banks in question are Spanish giant Santander – who have US$3.1bn invested in the ﬁrm – and France’s BNP Paribas who have estimated its exposure to be more than US$460m. Madoff is alleged to have used money from new investors to pay off existing investors in the fund. Prosecutors say Madoff, a former head of the Nasdaq stock market, masterminded a fraud of massive proportions through his hedge fund and investment advisory business. Further reports show that while BNP Paribas has no investment of its own in the hedge funds managed by Madoff, it does have risk exposure to these funds through its trading business and collateralised lending to funds of hedge funds. Santander, meanwhile, says its exposure to Madoff was through its investment fund Optimal.
UPFRONT FST EU9:12june
With many global economies now experiencing recessionary conditions we decided to take a look at some of history’s other dramatic financial crises
Argentine Economic Crisis (1999-2002) In 1999, Argentina entered a three-year recession. Investors ran on banks for dollars, which they then sent abroad for safety. In response, the government froze bank accounts. Citizens protested and destroyed property and fatalities ensued. In 2001 the government collapsed.
2 3 4 5 6 7 8 9 10 18
Russian financial crisis (1998) In August 1998, Russia’s markets collapsed. Investors, fearing a devaluation of the ruble and a debt default, panicked, leaving the market with a 65 percent drop in one day. As a result, several major banks closed, and inflation increased.
1997 Asian Financial Crisis (1997-1999) Policies leading to large amounts of credit pushed up asset prices, which then collapsed, leading to massive debt defaults. International investors panicked and withdrew credit. To keep the region attractive to foreign investors, ASEAN governments jacked up interest rates and bought up excess domestic money using foreign reserves.
The dotcom bubble (1995-2000) When early dotcoms’ stock values shot skyward, venture capitalists jumped aboard en masse to finance internet startups and dotcoms burned through their money, positive it would come back. But in 2000, the NASDAQ began to trend downward.
The Japanese Asset Price Bubble (1986-1990) Rather than a dramatic crash, Japanese real estate and stock values decreased slowly, leading to Japan’s ‘lost decade.’ People started investing outside of the country and companies lost some of their international competitive advantage.
US Wall Street Crash of (1929) In the late 1920s, hundreds of investors contributed to a speculative bubble in the stock market. Many went into debt to purchase stock, resulting in more than US$8.5 billion in debt throughout the nation – more money than was in circulation at the time.
Tulip Mania (1637) In order to secure new varieties of tulips, a market developed int the Netherlands around their trade where futures contracts where signed. Professional growers were willing to pay more and more for flowers and some tulips became worth more than peoples’ annual wages.
The UK’s Northern Rock Bailout (2007) When global liquidity dried up, Northern Rock couldn’t cover its money market borrowings. It asked the Bank of England for money in 2007, at which point the Tripartite Authority gave it emergency financial support.
United States Savings and Loan Crisis (1980s-90s) Old, incompetent policies were behind this mess as the government chose S&L’s, traditionally funded by short-term deposits, to finance long-term, fixed-rate mortgages resulting in a masive crash
Swedish Financial Crisis (1990-1994) In 1985, Sweden deregulated its credit market, leading to a commercial property speculation bubble. But the bubble burst, leaving 90 percent of the banking sector with massive losses, including all of Sweden’s largest banks.
UPFRONT FST EU9:12june
THE NEED FOR NETWORK CONVERGENCE
HANGING BY A WIRE
ince the emergence of Fibre Channelbased Storage Area Networks (SANs) in the late 1990s, enterprise IT managers have maintained two types of networks: a SAN for storage I/O trafﬁc and a Local Area Network (LAN) for data networking trafﬁc. The increasing adoption of blade server and server virtualisation technologies has extended the demand for SANs from the traditional database tier to the application server and web server tiers. While IT managers could continue to operate with a dual-network model across the enterprise, the overarching need for data centre consolidation is forcing organisations to seek network convergence solutions that will improve the overall cost structure and operational efﬁciency of the data centre networks. Ethernet is the predominant networking technology in the data centre. The prevalence of ethernet makes it an ideal choice to produce the convergence of data centre networks. However, ethernet, as it exists today, is prone to high la-
tencies and packet loss when subjected to network congestion – characteristics that are highly unsuitable for carrying storage trafﬁc. The Institute of Electrical and Electronics Engineers (IEEE) is working on enhancements to ethernet protocol, rightfully termed ‘Enhanced Ethernet (EE)’, to eliminate these drawbacks and facilitate storage and networking trafﬁc to be carried over the ethernet infrastructure. In order to leverage ethernet enhancements and drive convergence in the data centre networks, a consortium of storage and data networking vendors have worked together under the guidance of the INCITS T11 committee to develop a new standard called Fibre Channel over Ethernet (FCoE). FCoE encapsulates complete Fibre Channel frames onto ethernet frames, enabling a consolidated 10Gb/s ethernet infrastructure to carry both data networking and storage networking trafﬁc. By continuing to use Fibre Channel as the upper layer protocol, FCoE also provides seamless connectivity to existing Fibre Channel SAN resources. To to learn more visit www.emulex.com/products/fcoe/
new survey has been revealed that shows spending on wireless infrastructure has overtaken spending on wired in over half of the large enterprises in Europe. The research examines the overall trends in the networking infrastructure market, reasons why companies are going wireless, and any concerns companies have about wireless technology. The survey polled 400 IT directors in large enterprises in different sectors across Europe, including ﬁnancial services.
61% of IT Directors rated the strategic need for employee mobility as the main driver when deciding on a WLAN installation
Over 1/3 of companies rely on a completely wired LAN
POLITICALLY CORRECT German Finance Minister Peer Steinbrueck has rufﬂed feathers after he criticised the UK goverment’s economic recovery plan – in particular the cut in VAT from 17.5 percent to 15 percent. Steinbrueck said the UK government’s switch to a ‘crass Keynesianism’ to try to spend its way out of the economic crisis after years of preaching ﬁscal rectitude was ‘breathtaking’. The Sueddeutsche newspaper concluded that Mr Steinbrueck was right to question the introduction of tax cuts, but the paper warned that the German ﬁnance minister should tread carefully and ‘not scare off the partners whom he needs’.
According to the Spiegel newspaper, the reaction in Downing Street to Steinbrueck’s comments was symptomatic of a ‘coolingoff’ in Anglo-German relations, following the mini-European summit which German Chancellor Angela Merkel did not attend. But this is not the first time Steinbrueck has played the ‘bad guy’ role. He is renowned as a minister who is not afraid to speak his mind and is well known for his ‘undiplomatic language’, said the Spiegel. Back in September, Steinbrueck said that the US and Britain were responsible for the current financial crisis, noting that their ‘insane drive for higher and higher profits’ was partly to blame for the crisis. At the time he had warned that the US would ‘lose its status as the superpower of the global financial system.’
73% of IT directors said that they anticipate being completely wireless by 2010
Financial services spend a lower proportion of their budget on wireless devices than the
68% spent by those in manufacturing, retail, distribution or transport Source: Motorola Enterprise Mobility business
UPFRONT FST EU9:12june
CREDIT CRUNCH ROUND-UP A look at how the global financial crisis is affecting European countries.
GERMAN CHANCELLOR ANGELA MERKEL has warned next year could bring more bad news for the country, predicting its economy could hit rock bottom. Her words follow the results of a poll by the German Economic Institute, which indicated that only 52 percent of all businesses in Eastern Germany and 45 percent in Western Germany would hold onto their employees in 2009. The German government has been criticised for not doing enough to stave off recession despite announcing a package that included tax breaks and incentives aimed at generating €50 billion in investments.
THE IRISH REPUBLIC has sunk into recession after its economy shrunk for the second quarter in a row. According to the Central Statistics Ofﬁce, the country’s GDP contracted by 0.5percentin the three months leading to June. Economists attribute the recession to the slump in the country’s previously buoyant housing market. Unemployment across the country in October reached its highest levels since 1998 – 6.7 percent.
A WAVE OF MASS REDUNDANCIES has swept the UK amidst attempts by the government to stem the crisis. In just one week in November the number of jobs lost in Britain reached 25,000. The UK government has announced a stimulus package including a range of tax cuts and government spending projects totalling €23 billion in the next 18 months. The package also included cutting VAT to 15 percent.
UPFRONT FST EU9:12june
THE DUTCH GOVERNMENT has launched a €6billion economic stimulus package to help the country survive the global ﬁnancial crisis.
THE SPANISH ECONOMY will have achieved growth of around 0 percent in the second half of the year, according to the country’s Central Bank.
Its value is equivalent to around 1 percent the country’s GDP. The package will include measures to help boost corporate liquidity
Spain was previously the fifth largest economy in Europe and expanded by around 3.7 percent last year. But the 10-year property boom that helped buoy up its wealth has been hit hard by the international credit crunch and by rising interest rates.
ICELAND’S GOVERNMENT HAS AGREED to pay compensation to savers affected by the collapse of the internet bank Icesave after securing a €1.6 billion loan from the International Monetary Fund. Under the Icelandic depositor protection scheme the ﬁrst €20,887 that savers lost when Icesave’s parent company was nationalised in October will be protected. The loan is aimed at restoring conﬁdence in the Icelandic economy and made Iceland the ﬁrst European country to receive an IMF handout since 1978. Iceland has been forced to take over three of its most debtladen banks and the IMF has warned that the country’s economy could contract by a further 10 percent next year.
DENMARK’S STERLING AIRLINES has ﬁled for bankruptcy after rising oil prices and dropping demand for air travel reduced the airline’s proﬁtability.
BANKRUPT ITALIAN AIRLINE Alitalia has been taken over by a group of private investors. The group is expected to launch a smaller private airline in Alitalia’s place.
The airline’s Icelandic owner Palmi Haraldsson ran out of money to support the business and then failed to ﬁnd a partner to take on the airline.
Alitalia collapsed with debts of around €1.2 billion and was spending around €3 million a day in the run up to its demise.
He told the Independent Newspaper: “Over a three to four week period the whole ﬁnancial system melted down and that resulted in our shareholder being unable to continue his support to the company.”
The Italian government gave the airline a €300 million loan but this was judged by the European commission to be illegal state aid so will not have to be paid back by the group of private investors.
RUSSIA IS FACING FINANCIAL MELTDOWN with the World Bank predicting that the country’s economic growth will fall by 50percentin 2009 to around 3 percent. The Kremlin has spent around €42 billion defending the rouble against the damage caused by plummeting oil prices. In just two months the Russian stock market lost around two thirds of its value and industry production, which was growing at 5.4percentat the beginning of the year has virtually come to a halt. One reason why the country has been hit so hard by the economic crisis is that Russia has such high levels of debt after relying on cheap credit from abroad for so long. The Kremlin’s response to the situation has been to lower the value of the rouble against a basket of currencies by 1percentand to raise interest rates to 12percent.
UPFRONT FST EU9:12june
FROM THE VAULT Q2 2008
José Maria Fuster Group CIO, Santander
Earlier in the year we spoke exclusively to José Maria Fuster, Group CIO of banking giant Santander, about building a global infrastructure and technology’s relationship with business. “At Santander, technology has always been considered a competitive weapon,” he told us. “CIOs should try to think what is in the company’s top execution agenda, both now and in the future. IT professionals need to be conscious of not only what is critical today, but also what will be important tomorrow, from an inner and outer perspective.” To read the article in full, access an entire archive of past issues, and subscribe to the magazine, please visit www.fsteurope.com
TARGETING DATA LATENCY
familiar name in SWIFT messaging integration, Volante Technologies is securing a new claim to fame – data integration for ultra low-latency environments. Volante has proven to handle the most complex data feeds with speeds as high as double- and single-digit microseconds. “High-speed data movement was simply a bonus to our back-ofﬁce customers,” says Vijay Oddiraju, CEO of Volante. “But today, as ﬁrms discover that inefﬁcient data integration is the single greatest cause of latency, Volante is attracting a new class of front-ofﬁce customers and partner vendors.” Volante is working with a number of major investment banks in lowering the data latency in their automated trading systems.
Beyond pure speed, one of the key attractions of Volante data integration is that it works on any platform, application or network environment, while requiring no dedicated infrastructure of its own. Volante supports the massive throughput and scalability necessary to meet growing data volumes, while simultaneously relieving demands on hardware. A major Volante innovation is ‘hop-less integration’ which slashes integration time and eliminates processing burden from applications. Running within the cache memory of applications, hop-less integration enables fully transformed data – which may be enriched, normalised, ﬁltered or processed in a
variety of other ways – to ﬂow seamlessly from one application to another. Since 2001, Volante has been providing automation tools to the capital markets industry for the most complex data integration challenges. Pre-built modules simplify integrations for vendor feeds, as well as ﬁnancial data types and protocols, such as SWIFT, FpML and FAST FIX. “Volante customers have discovered that dramatically reducing latency is not only possible,” notes Oddiraju, “but it can be done in a way that virtually eliminates time-consuming hand coding as well. This is a win-win solution anywhere in the data architecture.” For more information please visit: www.volantetech.com
UPFRONT FST EU9:12june
UNDERSTANDING THE DANGERS TOP OF THE CLASS OF LAPTOP THEFT
ith changing working patterns and the increasing need to travel and work remotely, the laptop has become a valuable part of our working armoury. However, with the beneﬁts of connectivity outside of the ofﬁce comes greater exposure to security risks. And with the FSA prepared to take enforcement action against ﬁrms failing to encrypt customer data offsite, it’s not only an organisation’s reputation at stake when security breaches occur: it could be a substantial ﬁne. Organisations can no longer afford to be complacent about the physical security of their laptops and mobile devices. Security tools, such as locks and encryption designed to protect sensitive data from being accessed by unauthorised users, are not sufﬁcient enough. Often the barrier to these tools working effectively is the reluctance of employees to use them. Frequently this is simply due to a lack of understanding of the true cost to the business of a stolen laptop or lost data. SAI Global’s new laptop security elearning course can help ensure employees understand risks and how to avoid them. The course is designed to educate employees on the importance of securing and pro-
tecting laptops, other mobile devices and the information they hold. On completion, employees will better understand why it’s important to protect the security of these devices, what security measures they can take to ensure this and what to do in the event of loss or theft. The course uses a scenario-based approach to illustrate the threats associated with mobile computing, reminding users of internal and external security dangers they may encounter whether working from home, in the ofﬁce or when travelling on business. By using this approach the course ensures your employees are given the conﬁdence and knowledge to ‘do the right thing’ when using mobile devices wherever they are. To find out more visit: www.saiglobal.com/compliance
THE SPANISH INQUISITION?
panish banking giant Santander, one of eurozone’s largest banks by market capitalisation and the world’s second biggest after HSBC, has said it will cut 1900 jobs in its three UK businesses – Abbey, Alliance & Leicester and Bradford & Bingley. The banking group has said that the jobs would be cut in 2009 to reduce costs and has not ruled out compulsory redundancies. Unions have reacted with dismay to the announced cut, which represents eight percent of the group’s British workforce. “This announcement shows we are on track to fulﬁl the commitment we made at the time of
the Alliance & Leicester acquisition to grow our UK business whilst ensuring we meet our costsaving targets,” said Antonio Horta-Osorio, chief executive of the combined UK business. The group, which plans to save €202 million by the end of 2011, has said that while it did not plan to close major sites in the UK, it might consolidate smaller ofﬁces into larger sites. So while the news regarding closures will provide welcome reassurance for many UK members, the suggestion that smaller sites may be consolidated into larger ones raises serious questions over some locations around the UK.
rady plc, the leading supplier of trading and risk management solutions for metals and commodities, has announced that it has been included in the latest Chartis Risk Tech 100, a worldwide risk technology ranking that researches, evaluates and ranks the world’s top 100 risk management vendors. Brady has risen in the overall rankings compared to last year and was highly ranked in terms of customer satisfaction. The company’s rating in the annual report is all the more signiﬁcant given its high degree of specialisation and focus on precious and base metals and commodity trading. The Chartis Risk Tech 100 report was compiled based on an initial survey of 3200 global risk technology buyers, followed by the completion of 830 detailed questionnaires, researching 347 risk technology vendors and conducting 127 interviews with buyers of risk technology. During September and October, Chartis assessed the top 150 companies and 20 independent consultants then reviewed their ﬁndings. By late October, Chartis had chosen the top 100 companies and published the report. Gavin Lavelle, CEO of Brady, comments: “Brady’s inclusion in such an important, mainstream annual risk technology report is great news. It is especially encouraging to achieve independent and international recognition for our high level of customer satisfaction. I believe that Brady’s improved position compared to last year is a reﬂection of our strong performance and our team’s dedication to delivering excellent products and a high level of service to our client base.” The Chartis report ranked Brady at 70th overall and, signiﬁcantly, also ranked the company in the top 30 for customer satisfaction. Brady clients include many of the world’s largest miners, reﬁners and producers, as well as tier one banks and a large number of London Metal Exchange (LME) category 1 and 2 clearing members. To access the full report please see www.chartisresearch.com or visit www.bradyplc.com
UPFRONT FST EU9:12june
THE FIVE-MINUTE EXECUTIVE
Winning combination Following the merger of Emirates Bank and National Bank of Dubai last year, Rick Pudner, CEO of Emirates NBD, discusses the challenges of successful merger completion and how Islamic banking is providing a significant boost to earnings.
What has the merger done for the new group’s stature in the region? The deal made Emirates NBD the biggest bank in the Middle East by assets and it’s this scale and the heritage of the two legacy banks that positions us as a national champion bank. The size of our balance sheet also makes the bank a natural leader in big ticket project lending, an important growth catalyst in the GCC banking sector. Emirates NBD boasts over 20 percent of the domestic, corporate loan market. The deal also meant pooling two talented staff teams in the region. This team remained dedicated throughout the deal, enabling us to grow further still since. Has it been difficult bringing together two banking giants? Generally, the banks stakeholders were pleased with how the deal went. The banks partnered with best-in-class advisors early on and thus the merger progressed very smoothly. Evident to how smooth the process was is the fact that business ran as usual and even managed to grow throughout the deal. An important challenge has been the integration of our staff. With new offices and merged teams in place, settling the bank’s people and creating a positive new culture has been a priority over the past year. To this end, we have hosted ‘Culture Workshops’ for all employees. These sessions focused on team building and communicating the new vision, mission and values of Emirates NBD to all. Technical integration is of course a challenge, front-end and backend. We are on-track with all areas of integration and are on-line for our 2009 deadline. It has been said that the Emirates NBD merger is a blueprint for future large regional mergers. Do you feel threatened by the arrival of international banks in the UAE or do you see the competition as being healthy? Competition is always healthy and inevitably drives progress. As the market stands, cluttered as it is, the authorities are hesitant to issue new licenses to international competition. After further consolidation I’m sure this will ease up but we are the biggest in the region with the largest distribution network in the country. We will always work hard to secure this position. What goals do you have for Emirates NBD in the next 12-18 months? Is overseas expansion on the cards? The bank aims to continue growing at a steady rate. Growth will be both organic and inorganic. Organically, we see the Islamic finance
“Competition is always healthy and inevitably drives progress. As the market stands, cluttered as it is, the authorities are hesitant to issue new licenses to international competition” division continuing to develop as with our lending. We are also seeking to strengthen existing international positions over the next year. Inorganically, we have not made secret of our hopes to make one or two strategic acquisitions in the medium term. Outside of the UAE, building upon our position in Saudi Arabia is a priority. Other markets on our radar include Turkey and some of the CIS nations. You can read the full interview in FST’s sister publication, CXO Europe, or online at www.cxo.eu.com
UPFRONT FST EU9:12june
1 2 3
HUNT BROTHERS Lost Undisclosed Amount Having attempted to corner the silver market by purchasing approximately 100 million ounces of silver bullion throughout the 1970s, brothers Nelson and William witnessed silver prices crash on March 27 1980, a day now deemed as Silver Thursday. Nelson was fined US$10 million for attempting to control silver prices.
PETER YOUNG Lost €446 Million In 1996, Young secretly created several companies in order to exercise stock warrants for own his benefit. Two years later, he was charged with conspiracy to defraud, but was found mentally ill and unfit to stand trial. At one court appearance he was dressed as a woman and answered only to the name ‘Elizabeth’.
JULIAN ROBERTSON Lost €12.6 Billion Robertson started the hedge fund firm Tiger Management in 1980 and turned a €5.9million investment into €5.3 billion. However, he failed to participate in the tech-stock craze, which he deemed irrational. As a result, Tiger Management suffered massive losses, with all funds closing at a value of €4.4 billion (previously worth €17 billion in 1998).
THE BIGGEST LOSER
t’s a sad fact, but rogue trading makes headlines. The idea of a single person losing millions or billions of cash is always interesting, but even more so when that person is losing other people’s money. When a trader feels that he or she has a special gift for snifﬁng out money making positions, it can be a dangerous situation. Unfortunately, luck is a ﬁckle friend. When these formerly ‘magical’ traders start losing, they often look for ways to magnify their bets and win back their losses. Aside from the ﬁnancial damages that rogue traders inﬂict upon the market, they do serve one very important function: they remind us that seeking exceptional returns means taking on equally exceptional risk. Because of this, take a look at ﬁve traders and fund managers that have become very famous for their very public losses.
JEROME KERVIEL Lost €5.1 Billion The SocGen rogue trader, Kérviél’s losses occurred from an unauthorised speculation in European futures. Since he was initially employed with Société Générale before becoming a trader, he was, for a time, able to manipulate the system and hide his losses.
JOHN MERIWETHER Lost €4.3 Billion In 1994, Meriwether founded the LongTerm Capital Managment (LTCM) hedge fund, which managed more than €74 billion in assets. In 1998, LTCM made a bet that the troubled Russian financial markets would revert back to normal, and took a large, unhedged position on Russian debt. The fund ultimately collapsed and LTCM was forced into liquidation in early 2000.
CAN WE FIX IT?
ecember saw the European Central Bank joining the United States Federal Reserve and other major central banks in cutting key interest rates by half a point in a concerted move to stabilise ﬁnancial markets and avert recession. However, economists believe the ECB’s power to stem the ﬁnancial crisis in Europe is limited. The cuts were the ﬁrst in more than ﬁve years and the move echoed the coordinated rate cuts on September 17, 2001 in the aftermath of the 9/11 attacks. The cooperation among central banks contrasted with a divided response to the crisis from European governments this week, which has undermined investor conﬁdence and highlighted chronic weaknesses in Europe’s ﬁnancial architecture. Economists say the ECB has effectively replaced the money market, where banks trade money in overnight and other short-term loans to remain liquid. It has been supplying tens of billions of euros via so-called ‘quick tenders’ for money. And banks have been parking any surplus funds with the ECB rather than lending it to each other. Technically, the ECB can go on propping up the money market in this way indeﬁnitely, and there’s nothing to stop it continuing to cut interest rates aggressively. But economists say the general loss of investor conﬁdence is causing the dramatic slump in share prices and putting banks in trouble can only be solved by pledging taxpayers’ money to rescue major banks. Source: BusinessWeek
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ith London real estate and rental prices amongst the highest in the world, many financial giants are reportedly looking to relocate some functions in order to drive down costs. However, along with lower leasehold, staffing and operational costs, relocation can also present an opportunity to restructure processes in order to optimise operations. Three areas that financial organisations are examining are location, the amount of office space required and internal processes. If you had to name the common link connecting these issues though, would imaging and document automation spring to mind?
ISSUE IN NUM8ERS
The right tools for the job
Credit Suisse has over
1000 projects running simultaneously (p30)
Danske Bank plan to roll out new technology across all operating countries by 2010 (p36) The risks associated with banking are
five or more times larger today than a year and a half ago (p84)
The Erste Group has grown its customer base from
600,000 to 16.6 million in little over a decade (p98)
The number of people of working age in Europe will drop by
35 million by 2020 (p128) 26
To work effectively, staff in regionally located departments need quick access to information, incoming documents and to upload documents. Putting in place a central scanning unit where all incoming mail and company documents can be captured, filed and distributed electronically can streamline the way information is transferred across the business. This helps to avoid delays, ensuring incoming documents can be quickly routed to the relevant department, in any location, at the start of each business day. Moreover, the ability The reduction on file storage to classify and index document types on arrival space alone saved the bank over means that documents relating to a particular process can be automatically routed to speciﬁc perat Greater London rates sonnel and departments, regardless of their location. All document types, including paper documents, faxes, emails and attachments can be classiﬁed and indexed to ensure that mail is processed in exactly the same manner regardless of how it enters the organisation. Automatic routing of documents to the relevant team not only increases employee capacity, it also serves to reduce response times and improve customer service.
Banishing the filing cabinet Many organisations are looking to maximise use of their office space or reduce their space requirement, yet filing cabinets and archives still take up valuable real estate. Implementing a scanning and document management solution that allows departmental staff to access the material they need electronically reduces the need for onsite storage, whilst ensuring documents are securely archived for business continuity purposes. In the case of one top-four UK bank, a number of operational and regulatory factors led to the decision to commission a scanning project that would enable the bank to archive and access KYC documents electronically. The reduction on file storage space alone saved the bank over £400,000 at Greater London rates. For more information visit www.basware.co.uk
UPFRONT FST EU9:12june
uropean companies are becoming increasingly concerned that the US, which is allegedly spying on EU cross-border bank transfers as part of its ﬁght against terror, is also doing this in order to obtain economic data. It recently emerged that the private Belgian company SWIFT, which manages international payments in the EU, has handed over data to Washington. SWIFT was thrust into the limelight when the New York Times last month reported that ofﬁcials from the CIA, the FBI and other US agencies had, since 2001, been allowed to inspect transfers. The standardised SWIFT transfer format contains the names of the transferral and the receiver, the account number and bank address, as well as the amount and the intended purpose. The transfer data can therefore give information about prices, supply and customer information. This month the European Parliament requested the ECB to make clear its knowledge of the affair, while also saying CIA snooping “could
give rise to large-scale forms of economic and industrial espionage”. MEPs said they would organise a hearing with the ECB, in order to ﬁnd out the exact role of the bank in the secret agreement between SWIFT and the US government.
KNOWLEDGE TRANSFER PREDICTED TO RISE
a closely networked team was important and a further FT, a leading international provider of IT 51.6 percent cited a global presence, with the internaservices to the financial sector, has antional ability to recruit and deploy skilled people. nounced the results of its European surThe companies surveyed by GFT also expect to vey that analysed success factors in the have a rise in outsourcing requirements in the coming outsourcing of IT projects. year. Around three-quarters foresee a need for exterThe research reveals that the demands of nal support in the strategy and process consulting large, international enterprises are on the rise sectors (87 percent and 80 percent respectively) and as businesses recognise the continuing imporalmost two-thirds (59 percent) expected demand for tance of investment in IT, despite the difficult IT strategy consulting to increase. In addieconomic circumstances. Asked about the tion, almost half anticipate an expansion greatest benefits derived from working with exin the use of managed services models in ternal service providers, over a quarter of reterms of infrastructure operations (47 perspondents across Europe cited the transfer of of respondents cent) and business process outsourcing knowledge back into the business. The industry were looing for the has moved on from the perception of outsourcing as a right skills from (42 percent). Ulrich Dietz, Chairman of the Executive cure-all, using the cheapest headline day rate in an their external offshore location. Whilst costs are obviously still an service providers Board of GFT Technologies AG, says: “The survey reaffirms our strategy to consistently important factor, businesses are increasingly lookdeepen our industry specialisation and be available as ing at the knowledge gains to be had from a properly colan international partner. Our global network of experts laborative process. enables us to offer our customers an on-site team that When asked how they expected their requirements to perfectly suits the project. Our focus on the financial serdevelop in the coming years, the top three responses were vices sector and our extensive understanding of the key skills, good relationships and an international presence. processes involved often makes us the preferred partner 60 percent of respondents were looking for the right skills for the sector.” from their external service providers, 56.7 percent thought that
Source: Successful Projects and Services in the Age of Global Delivery: Best Practices for Placement, Control, and Staffing – (September 2008). A trend survey conducted by Lünendonk in conjunction with GFT.
UPFRONT FST EU9:12june
COMPANY INDEX Q4 2008
28 ABSA Group AIIM Aktia Bank Plc. Alliance & Leicester Amazon AMR Research Anglo Romanian Bank AOL Argos Barclaycard Barclays Basware Bellis Jones Hill Brady Plc. British Airways Cathay Pacific CESG Citigroup Clydesdale Financial Services Comset Cranfield Technology Institute Credit Suisse
Companies in this issue are indexed to the first page of the article in which each is mentioned 102 64 128 110 116 58 42 92 102 102 140 26 2 23 134 134 78 48 102 56, 57, IBC 102 30
CSC CyberArk Danske Bank Deutsche Bank Dimension Data Disney Dolce & Gabbana Double-take Software Dow Jones Dunhill Emulex Erste Group Etihad Airways Eurogiro Four Seasons Fraunhofer Institute Garanti Technology GarantiBank Golman Sachs Google HBOS House of Fraser
15, 86, 87 144 34 107, 108 112, 113 132 132 10, 54, 55 90, 91 132 19, 45 90 134 110 132 78 126 126 140 92 140 102
IDC IND Group Jimmy Choo Keio Plaza Kofax Lloyds TSB LogiCRM Loglogic Lufthansa Malaysia Airlines Manchester United MasterCard Microsoft Morgan Stanley Motorola NATO Nokia O2 PayPal Pitney Bowes Porsche Design Providian Inc.
116 IFC, 120, 122 132 132 60,61 140 4, 114 ,115 83 134 134 102 102 92 140 8, 67, 74 78 102 102 92 118, 119 132 102
RBS RIM RSJ Invest SAI Global Salesforce.com SAP Serena Software Sony Ericsson Steadlands Thomas Cook TietoEnator Transport for London UBS Virgin Visa Volante Yahoo! Yves Saint Laurent
140 6, 74, 77, 78 84 23, 93 116 33 13, 49, 50 71, 72, 74, OBC 62, 63 102 128 102 140 134 102 22, 41 92 132
ritish credit-card providers have agreed to cut consumers some slack by halting the practice of raising penalties on their high-risk borrowers. The guidelines include giving customers 30 days notice if the interest they pay on their credit card bills is to be raised, and the option of closing an account and paying off their bill at the existing rate. Over the past two months the British government has noticed a worrying trend of ‘risk based assessment’, where credit card owners were being sent notification that their annual percentage rate was going to increase significantly overnight. In some cases, the rate had been increased by as much as 10 percent with very little notice, even though the British banking code requires credit-card providers to give customers 30 days notice on any changes in terms and conditions that would be “disadvantageous to the borrower”. However, contracts often include a clause allowing for interest rate changes, allowing providers to still be able to raise them.
The new code, which will even be binding on large credit card providers such as Barclays and HSBC, was made after a meeting conducted earlier in the month with the UK’s Consumer Affairs Minister. British Prime Minister Gordon Brown had previously pledged to stamp out the practice, which he described as “irresponsible.”
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illions of customers with the Halifax spokesman about the new structure. UK’s Halifax and Bank of The new account, dubbed the Scotland will see big changes ‘Reward’ account, will abolish the current to their current accounts in interest charges for people in the red. Also the New Year. disappearing will be the existThe changes are a reAlso disappearing ing overdraft fee of £28 per sponse to last July’s critical re- will be the exisiting month, and the maximum three overdraft fee of port by the Office of Fair charges a day of £35 each for Trading (OFT) into the operapaying or bouncing cheques, or tion of personal current acmaking other payments, while counts. The report said that in the red without permission. per month the way they worked was Instead, customers with an complex and opaque, with arranged overdraft of up to many customers not knowing how much £2500 will pay £1 per day; those with a they were likely to be charged in interest higher arranged overdraft will be charged and overdraft fees. £2 per day; and anyone with an “It will reward good behaviour and is reunarranged overdraft will have to pay £5 ally simple and easy to understand,” said a per day.
NEWSBITES • The National Institute of Economic and Social Research (NIESR) has estimated that the UK economy contracted a full one percent between September and November, suggest that the economic slowdown is worsening. • The global crisis has tightened its grip on industry-heavy central Europe, causing Hungarian and Czech manufacturing to shrink and forcing the latter’s biggest producer to shift to a four-day work week until mid-2009.
LUCK OF THE IRISH? The Irish government is to provide a fund of €10bn to recapitalise all its listed banks.
owever before any money is paid out, the banks must await the outcome of the most recent rights issue and if private investors choose not to step in, then the state will have to provide the money instead of using the fund. Finance Minister Brian Lenihan told RTE News: “Some financial institutions are so embedded in our economy, in terms of their borrowing and in terms of their deposits, that they are of systemic importance to our economy. “It’s very important that our banking system is seen to sustain and support our economy.” The Irish government said the objective of making the fund available was to ensure the long-term sustainability of the banking sector. It pledged to secure the interests of the taxpayer through appropriate terms and return on the investment. The money will be available to AIB, Anglo-Irish, Irish Nationwide, Irish Life & Permanent and Bank of Ireland, which owns the Bristol & West bank. Shares at Bank of Ireland and AIB have fallen 92 percent and 88 percent respectively this year.
Shares at Bank of Ireland and AIB have fallen
88% respectively this year
KARL LANDERT:DEC08 15/12/2008 17:39 Page 30
â€œWe are not a service provider; we are an IT organisation of a financial services institution and we need to understand our business. We walk the talk and what we say is what we deliverâ€?
KARL LANDERT:DEC08 15/12/2008 17:39 Page 31
Interesting times Becoming Credit Suisse CIO in May 2008, Karl Landert’s first few months in the job have coincided with an unnaturally turbulent period for the industry. FST editor Huw Thomas spoke to him about managing IT in an age of uncertainty
sked to deﬁne his role as head of Credit Suisse’s IT function, Landert likens it to being mayor who has to manage the different aspects of day-to-day life in a busy city. “There are dozens of buildings and an infrastructure which is sometimes old,” he says. “You need to replace it to cope with growth and the inﬂux of people coming in from rural areas. Your role is not purely a technology role anymore.” If Landert is a mayor, then the city he became responsible for little over half a year ago is one located in the middle of a war zone, facing unpredictable attacks from all sides. Good news is in short supply in the ﬁnancial services industry, with the ongoing credit crisis leading the Swiss giant to report a third quarter loss of more than €800 million. Given the situation, a siege mentality would be understandable. But if Landert is fazed by this baptism of ﬁre, he does a good job of hiding it. “It’s been a challenge because a lot of things have changed in the ﬁrst few months,” he conﬁrms. “But it’s also been highly rewarding. If you don’t enjoy working with your own people, your IT organisation, but also with your peers on the business side, don’t do this job. It’s a people job and with all the challenges that we are facing and all the bad news, the one most rewarding thing you have is working with a good team, having a good spirit, and making some of the tough decisions you need to make. But as long as the team is working well, people enjoy working with each other, I think that gives you a lot of motivation.” In the choppy waters currently being navigated by those in IT in the ﬁnancial industry, a major challenge is building any kind of long-term strategic plan. When the managers are anxiously awaiting the next bombshell that threatens to blast them out of their corner ofﬁce, it can be hard to both get their attention and convince them to part with jealously guarded funds. Though Landert is far too discreet to voice such a forthright assessment, he nonetheless recognises such pressures. “Given the seismic events we are seeing right now, we see these profound changes coming along,” he
conﬁrms. “Nobody can afford to have a long-range strategy which is very detailed. I think one of the common themes which I see throughout all the things we do in our long-term strategy is about becoming a very agile IT division of ﬁnancial services or of the bank. The agility has to be within the whole IT organisation in structural technology-type of activities, in the way you set up your operating model in order to react to and be able to survive some of the volatility we have and some of the changes which will come along.” It seems that even the biggest organisations are going to have put major plans on the back burner in favour of being prepared for an increasingly uncertain environment. For Credit Suisse at least, this shift in focus is already underway. Though, as with any move that requires a drastic direction change, it cannot be done overnight. “You need to look at the way that you do ﬁnancials and how you account for IT costs and the investments you do,” Landert continues. “You’ve got to tackle some structural aspects of the organisation. You’ve got to look at the operating model that includes some of the sourcing strategies you have. You’ve got to look at your architecture and your infrastructure, at technology processes and standards, and last but not least, at your workforce. It’s the key point that you align all these activities because they all highly depend on each other and you cannot change one without affecting another.” A common response to uncertainty and constrained budgets is a greater reliance on outsourcing. By not actually owning technology and processes themselves, organisations can ﬁnd it that much easier to walk away if circumstances change suddenly. Landert conﬁrms that this is very much a part of Credit Suisse’s plans, but that the issue is not as black and white as it might sometimes appear. “You’ve got to have a clear strategy, and the clear strategy now regarding outsourcing is what parts of the overall value chain you outsource what you keep in-house,” he says. “More and more you want to keep in-house design knowledge and architectural knowledge, beyond the pure contract management that you always keep in-
KARL LANDERT:DEC08 15/12/2008 17:39 Page 32
VIRTUAL REALITY he driving force for any virtualisation strategy comes down to three aspects. First, you want to employ your machinery better, so that you utilise your servers to a higher degree than having only five percent utilisation on them. Second, you want to reduce power consumption. We have a lot of power issues and it’s becoming a driving cost factor. In many areas of the world it’s a constrained resource. So you want to reduce your power and with that you also reduce the power consumption, you reduce the data centre space you need. You don’t need to go and construct new data centres and buildings. Last but not least, it allows you also to simplify the overall management and systems management processes. It has an effect on sustainability, but there are also very good economic reasons to pursue virtualisation.
house, in the retained organisation. And you want to have the ability to do what is called today multisourcing. By keeping that in-house you can utilise different partners and use competition between different partners. But it’s also easier to switch vendors.” Of course, any decision regarding outsourcing has to take geographic and vendor risks into account. The key issue for Landert is that design and management authority remains inside the company. But contrary to the prevailing winds blowing through the industry, Credit Suisse is even looking at bringing some previously outsourced elements back into the organisation. Landert tells us that the possibility of bringing certain helpdesk functions back in house are currently being explored. “I think it’s the realisation that most companies, although they are global by nature, have a very big challenge in providing you with a consistent global service,” he explains. “Sometimes you have local champions, who are better prepared to do that. Secondly, what is driving it is where we have customer satisfaction issues, which are leading us to this conclusion. For example, in Europe we ‘re-insourced’ some of the helpdesk and the desktop end-user computing services, which we had outsourced previously in some of the European ofﬁces. We’re looking at it on a broad scale right now.” It’s an important consideration. While it can be tempting to go for the lowest cost option in difﬁcult times, doing so at the risk of alienating customers can lead to yet bigger headaches. Credit Suisse operates an integrated bank model with IT acting as a shared services unit to all the sections of the organisation, from asset man-
agement, to private banking, to investment banking. Serving all these speciﬁc needs at a time when ﬁnancial markets are in such a state of ﬂux must surely present some problems? “Right now one of the challenges we have is certainly sizing IT and the way we provide our services to some of the peak volumes we have seen,” Landert responds. “We have been reacting very fast to deal with some of the volumes which were created by this market volatility and by the events we have seen. Right now the challenge is how can we sustain the business, how can we make sure that when we have these events where you triple and quadruple your volumes, that all the systems are really delivering on their SLAs. Reaction to these events has kept us pretty busy.” So what of the future? It’s virtually impossible to open a newspaper without seeing stories about falling budgets and brutal cost cutting. Speak to most people working in ﬁnancial IT and they will tell stories about being asked to do more with less. While Landert is cautious about sounding too many alarm bells, he nonetheless acknowledges that the current situation
KARL LANDERT:DEC08 15/12/2008 17:39 Page 34
requires some very careful use of resources. “Going forward I think there are going to be some of the tough decisions that we need to make about where we continue to invest and where we reduce investments,” he says. “That’s not an IT call you make alone; that’s the one you do with your business.” Making these kinds of calls really puts a spotlight on the quality of IT’s governance and its interaction with the business. It’s an area where Landert believes his team has demonstrated considerable success. “I think that over the last couple of months, we have made signiﬁcant progress in providing the full transparency of the levers we have,” he continues. “This is a business IT alignment which is absolutely crucial in difﬁcult times. You have to be agile, to have the full transparency, and to understand the leverage you have on what you can do and you cannot do with your IT infrastructure in supporting the business. That’s going to be very important in the coming months in deciding where we put your investments and where we don’t invest.” In any case, Landert is sanguine about the bank’s ability to weather any effects a prolonged downturn may bring to technology expenditure, largely due to the work that has been done recently. “We had the luxury to be in the situation where we could gain a lot of synergies through combining all the different IT units whilst at the same time continuing to invest,” he says. “So we are looking at three or four years of having done healthy
“It’s a people job and with all the challenges that we are facing and all the bad news, the one most rewarding thing you have is working with a good team” investments and increases in the IT development.” Landert clearly believes that this groundwork will be enough to see him through, but also seems generally upbeat that budget cuts won’t have too big an impact on his work. Though he acknowledges that the current uncertainty will have an effect, he remains conﬁdent that IT will retain the capability to be effective, simply because IT is so fundamental in coping with some of the challenges that the industry is facing. To ensure that the company’s IT doesn’t stagnate, Landert promotes the concept of managed evolution. It essentially boils down to a constant evaluation of the bank’s IT assets which enables change to be made without potentially crippling investments. “To survive and to keep your cost
CREDIT SUISSE – EDITED HIGHLIGHTS
1856 – Credit Suisse’s predecessor Schweizerische Kreditanstalt (SKA) is founded
1989 – SKA’s sister company CS Holding becomes parent company of the group
1905 – Opens first branch outside Zurich
1997 – CS Holding becomes Credit Suisse Group
1910 – Unveils representative office in Paris
2005 – Credit Suisse implements its One Bank strategy by merging its Credit Suisse legal entities in Switzerland with Credit Suisse First Boston
1940 – SKA launches New York Agency
KARL LANDERT:DEC08 15/12/2008 17:39 Page 35
IT’S NOT JUST IT Landert explains the importance of Credit Suisse’s people o attract and retain best talent we have what we call strategic workforce management programs in every region, which are co-ordinated globally. We have career development paths and the whole framework to develop people. It is pretty unique and it’s something we use globally where to show the career paths which we have in the company. We have a very good and successful mobility program for people to move between the different divisions within the IT organisation. And when I speak about mobility program we are speaking about an organisation of roughly 12,000 people, including contractors and some of our partners. We’ve got more than 1000 projects running simultaneously, more than 1000 applications. There are lots and different cultures of every multinational environment. This gives you the ability to attract a lot of talent who will actually enjoy working in such organisations. I think there’s another change that is also happening right now; you need to hire for potential. You need to hire people that also enjoy moving along the organisations as you start to be more process-oriented, especially in certain application development areas. You also need to specialise people in a certain type of roles, like grouping together test people and having a quality assurance test competence centre, which you may locate in whatever geography. That’s also a change in the way that people have been working in the past.
levels acceptable you need to have a constant process of eliminating your heritage and your end-of-life application systems,” he says. The approach allows the technology portfolio to be contained, both in size and complexity, reducing redundancy and enabling a much greater level of component reuse. Key to its success are solid architecture and strong standards. “That is one thing we do and we have been very successful in it in the last 10 years, in different parts of the IT organisation, Landert continues. “Constantly re-engineering and reinvesting in our systems enables us to eliminate some of the old ones and reduce complexity. That allows you to become more flexible and agile and to also meet business needs in a faster way.” It is maintaining this overarching philosophy which is key to Landert’s role. Returning to the idea of what the modern CIO actually is and what responsibilities the IT function has, he offers a stark assessment. “We are not a service provider; we are an IT organisation of a financial services institution and we need to understand our business,” he says. “We need to be respected and accepted by our counterparts and our colleagues in the business, and we need to speak with them in the
same language. We walk the talk and what we say is what we deliver. These are some of the key principles.” As stated earlier, Landert sees being a CIO as like being a mayor. Making sure there aren’t potholes in the roads and that the buses run on times. To do this requires the ability to get a good overview of the business, to avoid getting bogged down in details. “At this level I don’t want to make a call about which kind of technology we want to use or what application we want to build,” he says. “You need to have a view on how you spend and how you prioritise spend along the business areas you are supporting. You need to have a view about what kind of skills you need today, what you will need in the future and how it will develop.” Perhaps most importantly, it is about setting the right tone. In times as trying as those we now face, it is essential that management leads from the front and brings together all the disparate elements of this global organisation. “These interdependencies are what you need to manage besides the people side and interfacing with the business and working with your people to keep them engaged,” Landert concludes. “Engagement of the organisation is a key factor in being successful.” n
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CHANGE OF HEART
They say change is a wonderful thing. Though given the current state of the global economy, it is easy to see how that idiom could be forgotten. Particularly over the last twelve months’ where the idea of change has become more synonymous with unpredictability than ever before. As we continue to operate in an economy littered with job losses and cutbacks, where the unknown is literally around the corner, it is obvious where the lines became blurred BY M AT T B U T T E L L he process of change within the ﬁnancial sector hasn’t always been so steeped in uncertainty. If you look back over the last couple of decades, many of the changes that ﬁnancial institutions have seen have been welcome ones – not to mention, in many cases, long-awaited. The advancement of technology and the way this has helped shape our industry is one such development that comes to mind. Today, with 20 years at Danske Bank behind him, CIO Peter Schleidt is no stranger to the changing face of technology. As with any ﬁnancial institution, Danske Bank has changed irrevocably over the last two decades, but then, so has Schleidt. When he joined the ﬁrm, he was a fresh-faced university graduate and has stayed with the same company ever since, working up to his current role. “I think I have tried every possible job within IT,” he jokes. “And as my role has become more and more business orientated, I too have had job experience outside the conﬁnes of IT.”
Schleidt Ed P36-40.indd 37
While his title suggests he is solely in charge of the bank’s technology, Schleidt is actually involved with much more beyond the traditional conﬁnes of IT. “The job today is more about bridging the gap between IT and business,” he explains. “I’m a manager who does deal with business development but also, within the management of the bank, I am the person who speciﬁcally knows how to handle the development of IT initiatives.” And it is through these IT initiatives that Schleidt has seen the most change. As he notes: “Our business vision at Danske Bank is ‘One Platform’. We are now operating in retail banking systems in all the Nordic countries and we have two banks in Ireland and one in Northern Ireland where we do retail. The interesting thing is these are all based on exactly the same platform: It’s the same products, the same processes, the same systems, the same way of organising the brand, the same creative processes. Everything is, as much as possible, exactly the same within our banking model.” This is a vision that wouldn’t have been feasible several years ago, not least because of the technology involved. “One very big beneﬁt of doing this is that there are a lot of cost synergies when we’re doing cross-border mergers this way,” adds Schleidt. “For other banks that do not have this strategy, it can be difﬁcult to justify this, but for us, by having this approach, we can take out around 20 percent of the cost of the bank that we take on in a merger.” In other words, while in Northern Europe the average cost of IT is between 15 and 20 percent of the total cost of the bank, when Danske Bank go into a new market, buy a bank, integrate it, and run it on their existing systems, then they only have to look at a marginal cost to run that new bank. Nordic countries have always been frontrunners on IT, and this is something that Schleidt is both aware of and keen to maintain. “The big thing we’re investing in at the moment is digital banking,” he explains, “and while you might say that this isn’t particularly special because everybody is talking about it at the moment, it is still a consistently important part of our set-up.” He highlights the importance of this issue with an anecdote from his own experience, saying that several weeks ago, in a supermarket in Denmark, a lady standing in front of Schleidt in the queue had tried to pay by cheque. The cashier looked at the cheque and asked, ‘What’s that? I’ve seen this before.’ This wasn’t a joke by the cashier, but a clear illustration of how our banking systems are changing. In Finland, for example, cheques do not exist anymore. They have been abandoned for some years and there is a much more integral focus on the idea of, what Schleidt calls, “self-service” banking. While customers in Denmark may be using internet banking more and more, when a customer wants to take out a new mortgage loan or increase their overdraft facility, for example, 95 percent of these new banking agreements are still being made on paper. In response to this issue, Schleidt and his team at Danske Bank are currently investing in a digital banking program that will turn these statistics around. Schleidt’s hope is that within three years, 95 percent of these agreements will be being signed electronically.
“It’s our ambition to fully automate the main processes of banking so that if a customer is out shopping for new furniture, for example, and they need more cash, they can send us an estimate from their mobile phone and we can make the automatic credit decision that will grant that customer the money. They then click on their phone and open up an electronic agreement, which they sign digitally, and in real time have the money in their account. It’s about making banking easier. That’s our goal.”
95 percent of new banking agreements are still being made on paper
With plans to roll this technology out across all operating countries by 2010, there is no sitting back for Schleidt and his team. After all, it is a big operation and rolling it out in such a short timeframe is challenging enough as it is, not to mention doing it in the shadow of such unruly market conditions. “We’re quite lucky because the really good thing about our executive board is they don’t see IT as a cost, they see it as an investment.,” highlights Schleidt. “And that’s also how we treat new projects.” It seems then, at least for now, Danske Bank aren’t looking to scale down their development activities. “We’re planning some really big investments over the next two years, particular in relation to our digital banking model, so we can achieve those goals.”
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“You can risk failure if you have a management team where there’s not enough fresh blood”
MERGER AHEAD “There are a number of challenges that are presented because mergers require such a big project; for instance, when we took the National Irish Bank, our employees went home for Easter vacation and when they came back again everything had changed. They had new PCs, they had to sign in with new usernames and passwords and every single system that they signed into was new. There were a lot of new products that they did not have before. Everything was changed over the course of that long weekend. Making such big changes all at once, involves careful planned and it can take a lot of development because, even though we are using the same systems, they
One of the most interesting things in listening to Schleidt speak is his conﬁdence about his own business processes. I ask him, then, if he foresees any danger in terms of the IT budget being cut in the near future? A fair question considering the cutbacks many of our industry’s biggest institutions have witnessed in recent months. “No,” he simply responds, with extreme certainty. “What I’m saying is that it’s all about the net presence value. Our budgets for investment are not something that is ﬁ xed once a year. It’s something that is in our governance process and we regulate it throughout the year. It’s a running process. Every time we make a new iteration of our development plan and portfolio projects then, of course, budgets may go up a little or down a little, but I’m conﬁdent that, as I understand the projects that we’re running and the value they have, we will see good progress in development of the bank.” Without sounding too simplistic, the trick is to keep things moving. You can’t afford to stand still in this business. For Danske Bank, there continues to be a lot happening with technology and the way the bank is expanding. Schleidt says any of one of these can lead to potential risks and therefore there have to be ways that the available technology can be used to better manage risk. “I actually think the Basel II regulation is helping with that a little bit,” he goes on to say. “In my mind it’s too bad that this crisis is coming along now. If this had happened in a few years’ time, when everybody will be ready with the Basel II initiatives, then we would have been better off.” Of course, you could also turn it around and argue that it’s the fault of the ﬁnancial institutions for having been too slow to adopt Basel II regulations, and as Schleidt points out, with politicians con-
Peter Schleidt explains the challenges involved in the integration process
have to be adapted to specific markets. Furthermore, the payment infrastructure of a new country sometimes requires us to operate in a new language, so, for example, when we went into Finland we were not capable of speaking Finnish to our customers straight away; we are now. There are some things that remain different from market to market, and that cannot be helped. In Ireland, the ISA savings account operates very differently to how accounts operate in Denmark, and we need to develop those differences into our platforms so we can fully support these new markets. Currently we’re not in the process of any mergers because of the markets, so what we’re actually doing
is looking to further develop our platform to be more cost-effective and also more competitive towards the customers. The organic growth is actually part of the business situation that we foresee and we’ll have for the next few years.”
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stantly making announcements about our current ﬁnancial systems, there’s always a chance that there will be more regulations to come further down the line. “I hope that when regulators look into it they ﬁnd out that Basel II actually covers a big part of the issues that are needed,” says Schleidt, stressing that too much regulation could itself be detrimental to the industry. “But time will tell.”
Time goes by It is the way technology is being used to develop business models that is ultimately the key for Schleidt. The digital banking programme that he has already discussed is very much a program that, along with other initiatives, has been driven up by the IT organisation of the bank. “When we talk about business development, we have various business areas involved to ensure we are in alignment in our priorities,” notes Schleidt, “and behind the scenes we’re talking about how our service-oriented architecture (SOA) should evolve so we can develop things and see what new technologies we need to bring on board.
SOME KEY DATES IN THE HISTORY OF DANSKE BANK 40
“On one side we’re being very proactive toward what business development we should do within the bank and then we’re also trying to make sure that we drive the IT side of our development in the right direction.” After 20 years at Danske Bank, Schleidt is positive as he looks to the future. “Of course its always good to have a lot of domain knowledge,” he notes, “but on the other hand we do try to take in a lot of new candidates directly from universities, and business and IT people from outside the walls of the bank.” He believes it is important that the bank’s environment allows fresh ideas to be cultivated, challenging the senior management team. “You can risk failure if you have a management team where there’s not enough fresh blood,” he notes. “I think we’re aware of that and trying to do that in our own way.” As IT becomes more capable of bringing in innovation and new ways of looking at systems within the management ﬁeld, Danske Bank continues to change. Schleidt notes that during the short term, with the ﬁnancial crisis, Danske Bank’s focus is going to be about making sure they are getting all the beneﬁ ts out of the current project portfolio that they have in place. One thing is certain, change for our banking systems is coming, and thankfully, despite all the indecision and negativity, there are still places where ‘change’ is being touted as a positive thing. And Danske Bank, at least, remains one ﬁnancial institution that isn’t afraid of the changing landscape of our economy. “There’s no doubt that IT is becoming more and more important,” concludes Schleidt, “I don’t know whether it’s the brain or the heart of the bank, but there is a certainty that if the IT doesn’t work, then the bank doesn’t work.”
Although it’s banking activities can be traced further back, the Danske Bank Group came into being, in legal terms, when it began to establish subsidiaries in the twentieth century and presented its first consolidated annual accounts in 1980.
1975 – The Group saw little scope for further expansion in Denmark. But the expanding export markets provided opportunities internationally and the Group developed a new strategy, opening of Danske Bank International in Luxembourg in 1976.
1990 – Three banks,
1997-2005 – The Group
Handelsbanken, Provinsbanken and Den Danske Bank, merged under the name of Den Danske Bank as a result of the liberalisation of Danish banking legislation. The integration of the three banks’ IT systems gave the Group a technological lead.
had been doing business with companies in Northern Europe for many years, so it established branches in Oslo, Stockholm and Helsinki. Its international operations were further expanded in 2005 with the acquisition of National Irish Bank in the Republic of Ireland and Northern Bank in Northern Ireland.
2007 – The Group strengthened its position in the northern European markets again with the purchase of Sampo Bank. The purchase included Sampo Pankki in Finland as well as Sampo bankas in Lithuania.
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TOM BUTLER:DEC08 15/12/2008 17:44 Page 42
MAKING A DRAMA OUT OF A CRISIS? Anglo-Romanian Bank Chief Executive Thomas Butler argues that the current downturn is merely a blip that needs to be managed through
y strategy as CEO has been to focus on a geographic niche. I joined the bank in 2004, when we operated as a single bank located in London with a history as a trade relationship-ﬁnancing bank. When I arrived, the board gave me a mandate to buy two similar banks, one in France, one in Germany, which we did in 2004, and integrate them into the UK bank. Since then we have gone from being a stand-alone bank in the UK to a multinational one reaching across the EU, and particularly into Romania, which joined the EU last year. Our goal of creating more reach and breadth across the region has therefore resulted in a more complex organisational structure. Initially, the main part of our expansion was Romania, but then we continued to broaden our geographic reach to other parts of the Balkans, particularly the for-
mer Yugoslavia, as well as Ukraine, Russia and some of the other countries around the Black Sea. My secondary focus has been toward enhancing a more corporate business, a strategy we have been executing for the last four and a half years. We’ve been able to capture a number of key corporate relationships and have seen considerable success as our proﬁtability has increased and cost efﬁciencies have improved. The credit crunch is a global problem, with no country or ﬁnancial institution being exempt. Its impact on Anglo-Romanian Bank is determined by the extent that liquidity impacts those banks that we have credit relationships with and their ability to reﬁnance or pay back existing exposures. There’s evidence that the IMF and other institutions will make liquidity available. Certainly, in the case of the Central Bank of Russia, there’s an
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enormous reserve of hard currency that is being fed into the banking system to alleviate some of that stress. In terms of our own banking operations, we’re also confronted with issues of tighter liquidity which inevitably impacts the cost of funds. It determines the size of your balance sheet, and there’s simply no liquidity in the market right now to go ahead and fund yourself.
to because due to higher prices there simply isn’t money available. This ultimately creates tension with your clientele and the only way to overcome this is to re-emphasise that this is a short-term peculiarity of the marketplace. Our focus is to reiterate that we’re going to be here for the long haul and we will continue building working relationships with our clients during the good times and bad times. In order to ensure that our staff enhance investor enthusiasm and provide competitive differentiation, we are speciﬁcally focusing on the quality of our service delivery. As a relatively small bank the training of each member of staff is a speciﬁc and continuous process. Our focus here is on the Romania staff, which is the largest part of our ground operations. We also use what we call a cultural approach, whereby myself or colleagues who have more experience and more seniority are able to go into the marketplace with our local staff, calling on clients and demonstrating the values of the institution.
“Although we’re going to have to cut back a bit on our activities, now is not the time to get demoralised and discouraged”
Making a diagnosis
As CEO, it’s important to appreciate that there’s a difference between symptoms and causes, and to understand what the underlying Customer satisfaction is clearly very imnature of the business is. What’s giving rise to the problems you’re seeportant for ﬁnancial services organisations, and ing? I think if we take a look at the current credit crisis, in my view the cause delivery of this whilst simultaneously having to is excessive leverage. Banks, ﬁnancial institutions and investors moved pass on those increased costs right now is diffrom relatively conservative measures of how much leverage to take on to ﬁcult. Customers traditionally want the best extremely high amounts of leverage, sometimes 40, 50, 100 to one. That service at the cheapest price and the only way was ﬁne as long as you had asset inﬂation and you could continue to leverto overcome this conﬂict that continuously exage up, but as soon as asset deﬂation emerged, which began with the ists is to demonstrate to your client that you are housing bubble crash in the United States, then the impact on the de-leverreally adding value, whatever the state of the aging was extremely accelerated and intensiﬁed these problems. Why then economic climate. was this kind of leverage permitted? Was this a failure on internal regulaThis is not a matter of simply the cheaptory controls or a symptom of the unbridled greed to address those causest price for a product. For any institution to es and prevent the symptoms from reoccurring? be successful it has to demonstrate to a client To understand this we have to look at the underlying market conditions that it is providing something additional to a and not just as momentary blips in the market. So, how do we do it? It’s standard commodity product, such as credit. In our case, we are focusjust a matter of separating what are the symptoms from what are the causing our client managers on understanding our particular clients and es and then looking at it in a logical and evaluative way. What we are reitworking with those clients to define a strategic vision that they want to erating to both our staff and clientele is that this is a blip. For our staff, achieve over the next two or three years. We want to be known as a although we’re going to have to cut back a little bit on our activities, now ‘trusted financial partner’, our is not the time to get demoralised and discouraged. Yes, clients trust in us to help guide it is going to be stressful and difﬁcult, but the priority is them through the financial marto communicate to your clients that this is an unusual Anglo-Romanian Bank ketplace and achieve their busiphenomenon. This blip is temporary, but whether it be six, is the only international ness objectives. 12 or 24 months, we’re here for the long haul for both bank with its core Of course, that’s not an easy clients and staff. thing to do. We ﬁnd ourselves facing business focused in cultural issues and product limitaPlaying it safe Romania. In operation tions, and there’s also the challenge In terms of our capital and our balance sheet we are for more than 30 years, of managing expectations. We’re in a strong bank. We have beneﬁted from not engaging in a phase right now in the wholesale excessive leverage or not investing in a lot of synthetic dethe bank now has capital market where there are clients that rivatives. Instead, we operate on an old banking strategy of over €100 million. we simply cannot lend additionally and that’s going to be a strength for us to get through
TOM BUTLER:DEC08 15/12/2008 16:55 Page 44
this. Of course, there will be constraints and we’ll have to live with those constraints, but ultimately, we will be a stronger and better bank which provides more opportunities in terms of our market share. Providing such a solid foundation through conservatism is vital, but we are aware that this does not necessarily produce the most exciting news for our shareholders. We are attempting to retain the balance but it is difﬁcult in light of the greed that occurs in the marketplace. There are certainly proﬁt-driven motives, and individuals and institutions are constantly trying to maximise their proﬁt and shareholder value, resulting in an inevitable conﬂict between the short-term maximisation and a long-term maximisation of value. One of things institutions and investors need to look at is whether that short-term focus is leading to these kinds of crises periodically. I’ve read a lot of these investor newsletters describing these instruments and I didn’t understand how I could get all my money back and still get a higher guaranteed return. My very simple philosophy is if I don’t understand it, I don’t do it. It’s simply a matter of common sense. Do you understand what you’re doing? Do you understand the risks involved in it? Is the reward you’re getting for taking that risk adequate? Then fourthly, do you know that you are in a position to control some of those risks or mitigate some of those risks, if things don’t turn out exactly as you expect? I’m oversimplifying because there are enormous pressures in the investor community to deliver certain proﬁts. If you miss those estimates, your share price gets hammered and the board of directors and management come under criticism from the large institutional shareholders. There is a lot of pressure to jump in and imitate other strategies that are capturing this risk but as more people do so, the likelihood and not the perception of failure increases.
Thomas Butler has been CEO of Anglo-Romanian Bank since 2004 and has been at the forefront of a major transformation programme. Prior to joining Anglo-Romanian Bank he spent more than 20 years at JPMorgan Chase in various senior roles.
What I’ve done in terms of performance measurement is to lessen the performance reward for the individual unit, at least at the senior management level, and increase the component that reﬂects the overall performance of the bank. In all of this, taking into account the extent to which they’re working with other units and trying to cross-sell and build synergies does not come without its difﬁculties. You just have to continually emphasise that we’re not silos. We’re part of a larger organisation and if the overall organisation does poorly whilst one group does well, it’s going to result in the demise of the overall organisation. So we all have to pull in the same direction and sometimes we have to sacriﬁce the local proﬁt to achieve the overall strategy and the overall success of the bank. The metrics and reporting that is ensuring our organisational development are done in a frequent time frame. I’m copied in on all initiatives from ofﬁces that involve another ofﬁce so I can see who’s attempting to initiate or generate business by cross referrals. I also have a method of following up in terms of tickler ﬁles to see the outcome of that referral and to ensure a member of staff followed it up. I also bring my senior staff together every couple of months, during which we talk about these issues again to try to highlight how important it is to work together as a team and avoid those silo mentalities that can be so destructive of team ethos. Of course, as a small organisation we don’t have the complexities of larger institutions such as Citigroup. I’ve got only four branches in Romania, a branch in Frankfurt and my operation in London, so we have a very direct operational approach and a strong view of what is going on. It’s primitive, but it works in a small organisation. n
“Sometimes we have to sacrifice local profit to achieve the overall strategy and overall success of the bank”
One for all Balancing the need for autonomy from each of our business lines with a need for synergy across the enterprise is an ongoing and difﬁcult task. Individual units have their own proﬁt goals and are driven to meet those targets. At the same time, we have consolidated overall targets and have produced longer terms for our strategic targets, so the business lines aren’t always perfectly co-ordinated. All we can do is to try to emphasise that all the units are part of a whole and we’re judged by the success of the overall bank, not by the success of an individual unit.
CITI UNDER SIEGE? From a position of strength a few years ago, Citigroup now faces regular attack from the effects of the credit crisis. FST sat down with Marco Diehl and Klaus Christof to find out how IT is coping under the strain 46
FST. Could we start by discussing the crisis a little bit and how deep you expect the impact to be within the IT function, particularly in ﬁnancial services where it’s an industry so dependent on technological innovation? Marco Diehl. What I think we have already started seeing is that the ﬁnancial crisis is spreading out into the real economy and now includes the IT area. That means there will be quite a slowdown on IT spends across the whole industry. The focus will be really on process
improvements and while overspends of IT will continue to be high it will be very speciﬁc that quickly generate revenues. FST. And what about the impact directly on your function? MD. We look at synergies within the organisation in different countries and we look into whether we have similar applications and similar functions being used across those countries that can be consolidated. We are trying to be efﬁcient and concentrate on the really important things, and overall we are looking to work closely to concentrate on the key critical projects and stretch those that are not absolutely mandatory. For example, we might have a cash solution in Russia and one in France and one in Germany, and they all have a similar function, so we are trying to combine them. If we can reduce the service, we can reduce the support. These kinds of activities are critical in this current situation.
approach, and then the project manager can implement those solutions. That’s the way it works at Citi, and that’s something that we will leave in place and enforce in the future to make sure that we reuse components that we have used eleswhere in this organisation. I think that’s a good way of handling things. FST. So that remains part of your drive within Citigroup for efﬁciency and ﬂexibility? MD. Absolutely. It’s about reuse and Marco Diehl joined a trainee program it’s about making sure that we can dewith Citibank Germany in 1994, after liver quick solutions by looking at what completion, he worked as a Business is out in the market and making sure that Analyst for Warrants Trading Technology we don’t have 50 applications for the in Germany. In 2003 he started building same purpose. up a IBM FileNet based BPM, ECM BPM is a good example where we see and archive solution centre as a shared we have maybe 20 different solutions services platform across Citi EMEA. He around the region and we look into how was promoted to IT Director in 2008. we can shrink them to maybe ﬁ ve or six and really achieve synergies by combining solutions that are already in place.
FST. In terms of communicating with your team, what are you telling them? How are you directly managing through this period? MD. I’m very honest with the team and I’m very clear that we are going through very, very difﬁcult times at the moment; but I also tell them any crisis will go over and there is a time after when things will pick up again. People need to really focus on critical areas, and they need to be committed. We need to work as a team, together with our colleagues in other countries and other areas to really make sure that we really come out of this current challenge strengthened. I think the team understands this and are actually working even closer together to really come away and overcome the current challenges.
FST. Do you have any real-life examples of where that’s happened? KC. Currently we are operating a BPM platform that we use in several countries, so we have a lot of experience regarding the implementation across different environments. What this means is that if a new user case comes up we can offer and support that business to get the best possible solution and advise them on what might be the best thing to do.
FST. Klaus, how about your function? Is it the same message? Klaus Christof. Yes, absolutely. We work together across different units anyway and we understand that we are all in the same boat.
FST. Of course the business need is always for speed and ﬂexibility, whereas risk management is slower and more thorough in its analysis. How do you manage the tension between those two factors? KC. We have a couple of internal processes that we have to follow when we do changes to any application, so there’s a documented change process and a development process. Of course, some things in the trading area are needed a little quicker sometimes, but usually all new developments are planned and then follow this process.
FST. Project managers and enterprise architects within the banks often have very different interests — long-term prosperity versus short-term gains — how do you balance those two issues? MD. What you have to do is have an architect council or architecture board that is involved in the project. That means, if you have
MD. We operate with very formal change control processes that we uphold at all times. It is key to have the right level of approvals, and there is no way to get anything in without those approvals or without proper UAT tests. That’s something that we really keep to very, very high standards at all times.
a new project, a project manager should really start identifying the particular requirements and then come up with potential technical solutions. Then they should run it through the architecture board to make sure that, as part of a larger organisation, you don’t end up having 50,000 different solutions and are maintaining a common direction. This kind of board should really sign off the principal
FST. Looking at the value chain for an organization the size of Citi must be frankly quite terrifying. How are you driving efﬁciency throughout that chain? MD. By empowering individual areas — for example, I’m running technology for Germany — and by giving a lot of responsibility into
Marathon Man As a semi-professional marathon runner, Marco Diehl tells us how looking outside of the financial services space can offer inspiration in innovation and leadership. In banking, you often have – especially on the investment banking side of things – lots of money in a closed area, whereas in the sporting environment, everyone is equal and everyone has the same opportunities, and I have found this conflicting tension to be quite interesting. The analogy between doing a marathon run and an IT project is very interesting. It is actually a very similar process. In both instances, there is a phase where you decide what it is that you want to do. You know that you want to deliver some function to the business, or that you really want to run the marathon. Then you have to start thinking about how you prepare for that marathon, or how you prepare for the IT project. After that, in both cases, you have the requirement phase, the build phase and then you have the training phase. There are lots of similarities between the two processes and you learn to understand how to react to things that did not work well or to things that don’t work the way you want them to. It also really gives me personal benefits, and I’ve found that it helps within my department too. People feel — at least for my area — that they can identify a little bit better with their manager, and they know he is not his office, closed door and unapproachable. The whole team in my area is pulling behind me and supporting me, and that’s great. Most of the time, a project is never finished. You deliver functionality, and then you sit together with the business unit and see what went wrong, what you’ve learnt, what you want to reflect on and what you can do better next time. Quite often, a project is only one step in the lifecycle of an application or a system and that means that when the project is finished, quite often, the next phase of the project has already begun. There is just a great synergy between those two processes. You always try to be a couple of seconds faster on the next marathon; you always try to be a bit more efficient for your next project, a bit quicker, a little more cost effective.
Klaus Christof, Vice President BPM Solutions EMEA at Citigroup, leads the EMEA Business Process Management solution team in Citigroup Markets and Banking Technology Frankfurt. Christof has more than 10 years experience in the Business Process Management sector and has a Dipl. Ing. (FH) degree in Electrical Engineering.
a specific country, we are able to make sure that we run each area effectively and then we are able to synchronise with peers through regular contact with other areas. That synchronicity of our overall approach ensures that we’re all working towards the same goals and I think it is the combination of these aspects that pushes us toward the innovation that we see at Citi. FST. Banks today, especially a ﬁnancial services organisation the size of Citigroup, are, regardless of regulations or not, truly international. How do you facilitate a global IT strategy? MD. I think this comes back to the point of having reporting that addresses issues on a local basis. So for all the reporting that we have to do in Germany, for example, we have local solutions and we have local reports that we have to produce. I think this will continue for the next couple of years and I don’t ever really think that this will be fully harmonised. Ultimately, the need for a local presence will still continue, especially from of a business perspective, as will the need to have IT people that really understand the needs of a localised market, the regulatory reporting needs and implementation strategies within a country-specific or regionspecific area. On the other hand, we should still be trying to see if there is a common framework that we can use for reporting of transactions and other processes, because, in principle, the reporting is very similar, the format or the details might be slightly different, but commonalities do exist and they should be utilised. FST. Modern business architecture is all about a holistic view of the enterprise. But if your organisation is run in a siloed way, how do you change the way you make those tech choices? MD. I agree it’s a very painful process. Quite often you have legacy systems that are 30 years old and so customised that it’s very difﬁcult to replace them, but I think whenever you do something new, what you should really keep in mind is having an open architecture as much as possible that allows you to move in this direction. Doing this is critical, and so that’s the way we handle this as well. It’s an evolutionary process. It’s not going to change overnight.
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ne of the questions we frequently ask ourselves is how large the IT Department will be in 2012. But the real question shouldn’t be how big the budget will be, but who will be spending it and on what? The role of IT has evolved to be the sole provider of solutions to the business. We have developed the belief that only IT is capable of understanding the complexities of automated business systems and we have come to assume that our job includes being the custodian of corporate data and the only mechanism whereby information is provided to the business. This world is being eroded every day. We are moving applications, and the critical business data that goes with them, into the cloud. Every business, no matter how large or small, has started to outsource tangential systems like payroll, travel, beneﬁts and pensions. Even core systems like sales force automation, supply chain logistics and e-commerce are moving out of the data centre. As little as ﬁ ve years ago, IT was involved in every one of these corporate decisions. Today, the business feels empowered enough, and the technologies out there are
reliable enough, for the business to go it alone without asking for permission from IT. This means that IT budget spend is shifting from IT’s control back to the business. So if IT is not to be completely evaporated in the next ﬁ ve years, what do we need to do to remain relevant to the business? We need to empower businesses to be able to solve their own technology problems, largely without IT’s help and certainly without seeking its permission. IT needs to provide the technology and governance infrastructure that enables this approach and we need to do it without questioning or second-guessing. Half a century ago, across the world, people demanded the right to free access to government maintained information held on the people’s behalf. They did it in the face of stiff opposition from their legislative, judicial and executive branches. Today business is demanding that same set of rights to the information stored in corporate computer systems on behalf of the business.
A thought experiment Many spreadsheets in use today support business decisions right up to board level. When you open Microsoft Excel, the
splash screen warns you that data is only ‘valid on day of issue’ because almost every spreadsheet contains data taken from a corporate business system elsewhere and is frequently days old. While not every spreadsheet needs to be up to the minute with the data it displays, innumerable decisions are made every day, in businesses across the world, based on out of date information. Imagine the next generation of Excel is to be able to populate the spreadsheet directly from corporate data via web services. If it were possible to view line item and summary information from the corporate business systems live, and everyone looking at the sheet were seeing the same live data, a quantum improvement in decision support for executives would be achieved. The trouble is, executives would want to update the data in the cells of the spreadsheet, and this is where the dilemma begins. We know we are responsible for making sure the data is updated validly, with integrity and with audit-ability, so allowing execs to ‘poke around’ in the data without the layers of our business system seems like a foolish suggestion. Therefore, when we build the service that exposes the data to Excel we must, of course, build in the self same rules
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Kevin Parker is VP and Chief Evangelist at Serena Software where he develops technology strategy and direction. A much sought after speaker; recognised around the world for his provocative and entertaining style. Parker is a 30-year industry veteran, educated in the UK and now living and working in California.
that we have in the existing IT system and the system should be using this service with all of its check and balances. We must also build in the authentication layers necessary so that only those people permitted to use the spreadsheet can see the data they are entitled to see. This feature is not available in Excel today. If this is the next advance in Excel, how long will it be before business is beating a path to IT’s doors demanding access to this capability and functionality? It seems likely that Microsoft will do something in this area, so it makes sense to be ready. But even if the good folk at Microsoft don’t go in this direction, what do we learn from this thought exercise? First we are reminded that the average business user is far above average when it comes to the use of Microsoft Excel. They frequently do things with spreadsheets that include programming macros, having links to URL’s and have multi-spreadsheet ﬁle dependencies. Second we see that such a simple extension of a common business tool would have us scrabbling to make our existing IT-centric services business-centric. We should have been doing that from the outset. For example, using common names for tags, using business functions to deﬁne the service boundaries and making the services easy to access across the IT infrastructure with all the security issues foremost. And thirdly it becomes clear that this changes the relationship between IT and the
business. In this scenario, IT develops the access methods and the business uses commonly available tools to consume them. In the blink of a thought experiment IT is changed forever.
Tomorrow is here We are already seeing technologies that go some way towards this imaginary next generation Excel arriving in the market. Many Web 2.0 technologies rely upon the use of services for their popularity and effectiveness. We see corporate wiki’s, internal IM’s and mash-ups starting to appear as replacements for, or adjuncts to, existing business systems. Business users see what
they’re happy with it and if someone comes along and improves it they’re happy with that too. All they demand is access to the data in a simple to consume format.
IT’s new mission The mission for IT has become the creation of access methods into corporate data that can be consumed by the business. The business is demanding empowerment and we should be looking for technologies that enable them to become self-sufﬁ cient in developing some of their own applications. In 2012, many of today’s developers will be embedded in the business units. They will be consuming services provided by their former developer colleagues who remain in IT whose job now is the creation of business-consumable services. The data centre is already shrinking as applications move to the cloud. This will continue until it is not clear to the business where their data is coming from – and they won’t care as long as it is available and current. The business user of 2012 will be combining data from internal and external sources along with business process in innovative visual experiences and creating applications that will be the new core corporate systems. They will do this without thinking about security, backup, workload
“Business is demanding empowerment and we should be looking for technologies that enable them to become self-sufficient” happens in the world of consumer technologies and demand that IT make the same thing available to them. The latest generation of recruits is used to building applications for the web and bringing together multiple sources of data live from the web in an easy to use and fun way. They don’t care about corporate branding or about what was done last time. If they can build it quickly and it does the job
balancing, disaster recovery, performance or any other infrastructure concern. IT will continue to care about them and will be responsible for making sure they do not affect the creativity of the business developer. Our business developer of 2012 will create applications with the sophistication of the Amazon website and will develop them with tools that bear more resemblance to Excel than Visual Studio.
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TIME TO GROW LBBW’s L BBW’s T Thomas homas Z Zeler eler ttells ells F FST ST why concentrating on growth is key, even in the current climate
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ith a global ﬁnancial crisis rolling on and a signiﬁcantly worsening economic situation, the topic of growth is something most ﬁnancial institution executives are shying away from at the moment. However, for Thomas Zeler, CIO at Landesbank Baden-Württemberg (LBBW), it is still a key consideration within his role. As he explains: “In the case of a merger, our technical platform is able to support that growth.” Events this September also support this argument, as the bank successfully completed the acquisition of the Czech BAWAG Bank CZ, which has since been renamed LBBW Bank CZ. This expansion into the Czech market offers excellent growth potential for the group, and Chairman of the LBBW Board of Managing Directors, Dr. Siegfried Jaschinski, commented that he sees the move as an important step to expanding the group’s sales activities in Central and Eastern Europe. For Zeler, the acquisition poses several issues from a purely technological standpoint. “We do know that a major and necessary step will be in connecting our controlling systems so that we have an overview about the main ﬁgures that are presented, and we know that this is likely to take around six months. We don’t, however, expect that we will have data migration compared to what we did for Sachsen Bank for example.”
ence call with one of our partners yesterday evening,” he explains, “and the situation is, well, I don’t know the word for it anymore. It’s not a crisis; it’s a mess.” At least for now though at LBBW, the current economy isn’t posing that much of a real challenge. “Over the last two years we have done a lot to improve our cost situation and our basic target every year is to improve our productivity by around about ﬁ ve to 10 percent, and right now we’ve made that,” says Zeler. However, he goes on to say that with the degree of unpredictability at the moment, this progress might not last. “We can’t be sure about where we will be this time next year because, while we hope our partners will be stable, there is no guarantee.”
Future proof One of a CIO’s biggest challenges is in trying to convey to management the need for investment in IT and technology, but when we ask Zeler about this, he notes that this is not really a problem at LBBW. “We have an investment plan and we know what we intend to do with our investments both next year and the year after that. We have to invest because we have to do certain things on the legal side of the bank, which are a must. Obviously we don’t know yet whether there will be any remarkable changes in the next year, so we have to look at this as an open space.” Technically speaking, however, LBBW is well placed to use such preparation to leverage business advantages. “Over the next year, our relationship management with big players in the market are the things that are likely to become the most important to us.” As with any institution, ﬁnding ways to improve the banking group continues be LBBW’s biggest challenge. What LBBW is now ﬁnding is that it has become more and more necessary to bring together the different cultures that exist within the group. After all, LBBW is currently made up of eight banks and enriching the overall culture may prove to be Zeler’s biggest challenge for the next 12 months. While the role of a CIO is still a very technical position, it is much more about leadership and people management than it was several years ago. “We have different programmes to bring these cultures together,” explains Zeler. “We are having discussions with HR departments to see how we can improve working together and it has become a part of our daily business to talk to these people and bring them into our culture.” Growth and a ﬁnancial meltdown don’t usually go hand-in-hand, but as the crisis continues to push forward, so does LBBW. “We’re being pretty smart, we want to work, and we continue to try to ﬁnd the key players and colleagues who want to improve the bank,” concludes Zeler. “We’re discussing, and we are ﬁghting, and this helps a lot.”
“We had a conference call with one of our big partners yesterday evening and the situation is, well, I don’t know the word for it anymore. It’s not a crisis; it’s a mess”
LBBW completed the migration of the former Sachsen LB databases in August of this year, around about six months after the process was launched. The procedure included the integration of all trading assets, security holdings and core banking systems, ultimately allowing for all key technical procedures to be transferred onto LBBW’s existing systems. What sounds like a massive overhaul of data in fact proved to be less daunting for Zeler. “In this case it was different compared to former BW-Bank AG. It wasn’t really a technical challenge because the existing technology situation and the number of accounts or customers of former Sachsen LB was relatively small,” he explains, before continuing: “We operate with certain guidelines, and we only have one product, one process and only one system in our bank.” He adds that the ﬁrst thing the group does with a migration process is compare products and customers, and then decides what will happen with every phase of the business. And while the LBBW is able to complete successful migrations of two or three banks within one year – mainly due to improved processes – he is also aware that the probability of this happening will often depend on the individual banks involved. Furthermore, with the ﬁnancial climate being what it is, there remains a great deal of pressure on CIO’s to do more with less. In the broadest of terms, the economic situation is impacting everybody, and this is something that Zeler is fully aware of – “We had a confer-
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RECOVERY TIME Ian Masters, Sales and Marketing Director for Double-Take Software, on the importance of being prepared for disasters FST. What options are available for ﬁnancial institutions seeking to protect their data and systems? Ian Masters. The options for data and system protection range from traditional tape backup through to synchronous replication, and the price tag associated with the available solutions varies greatly. The recovery point and time objectives will also vary with each of the chosen solutions and not all of them will provide both data and system protection. So in order to ensure disaster preparedness; you need to follow three basic steps. First, identify and understand your business-critical systems. Understanding and assessing your environment is the first step toward planning for a disaster. You will need to begin by identifying critical servers, business continuity objectives, and mandated requirements. Second plan for the rapid recovery of business operations following an unplanned outage. Look for a solution that complements your tape backup strategy by providing immediate failover capabilities. The overall goal is to minimise business disruptions and maintain a high level of conﬁdence in the ability of your ﬁrm to resume working in a timely manner. A risk assessment process can help prioritise the most important applications. Create a detailed plan to address the following: • Books and records back-up and recovery • Financial and operational assessments • Alternate communications with customers and employees • Business constituent, bank and counterparty impact • Regulatory reporting • Communications with regulators Finally, maintain a high level of conﬁdence through ongoing use and testing. This will ensure critical internal and external continuity
plans are effective and compatible. Practice, practice, practice. The top mistake most companies make is creating a plan but not revisiting the crucial steps to make that plan work. FST. At such a difﬁcult time for the industry, companies may put off investment in protecting their data. Can you outline some of the main challenges that are associated with the implementation of disaster recovery and how these differ for large and small organisations? IM. There has never been a good time to put off implementing a business continuity or disaster recovery plan. However in these difﬁcult times it could be even more important to implement a solution and ensure that your business can continue in the face of a
for a managed service that will meet your requirement and be charged at a monthly rate. My advice would be to look for a contract that does not tie you in for too long so that once the economic climate is better you reconsider your options. FST. Data is the backbone for all ﬁnancial institutions and disaster recovery plans are a must for IT departments, how can a successful business continuity plan demonstrate real ROI for organisations and offer competitive advantage? IM. You can actually look at your business continuity or disaster recovery solution differently and assess its potential for return on investment. In the past, a business continuity infrastructure has been looked at as an insurance policy that should be there in case of a disaster. What about if you could make your business continuity infrastructure dynamic – using it everyday of the week to move information technology systems anytime, anywhere, for whatever purpose? Dynamic infrastructure ties in all of the beneﬁts of business continuity, without restoration times, without downtime and without IT managers giving up their weekends. We have to remember that most of the time IT managers are faced with the more common disaster scenarios like deleted ﬁles or emails, ageing
“With operating profits reduced and competition high you need to ensure that you can continue as ‘normal’ throughout a disaster” disaster. With operating proﬁts reduced and competition high you need to ensure that you can continue as ‘normal’ throughout a disaster, the cost of downtime could be more crippling than ever before and you must be able to service your customers. The reason many businesses are putting off implementing a solution is the initial capital outlay. There are two ways to look at this, ﬁrstly you could consider opting
hardware, intermittent networks, failing power, hardware or just the challenge of provisioning a collocation facility for implementing a BCP. These are often considered the little ‘d’ disasters and can be costly in terms of downtime and manpower, so if you have business continuity solution that can alleviate these costs it would pay for itself. To learn more please visit www.doubletake.com
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An age of intelligence Did business intelligence help overcome the panic of 1907? Comset’s Ken Leedham seems to think so ne hundred and one years ago, the US was rocked by a ﬁnancial crisis. The New York Stock Exchange fell almost 50 precent from its high the previous year. There were runs on numerous banks, many fell into bankruptcy. There are clear parallels with the current ﬁnancial situation. The US stock market had been shaky for months and banks were contending with major liquidity problems. In those distant times, there was no Federal Reserve to come to the rescue. The man widely credited with saving the day was John Pierpont Morgan, recognised as the greatest banker of his day. Undoubtedly Morgan had sufﬁcient knowledge and understanding both of the strength of his own bank and of the external factors shaping the crisis – what we could easily term ‘intelligence about the business’ – to give him the conﬁdence to pump money into the market and to convince other bankers to join him. Whilst Morgan could build such an understanding from his handwritten ledgers and observation of events, today’s ﬁnancial world is inﬁnitely more complex, demanding investment in computerised business intelligence applications. A ﬁnancial institution trying to do business under the current economic and market volatility, and with short-notice changes in compliance and regulatory regimes, needs a comprehensive understanding of its business performance and ﬁnancial exposures, and the ability to
Ken Leedham is Business Development Director of Comset Ltd, a UK-based specialist business intelligence consultancy. Comset has been delivering business intelligence, data warehousing, budgeting and performance management solutions to organisations with large and complex information requirements for nearly 20 years.
use that information to analyse alternative courses of action. It is important to recognise that business intelligence needs to embrace all aspects of the enterprise – it is not a case of simply speeding up the mechanics of generating ever-increasing volumes of ﬁnancial reports. Jupiter Asset Management for instance, uses BusinessObjects as their business intelligence tool, and it adds value throughout their organisation. “We ﬁrst started using Busi-
nessObjects for institutional client reporting,” explains BI Team Leader, Adrian Yorke. “It has now spread to encompass areas such as order management, operational risk, SRI reporting, compliance and treasury.” We see an increasing trend towards this pervasive use of business intelligence. Only in this way can senior management have a clear understanding of the different forces that are driving business success, through revenue growth, cost management and mitigation of risk, and the interdependencies between them. But you have to start somewhere: ﬁnding that ﬁrst application, one that is actively giving signiﬁcant business pain, and then delivering a solution to it is key, and its success will drive adoption throughout the business. Whilst business intelligence tools, technologies and techniques can bring considerable beneﬁts to an organisation, implementation is not simple and success is not guaranteed. Bear in mind that you will probably only get one attempt: if your ﬁrst project fails, it will be difﬁcult to justify a second. But if your ﬁrst project brings real value to your business, then the use of business intelligence will undoubtedly spread and become an intrinsic part of day-to-day business processes. Returning to our original question – did business intelligence help overcome the Panic of 1907? This long after the event, we cannot know how much business intelligence Morgan had, nor how he used it before deciding to step in and risk his fortune. But we can safely assume that it was a well-considered decision, not one that was taken without a great deal of examination of the information available to him. What we can be sure of is that over the next few years, as we go through a recession and out the other side, the ﬁnancial institutions that will thrive will be those best able to understand and manage their performance, to take new revenue generating initiatives but balance them against risk. To do that, personnel throughout the organisation will need ready access to timely, accurate and relevant information – what they need, when they need it, where they need it, and in the right format. And that’s business intelligence.
Inside job The deep art of enterprise content management. By Jim Murphy he enterprise content management (ECM) market is at a critical turning point where it must prove itself or be lost altogether. No matter how loudly the vendors tout the notion of a uniﬁed ECM system or how many vendors consume each other, the ECM market has deﬁed complete consolidation. Having covered the market for eight years, I’ve kept a simple list of every content-management-related vendor that has crossed my desk, noting when it emerges, when it’s acquired or when it disappears. The number is growing daily. Part of the reason is disruptive technology and business models, which these days centre on Web 2.0 where community-generated content like wikis and blogs are changing the content management game. But more fundamental to the ever-expanding content management market is that its purpose is to deal with change and variety rather than predictability, with ideas and knowledge rather than data, and with the endless idiosyncrasies of human communication and collaboration rather than programmable logic. Companies do well to look at content management as an enabler for their knowledge management strategies (see Figure 1). Rather than existing separately from established systems like ERP, content management acts as an extension of them, allowing for exceptions to the repeatable processes governed by ERP, as well as recognising and capturing processes and data that Jim Murphy should be managed in those systems. At the same time, content management is an enabler for machine-to-human, human-to-machine and human-tohuman collaboration and communication. The human communication aspect of content management is surely an art, as is the deep information management foundation that supports it.
Hard work ahead A seemingly trite but crucial point about ECM is that, in its inﬁnite variety, it’s just plain hard. Vendors that have tried to go after the truly common denominators of content management demand – across industries and business processes – often look like little more than just another kind of database. A more expansive data repository is not nearly enough to solve the most pressing customer problems. Business initiatives like improving knowledge worker productivity, product development and innova-
tion, customer service and support, and sales and marketing (let’s not forget addressing the issue of compliance too) require purpose-built capture and delivery mechanisms, interfaces, business logic, analytics and unique ways of handling data. And contrary to what you may have heard, not all content repositories are the same.
Market development In principle, content management allows companies to manage information independent of its form, format or publishing medium. In this way, content remains accurate and synchronised across the many places it appears, and presentation can be changed without changing the content’s meaning. Unfortunately, because of competitive factors, speciﬁc market demands and the technology limitations of the past, many content management products have had to compromise this principle during development and maturation. The most successful and inﬂuential providers of content management in the enterprise were formed from two primary categories: document management and web content management (WCM). Document management systems typically handle content at a ﬁle level, organising, versioning and integrating documents by using metadata, which is information about the content that’s generally stored separately from the content itself. Document management systems grew not to handle content, but rather to manage the containers of content like word processing ﬁles, scanned images and PDFs. Document management systems developed that way for a good reason. Managing the intricacies of the content in those containers was far too complicated for most companies to face. Also, the early demand was to remove paper dependencies, so much of the content was scanned document images, which were very hard to break down into content components. Document management remains a useful and necessary approach in many situations, especially in managing paper and rich media, which can also be difﬁcult to break down into manageable content components. The emergence of the web brought an urgent need for companies to establish a presence in a new environment, as well as a burgeoning new kind of content management provider. They knew the information would have to be published and updated dynamically, with the same content elements likely to be seen and viewed in various places. So, managing content elements themselves, separate from form or format, was part of the fundamental architecture.
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FIGURE 1: CONTENT MANAGEMENT FOR THE ENTERPRISE Many Business Needs Work Places
Capture Repeatable Ideas/Processes
Processes Current Enterprise Systems Data
enterprise database vendors. They’ve continually asserted their expertise in managing growing masses of unstructured information. But just as those database vendors are resolutely entering the content management space, the structured versus unstructured argument is becoming moot. At the information management level, content management is largely an effort to bring structure to what was unstructured, so it can be easily searched for, analysed, automated, audited, reused, associated with business records and delivered to the right audience. To support emerging needs, ECM platforms have to recognise that structured and unstructured exist on a continuum. Technology mechanisms like XML, metadata, search and even forms are already conspiring to permeate that outdated structuredunstructured wall.
More art than science WCM was hot, but held unique new challenges. We ended up with vendors that, despite the good architectural principles, supported the web at the expense of other content management needs. Moreover, because it was new territory, vendors used various, often proprietary, architectures and development languages. The other major growth categories are records management and digital asset management (DAM). Both of these essentially use document management techniques, yet were founded on different principles. Records management is speciﬁcally used to address a business issue. DAM was largely created to deal with particularly hard to manage rich assets, like graphics and videos. They’re much harder than text to manage at any level of granularity, often requiring greater bandwidth and networking capabilities. They also carry an implication of intellectual or publishing rights property. The four most successful categories of content management, having been founded on various principles, exhibit a great deal of overlap, especially in their infrastructure. They also display many gaps, especially in their readiness to suit speciﬁc yet universal business needs. For instance, our customers are consistently surprised when ECM vendors don’t directly address product information management (PIM) or technical documentation management. Even when they do, it’s only to provide repository level services, which any database could accomplish.
Competitive factors The overriding reason for ECM’s resistance to PIM, technical documentation and the other gaps in the platform is the constant pressure for ECM vendors to distinguish themselves from powerful
Enterprise content management is more art than science. At its highest level, it is what enables companies to communicate and collaborate with their many human constituencies. At an information management level, IT departments have to manage the growing mass and expanding variety of content at an appropriate level of granularity, allowing them to assert control when necessary or worthwhile, or to offer freedom and ﬂexibility when not. That means that sometimes the systems will have to manage containers. At other times, they’ll have to handle documents, paragraphs, sentences, clauses and even individual words. They’ll handle text, graphics and voice, video and sometimes all of the above. Most importantly, they’ll have to manage the transition and transformation of content from one mode to another. The critical business problems and initiatives that call for content management require an even more expansive accommodation for information, spanning everywhere from highly explicit data in enterprise systems to the tacit knowledge in people’s heads. The most successful companies in the world will use the art of content management to beneﬁt from the skills, experience and expertise of their people: the employees, executives, partners, customers and consumers. All this explains the resistance to complete consolidation in the content management market. It also explains why content management isn’t and won’t ever be generic and commoditised. While companies can’t expect a single vendor to do everything, they can effectively establish a framework that governs their content management investments and aligns them with enterprise business goals and initiatives. Jim Murphy is Research Director for AMR Research
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Market drivers Thomas Senger examines how organisations are looking to get back in-branch to improve customer relationships inancial products are quickly becoming commoditised due to new market entrants and consolidation. The primary tactic banks are using to establish a level of differentiation is outstanding customer relationship. To overcome this challenge, banks are re-focusing on the branch and are investing to turn them into centres for ﬁnancial advice and sales. Hence, banks will create the customer proximity and trust to build a long term business relationship.
Case study The origin of small business loans can often be a complex process, requiring loan ofﬁcers to collect supporting documentation like tax returns and ﬁnancial statements. They usually receive this information in various ways
A quick look at how to overcome those niggling ECM issues Issue: Poor customer service due to slow, manual processes Solution: Speed up document-driven banking processes by capturing documents at the front office or ‘point of contact’ at branch locations. Issue: Inefficient, labor-intensive processes that delay the opening of an account or the closing of a loan Solution: Automate manual tasks like identifying documents or data entry with intelligent capture technology. Issue: High cost of handling paper related to loan/deposit workflows Solution: Replace couriers with the electronic delivery. Archive scanned images of documents electronically instead of boxes of paper files.
Cost control However, branch-oriented banking processes, such as new account opening and loan origination, are document-intensive and can push operating cost up substantially. Because of this, any ﬁnancial institution will have to consider the automation of business processes to improve efﬁciency and reduce costs. With this in mind, Kofax offers a collection of information capture, processing and notiﬁcation solutions that enable banks to efﬁciently deal with information and support documents related to the account opening or loan origination process inside the branch. In an effort to reduce processing times, these solutions facilitate the capture of documents early on in the deposit or loan workﬂow. They include technologies that detect missing documents and data and can proactively notify personnel to instantly correct errors with optimised information. Furthermore, these products are built around a ﬂexible architecture that is easy to deploy within the branch and include intelligent software that removes the complexity usually associated with document capture.
CUSTOMER PAIN POINTS
Thomas Senger is Kofax´s Senior Vice President of Applications Software & Services EMEA. Senger oversees all customer-facing sales and services functions in alignment with the company’s newly-introduced hybrid go-to-market model, which supports both direct customer engagements and indirect sales through channel and with alliances partners.
– through the branch or via fax or email. In an effort to streamline branch operations, one institution deployed multifunction peripherals (MFPs) throughout their branches, allowing them to consolidate printing, copying, faxing and scanning in one device. The bank wanted to use the MFP’s scanning functionality to reduce the number of paper documents that loan ofﬁcers had to deal with. Subsequently, they deployed a Kofax solution that allowed them to scan and capture documents through their existing servers using a single interface. The Kofax solution also provided a web-based application to enable loan ofﬁcers to route these documents to a
Issue: Limited access to information that is retained in paper format. Solution: Move document capture in-branch so that documents can be made immediately accessible throughout the organisation in an electronic format. Issue: The need to capture and track information for regulatory compliance purposes. Solution: Establish a chain of custody for documents that are used in banking processes by tracking what documents were captured, when and where they went.
document management system for additional processing. The process then allowed the bank to capture all documents, regardless of format, through one single source, which signiﬁcantly streamlined the process for originating small business loans. All of these elements combine to offer ﬁnancial institutions more efﬁcient processes that improve customer service and offer a fast return on investment.
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Write on track Steadland’s Peter Craik tells FST about current developments in the e-signatures space and details how this technology will affect financial services in the future FST. What applications speciﬁc to the ﬁnancial services industry can e-signatures be put to? Peter Craik. Since the introduction of legislation in 2000 giving electronic signatures equal status in law as wet-ink-on-paper signatures, any paper-based form that needs to be signed can be replicated in electronic format. In fact most ﬁnancial services organisations have made the halfway step by using electronic forms. However, in the majority of cases the electronic process chain is broken in order to capture the signature. After signing, the forms are then scanned and originals stored offsite. Utilising e-signature technology such as signature pad technology and Tablet PCs, alongside e-signature software to capture handwritten signatures electronically allows the chain to remain unbroken. The e-signature is securely bound to the form using hash algorithms creating an audit trail containing the biometric data from the signature (X-and-Y co-ordinates, timing, stroke order and, in some cases, pressure applied by the signer) alongside the ceremonial data such as the time and date stamp, location and the reasons for signing. Applications currently enjoying the beneﬁts of e-signatures include account opening, loan, mortgage and insurance applications, transaction dispute claims, changes of personal details, direct debit forms and customer experience surveys. FST. How different is the reaction from customers to signing electronically as opposed to the traditional static method? Do measurable results from the use of e-signatures make up for increased costs? PC. No major customers have advised us of any negative issues regarding e-Signing as opposed to the traditional wet-ink-on-paper method. In order to gauge reaction several companies carried out usability testing in selected branches prior to full implementation and reported only positive feedback. We ﬁnd our customers’ customers appreciate the efforts of their ﬁnancial institutions in staying technologically current,
Peter Craik established Steadlands in 1993 in order to act as an independent sales agent for manufacturers in the electronic component industry. Product developments led the company into other fields including IT peripherals and it is sales success in the IT field, which has seen valuable growth for his company.
especially where an eco-friendly message can be delivered simultaneously alongside increased satisfaction when delivering faster decisions, on loan provision, for example. Studies do exist which point to quantiﬁable cost savings adopting electronic over paper forms by a factor of 10. Although there is some initial outlay for the hardware and software, the ROI period is extremely short, usually counted in days rather than weeks or months. Of course, although cost savings are always welcome, other, more qualitative and less quantitative beneﬁts are also found, such as fewer rekeying errors, reduction of not-in-good-order (NIGO) paperwork and happier customers. The form completion and signature request processes are handled in the appropriate order and a declaration of who is signing and what they are signing can be displayed to avoid ambiguity and future dispute. Again this brings beneﬁts, which are difﬁcult to cost but contribute immensely to an improved customer experience.
FST. Can you tell us a little about current innovation in the e-signature space? What new developments are becoming available? PC. As well as the continuing evolution of esignature hardware, with the introduction of colour screens and screen protectors for enhancing hardware life, the major innovations fall into the software arena. Process set-up and delivery of forms in the relevant order is critical to successful transaction and software developments not only facilitate the e-signature capture-and-bind process, but also enhance workflow. Today, e-signature technology can orchestrate the entire e-signing ceremony, no matter where, how or when the signing occurs directly translating into more efficient workflow and more sales opportunities across multiple channels. As financial services now have a much wider structure it is imperative to not only manage the e-signing process, but also to bridge the gap between disparate systems, interacting with other bank IT solutions — before, during, and after the document presentation and e-signing ceremony, boosting profitability. New software developments will deliver this functionality and control. Another innovation creeping into this market is the post-process electronic storage (evaulting) of the electronic document, allowing documents such as mortgages or insurance policies to be traded as negotiable chattels. FST. In an age when people are increasingly tech-savvy what does the future hold for traditional signing? PC. For centuries mankind has applied its mark to documents as an indication of their agreement, authorisation or intentions. That is not something that will change quickly and, in my opinion, physical signatures will survive the challenges the internet brings. Of course we are not naïve to these challenges and are ensuring e-signatures encompasses both face-toface and internet-based requirements. n
After 25 years of ECM experience Doug Miles knows a thing or two about how our industry is changing. Here, he tells FST why ECM solutions are so important to today’s economic climate rganisations, both public and private, are operating in an era where they are called upon to no longer simply be ICT enabled, but ‘information management compliant’ as well. The emphasis in these times is about being able to handle the proliferation of information born as a result of the increasing number of channels by which individuals and businesses are able to communicate with each other. At AIIM, we represent the information management community as the global association for both users and suppliers of enterprise content management (ECM) solutions. These are the strategies,
services and technologies that enable organisations to capture, manage, store, preserve and deliver information to support business processes, and are the key to successful performance. By staying in control, organisations are able to maximise efﬁciency, productivity and business continuity. This isn’t easy – which is why AIIM exists.
The here and now In today’s markets, everybody in every ofﬁce, at every desk, is using computer tools to complete their daily work. Employees often need two or three different packages in the
IT’S NOT ENOUGH TO MANAGE CONTENT
doug miles.indd Sec1:64
workplace, and when you occasionally come across terms like ‘typing pools’ you realise that in the past people didn’t generate their own documentation at all, but had secretaries to do it. The changes in this process run parallel to ECM development. What used to be people with ﬁling cabinets along the walls and secretarial assistants to run those ﬁling systems, is now people generating their own documents and ﬁling them away in non-ofﬁ cial systems and against non-ofﬁ cial schemes. When I started on computers, for example, you could only use an eight-character uppercase ﬁle name to deﬁne a ﬁle or a document. That’s now moved on to long ﬁle names with folders and sub-folders, but we still have this crazy concept of ‘My Documents’ which has no place in the business world. Ultimately, whether a business goal is to meet increasingly complex regulatory requirements or to gain faster access to information, planning is the key to any successful implementation. At AIIM we have highlighted four cornerstones of ECM beneﬁts – Compliance, Continuity, Collaboration and Cost Reduction – and we understand that, as a business makes progress through the project, the ECM investment should build rewards for the organisation, reduce dayto-day costs, improve customer service and lower the all-too-real risks of compliance infringement. While many of the larger ﬁnancial organisations already understand this and have been dealing with these issues for many years, once you get down to the mid-market area you see that people actually look at these compliances as something they do in response to a particular directive and not as something they should look at on a day-to-day basis. That’s something that has to change. What’s more, even the most tech-savvy company has to realise that, at the end of the day, it’s still the people behind the technology that really matter. And while CRM processes cover most of those issues, banks and insurance companies need to understand the importance of this and many are subsequently connecting their CRM systems with their help desks and are now moving toward connecting the document management side of the bank as well. Undeniably, and especially in today’s unruly markets, organisations are having to dramatically change their business models in very short periods
Doug Miles is UK Managing Director, AIIM Europe, and has over 25 years’ experience of working with users and vendors across a broad spectrum of IT applications. He was an early pioneer of document management systems for business and engineering applications and has been involved in their evolution from technical solution through business process optimisation to the current corporate-level concerns of compliance, continuity, collaboration and cost reduction. Doug has also worked closely with other enterprise-level IT systems such as ERP and CRM. He has an MSc in Communications Engineering and is an MIET.
CORNERSTONES Doug Miles explains the four cornerstones of ECM. Compliance This has been very much to the fore and very much a strong driver in the financial sector. With companies being absorbed into other companies or having to do joint mergers, you reach a point where the value of a company is down to its information governance as much as it is about financial governance and customer relationships. Continuity Being able to store things electronically provides you with continuity and also helps with continuity planning so that you can improve access. That offers its own scenarios in terms of the fact that you can also outsource offshore processes without needing to set up physical transference. Collaboration This covers everything from shared project sites through to web 2.0 and enterprise 2.0, wikis and blogs and so on. There is an issue there, and the collaborations going on at the moment aren’t being handed too well. There are repositories of documents sitting around in sites that should be made available. Cost reduction This covers the obvious productivity benefit of being able to move documents through the business process in a way that allows companies to monitor, measure and improve the way the process is done.
of time. For example, if you’re merging the headquarters of two different ﬁnancial institutions, you have to make sure that all the procedures, processes, documentation, human resources and quality schemes are made available to everybody involved in that merger. You then have to quickly roll all of that out across the other businesses that you’ve acquired or that you’ve merged with, and that’s a massive challenge.
Key features In terms of ﬁnancial services environments, records management is key for most organisations. They may be storing information for the short-term or for the very long-term, but either way, what has changed over the last few year is the fact that there is now a need for a dialogue between records managers and IT managers. As it stands, nobody is sure how you store away an electronic record and make
doug miles.indd Sec3:65
WHOSE DOCUMENT? When Microsoft introduced ‘My Documents’, we didn’t immediately acknowledge the implications that would have. If you think about it, given what we’re trying to do now, My Documents was completely the wrong way to go. The whole concept of running a business is that you don’t have ‘My Documents’, but you have ‘Our Documents’, ‘Team Documents’ or ‘Company Documents’. So in many ways what we’re trying to do now is dig back from that and make sure that people don’t store their own emails in a way that’s not accessible to other people – especially in relation to those things that might need to be referenced for the future. We’re heading for turbulent times and where it used to be piles of paper on in and out trays, nowadays when someone parts with an organisation, it’s their email address stubs that cause the biggest information
sure it’s accessible in 15 or 20 years’ time, but what is clear is that if you are required to pull some of that material back, or if a customer demands to know what information you hold on them, then trying to pull that out of a paper system is always going to be horrendously expensive and very, very slow. In fact, it has almost becoming mandatory these days for anybody in those regulatory environments to provide solutions that give organisations the ability to designate records, store records and pull records back in a fairly adept way at any point where they might need to be audited. Furthermore, anybody who currently uses X-drives or ﬁle-shares to store their documents rather than keeping them in a proper ECM system, or anybody who is not taking measures to store their emails in a reasonably controlled repository are putting themselves at big risk. As people start to look at the collaboration beneﬁ ts and extend search portals to do things in their business, then the reuse of knowledge and the speed at which people can ﬁnd information and respond to data is going be so much better.
management headache. Nobody knows whether they’re important or not, nobody knows whether they should delete them or not and certainly nobody can search and find them in a coherent way. Subsequently, businesses are exposed to risk as those people move around to different businesses. Just ask people what they do with their important emails. Most people have some way of archiving them and some people rely on backup stores, but even where people have the ability to drop an email into a different document management system, you ask them whether they have policies on which emails should be stored and so on, and they say, ‘Well nobody told us that.’ They have to generate that within the business. They have to come up with a policy on what makes an important email that needs to be stored. The people who always get laughed at are the ones who say, ‘I print them off and put them in the filing cabinet’, when actually those are probably the only ones who are genuinely following a safe path.
“As it stands, nobody is sure how you store away an electronic record and make sure it’s accessible in 15 or 20 years’ time”
Of course, it could be considered that these functions will become part of the operating system and I think we’re moving to a scenario where content management services will become more and more part of the underlying infrastructure. Microsoft knows that this is what people need to have and that’s what the company’s Share Point solution is aspiring towards. But I think there will be a blurring of the dividing line between what is an ECM overlay and what is actually provided as a service within the operating system. Similarly, on a higher level, companies are looking to just have one business process management tool across all departments. They’re looking to standardise their business around a set of tools and then merge their processes on to that system. So further down the market, the sort of exposure that people will get to these tools will decrease their cost and it will become the role of ECM to ensure that every person at every desk has a way of knowing where to put their documents – somewhere safe and somewhere accessible in a controlled way.
doug miles.indd Sec2:66
STORAGE ISSUES Maxim Samo details the challenges of overseeing two major data centre projects for a prominent European bank during an economic downturn
he data centre build project kicked off back in 2005, when business was good and the economy was great. Everybody was looking to expand data centre capacity and space was at a premium. So back at that time we decided to build a new facility in the United States, a project build in two phases. The ﬁrst phase is 4.5 megawatts of capacity and the second phase is another 4.5 for a site that would be able to ﬁnally have nine megawatts of capacity. July 2008 was our live date and we went live with about 2.2 megawatts of capacity. That was always the level we planned to start at, but now we’ll wait a little longer before ramping up to full phase one capacity. We just didn’t put in the full mechanical and electrical, just because with the downturn in the economy the demand for all that capacity is no longer as high as we originally thought it would be. That actually was one of the big challenges, the complete turn in the economy. These data centre projects are like huge ships, like the Titanic. You can’t just totally turn them around from one second to the other. So we basically had to go through the project and look at where we could defer as much cost as possible given the new circumstances. Not fully build out the site but just kind of put things in where it makes sense. Despite the circumstances, the project has been successful. It was on time and on budget and the businesses are happy. Since we have brought that site online we do have people using it, especially in migrations from rented collocation sites that we had. We had to go into collocation rentals back in 2005 because of the capacity constraints. Now we have migrations out of those very expensive rental sites. If we bring them onto our site now it’s a lot cheaper for us in the long-term. While a lot of companies are looking to outsource things like data storage as a way of cutting costs, we look at things case by case. We’re actually working on a study looking at when we should we go into collocations and when we should build our own data centre? We’re building this for our own company at the lowest cost possible. If you need a huge chunk of capacity and you know you’re going ﬁll that site, it actually makes sense for you to build it. However, things are different if you just need a tactical space – for example, at the time we went into the collocation agreement, we knew that this was going to be temporary. We knew that once we had the new site we could actually move out of it. Of course, if the business situation improves, we can quickly scale up the centre’s capacity. The way it is now we can easily scale it up to the full phase one capacity of 4.5 megawatts. Once we see that we need to activate phase two, that would obviously be another major undertaking. Any project like this now has to take environmental concerns into account. We have something called the platform design committee. In there, we look at energy efﬁciency for our servers and other technologies. However, we also looked at efﬁciency in our plant. We are using state of the art units with variable speed fans and other features like that so you don’t have a data centre that uses a lot of energy for those servers in there. Even in the process of construction, together with the
“These data centre projects are like huge ships, like the Titanic. You can’t just totally turn them around from one second to the other”
POWERING DATA: BIG NUMBERS Between 2000 and 2006 global data centre power consumption doubled Consumption is expected to rise by a further 40 percent by 2010 Data centres account for around 0.5 percent of global electricity production The average data centre consumes as much power as 25,000 households
if you can correctly set a baseline, you can actually show that there is a business case there. The trouble is that savings are hard to quantify. They’re actually very difﬁcult to see. For example, you might start saving money on your utility bill, but at the same time you still have people installing new equipment. So maybe even in your existing data centre you will use more energy because you have growing amounts of equipment. So all your savings are basically gone because somebody installed a new piece of equipment, and it’s using all that energy that you just saved. That’s the difﬁculty. That’s the challenge here. But there is a business case, even if in trying environments.
Room for improvement
After the work over in the US I’m now back in Europe working on the renovation of an existing data centre. I believe the building is somewhere between 15 and 20 years old, so it’s got into its old age. It’s a shared ofﬁce It costs €4.4 million annually to power a 10,000m2 and data centre. We decided to renovate it because otherwise we’d have data centre to spend a lot of money either getting out of it and relocating elsewhere. The project is actually probably an even bigger challenge than the new general contractor we looked at ensuring that resources were as local as data centre because this is open-heart surgery. We have to replace the possible. We tried to favour regional traders for all the contracts so that electrical system in an existing data centre and be very careful while we do people didn’t have to drive across the country just to get to the job site. it. You really don’t want to bring the centre down while you do that. Obviously we implemented heat exchanges that allow us to do free Fortunately we do have some extra space in the building available. So cooling during winter. We have carpets made from recycled materials. what we’re doing is building the new electrical plant within the building while We even used recycled steel. Also we’re utilising company credits from the old plant is running, and then there’s going to be a switchover phase. the utility providers that we get for energy efﬁcient design. Alongside That’s going to be the critical moment when we switch over to the new electhe environmental beneﬁts we also have to ensure that these kind of trical plant. Once we’ve done that we can rip out the old electrical plant. efforts are ﬁnancially viable. Sometimes it’s hard to quantify. In addition What I learned on the building operation in the US has been to programme managing these big constructions projects, I’m also the very helpful in this new project. I’m originally a system administraglobal head of the data centre design team. Something we’re looking at tor, and then I started to work in the applications space so it was my is going into existing data centres and making the mechanical electrical ﬁrst real building project. First of all, it was a different culture, workplant more efﬁcient and trying to come up with energy savings in our ing with different types people. But I did learn a lot. I learned a great existing facilities. deal about how construction projects work, The difﬁculty there is ﬁrst of all you need what the difﬁculties are, how the accounting a baseline, so you need to know exactly how works, how project management works and much power you’re already drawing. Especially what general contractors do. All of that will in buildings that you share with ofﬁce areas, be of use for me in the renovation project. there’s quite an effort involved in just getting We are still at a very early stage on this that baseline right. But we are actually running project and we’re planning to have it completed a pilot in Chicago where we have created our by 2012. This will be happening despite the onbaseline. And what we did then is we started going economic crisis, though there will likely to go into the raised ﬂoor and start to do all be some implications. It’s not as if I have a topthe best practices for energy efﬁciency. So down mandate where I’m told that I need to cut we started to plug up all the holes we had in 10 percent of the budget. However, we are reour raised ﬂoor and made sure we had blanket visiting what we are doing. We’re making sure panels everywhere we could in the cabinets. that we’re not gold plating anything that doesn’t We also looked at the CRAC units, their fan need to be gold plated. There probably will be speeds, their humidiﬁcation, the sub-points some sacriﬁces once we actually get into the Maxim Samo is Director of and all that kind of stuff. We essentially began work. However, even in the difﬁcult times, now Information Technology at a major to optimise the whole system. more than ever, stability is absolutely the key to European bank. He has more than a We actually managed to create a busithe endeavour. We cannot make any sacriﬁces decade’s experience in the financial ness case and this is an initiative that we are where you would create a risk to the company. IT space. looking into rolling out globally. It’s very hard We can’t do that. So operational stability is and you need to put a lot of effort into it. But our number one priority during this project.
MOBILE Alan Giles of Sony Ericsson dispels some myths surrounding enterprise mobility and explains why the financial services industry is taking full advantage of its popularity
FST. With an increased focus on mobility, how can ﬁnancial institutions ensure they are balancing the need for security with business agility? Alan Giles. Enterprise mobility is an ever-changing arena, with a vast array of new applications being constantly released. Many of these applications are in the area of security, or require security to be considered before installing them on a handset. The problem? It is imperative that institutions feel conﬁdent that the devices they issue to their employees are not going to compromise their core business, either through insecure data transfer or loss of an unsecured device. There are a number of technology rich handsets available today that can help employees access ‘behind the ﬁrewall’ data wherever they are, at different speeds, via 3G networks or Wi-Fi etc. A balance needs to be struck between having a handset capable of delivering ease of use to the user, as well as maintaining the high levels of security required. If a user has to jump through too many hoops to get access to the data they need, they will not use the device to its full capability. There are a number of applications available today that enable connectivity in a secure manner, addressing both of the needs highlighted earlier. The types of data that employees are required to access vary from basic email retrieval (pull email), through to push email with full synchronisation of email, calendar, contacts, tasks and notes. There is also a growing trend for mobile access to customer relationship management (CRM) systems, sales force automation (SFA),
intranet data, real-time stock data and many other business speciﬁc forms of data. The ability to secure the data tunnel the user is receiving the data through is a prime requirement, and there are a number of secure VPN solutions available. It is possible to install ﬁrewall applications and virus checkers, which are complimentary to VPN solutions that can be managed remotely by the IT department. These can either be preinstalled as part of the handset software, or can be installed after the handset has been acquired. Smartphones are typically the phones of choice in this area, as the operating systems running on the devices are more open for development and the market has seen many enhancements in this area lately. Research In Motion (RIM) has traditionally held a leadership position regarding enterprise security, with many business users choosing a BlackBerry device for their needs. However, with the OS landscape expanding to include devices from Apple (iPhone), and devices supporting the Android platform from Google, as well as enhancement to existing business devices using Windows Mobile and Symbian platforms, the choices available to the IT manager, as well as for the end user, have never been so vast. Windows Mobile version 6.1 has been improved to offer many more business features as part of the core software, with full device management capability now available. Windows Mobile 6.1 also has some 18000+ applications available for use, over 6000 of which are
business applications. Symbian devices are also very feature rich, popular with business users and have thousand of applications available. Symbian powered phones have included the P Series from Sony Ericsson and the E Series from Nokia. FST. In relation to enterprise mobility, what techniques are in use or currently being developed to protect against unauthorised access to data? AG. Device management is one of the features most frequently asked for by enterprise customers today, from SMEs to large corporate customers. By incorporating device management into a wireless environment, it is possible to extend a whole host of security features onto a wide array of handsets, irrespective of what operating system they may be running. This obviously holds attractions for handset manufacturers, mobile operators and corporate customers alike. One of the key capabilities of device management is the ability to remotely lock a handset or wipe all data from it completely. This is particularly useful if an employee loses the handset or if it is stolen, thereby exposing the potentially conﬁdential data on it. It is also possible to perform a whole host of other tasks, to ensure the device remains as close to the state that it was in when it was provided to the employee. It is possible to remotely conﬁgure the hardware and software proﬁles of a handset, for example turning off the camera capability or the GPS receiver in corporate environments that are sensitive to the use of such hardware. Software restrictions can include the prevention of the end user installing untrusted applications. The combinations are endless. In large organisations, the IT manager has a tough time tracking the large number of handsets, the physical state of the handsets, the current user settings implemented, the various email proﬁle settings, APN settings, MMS proﬁles and so on. Device management can take a lot of this pain away, enabling the IT manager to administer all of the handsets in their network from a central platform. The capability exists to sub divide the user base into different groupings, and to store consistent settings for the handsets in this group. It is then possible to upload data from, and download settings, to these groups. It can also provide for bulk download of new software applications or handset software as appropriate. Another area of beneﬁt for the IT manager in a corporate environment is the ability to perform in-house ﬁrst line diagnosis of problems with handsets. Using device management it is possible to perform a handset diagnostic, requiring the handset to report various parameters such as software versions, battery health, signal
strength, SMS/MMS/internet proﬁle settings. Experience has shown that in a large number of cases where handsets are returned to operator or handset manufacturer, incorrect settings are to blame for the problems experienced by the end user. There is a cost beneﬁt to all parties in this scenario, as the removal of the requirement to hold replacement stock can considerably reduce the total cost of ownership for a handset deployment. FST. What does the future for enterprise mobility hold? AG. Enterprise mobility is forecast to carry on growing in the next few years. One of the prime drivers for this is the continued growth of mobile email. Research shows that of the end users who want mobile email; there is only a small proportion of these users that actually have access to the solution. Beyond email, the integration of sales force automation and customer relationship management solutions continues to grow. For all of these requirements, security remains a key consideration, so expect to see more detailed and comprehensive security capabilities constantly arriving. The utilisation of VoIP services is expected to grow as more and more handsets arrive with Wi-Fi capability. There is also a growing interest in ﬁ xed-mobile convergence solutions in the enterprise space, with a wide range of solutions to support this growth. Also key for the growth of services in enterprise areas is location based services, with a larger range of affordable devices with aGPS on board. Greater integration of mapping solutions with CRM systems is providing for a very robust user experience. From a technology standpoint, the upgrading of the 3G (UMTS) networks across many markets to incorporate Long Term Evolution (LTE) equipment will increase the speed of data transfer and available bandwidth. This will show a beneﬁt in areas of high deﬁnition video streaming, large ﬁle transfers and so on. Sony Ericsson will continue to listen to the requirements of enterprise customers, large and small, and will strive to deliver industry leading solutions to meet the needs of these customers.
“Beyond email, the integration of sales force automation and customer relationship management solutions continues to grow”
Alan Giles is Head of Enterprise Sales in Western Europe for Sony Ericsson Mobile Communications. He joined Sony Ericsson in 2007 having worked in various areas of the mobile communications industry for the past 14 years. His role includes the positioning and promotion of the Sony Ericsson enterprise propositions, bringing a wide range of enterprise capable handsets into the hands of the business user.
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FST gathers three industry experts to discuss the growing trend of enterprise mobility communications and the challenges it brings FST. With mobile communication devices now in play throughout the workforce, the challenge of maintaining security is becoming ever more complex, but what specific challenges does increasing enterprise mobility pose? Adnon Dow. Key challenges associated with increasing enterprise mobility are the direct impacts that mobility has on the IT and network infrastructure and the increased load demand thrust onto operations and the business processes of an enterprise. With today’s proliferation of the world wide web, intranet/internet, converged technologies and an increased virtual mobile workforce, high demand can suddenly be thrust onto an enterprise’s IT and network infrastructure. Operationally, the infrastructure must support, monitor and protect every end point, application, user and device connected to the network. More importantly, network awareness irrespective of the device, access method and/or time must verify that those that are connected are valid and authorised users. At the core, this requires driving business transformation and technology integration in the enterprise and those seeking to leverage the beneﬁts through mobility are scrutinising the gain, better results and cost efﬁciencies with such an evolution. Alain DeSouza. Data is an extremely valuable corporate asset and its integrity is paramount to any organisation. Businesses must be able to con-
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ﬁdently secure their mobile deployment to ensure that data saved on, and transmitted to and from, a smartphone is fully protected. With this in mind the ongoing challenge for a business is to protect its data, while controlling costs, complexity and usability. This is why security lies at the heart of the BlackBerry platform. However, there is no one-size-ﬁts-all solution for organisations’ security needs. The BlackBerry Enterprise Server enables decision-makers to manage over 400 policies and access rights, from switching off Bluetooth or a camera, to setting passwords and application permissions. This prevents threats resulting from human error or malicious attacks. Financial institutions need 100 percent visibility and control, and BlackBerry smartphones provide this as they can be centrally managed, remotely wiped, controlled and shutdown should devices be lost or stolen. Alan Giles. Maintaining security is the prime consideration for enterprises when implementing wider mobility solutions. The challenge is to balance the ease of use of a device, alongside the need to maintain security of conﬁdential data. When talking of security of data on a handset, it is also necessary to remember that the majority of handsets available now have removable memory. This memory should also be subject to encryption as well as the data on the device. It is also desirable to have the security settings remotely controlled and to enforce them as a default setting. This prevents unau-
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thorised use of the data should the device be lost or stolen. All of these challenges should be considered when choosing. Adnon Dow is Director, Advanced Technologies with Motorola’s Enterprise Mobility Business, EMEA. His responsibilities include executing the wireless business strategy, identifying and directing activities in facilitating incremental growth of Motorola’s wireless portfolio in EMEA.
Alain DeSouza is the Senior Manager, Market Development within the Solutions Marketing team at Research In Motion. He is responsible for helping financial service institutions use their BlackBerry platform to improve customer satisfaction and loyalty, increase organisational productivity and lower their operating costs. He brings over 13 years of experience in telecom, information technology, consulting and marketing helping financial professionals and institutions differentiate in market.
Alan Giles is Head of Enterprise Sales in Western Europe for Sony Ericsson Mobile Communications. He joined Sony Ericsson in 2007 having worked in various areas of the mobile communications industry for the past 14 years. His role includes the positioning and promotion of the Sony Ericsson enterprise propositions, bringing a wide range of enterprise capable handsets into the hands of the business user.
FST. What particular beneﬁts do mobility communication solutions offer to ﬁnancial institutions of all sizes? Alain DeSouza. Mobile communications enable ﬁnancial professionals to increase responsiveness, improve productivity and make more informed decisions through accessing business critical information on the go. This ultimately improves customer service which results in increased customer retention, differentiation and growth. Through the BlackBerry Alliance Program, Research In Motion (RIM) has partnerships with over 1000 ISVs (Independent Software Vendors) who have developed thousands of applications that enable businesses to access the information that matters the most when on the move. Financial institutions are able to deploy speciﬁcally developed and optimised applications to BlackBerry smartphones enabling their staff to take advantage of the productivity and information beneﬁts they bring. These partners include Blue Systems, Reuters and Bloomberg who have mobilsed their products and services as applications for BlackBerry smartphones. Alan Giles. There are many beneﬁts that can be discussed, and they can be equally applicable in large and small organisations. Some of these beneﬁts can be: Productivity – enabling the workforce to perform whilst mobile can vastly improve overall productivity. Time traditionally lost when away from the desk can be utilised more effectively. Travel time, usually lost time, can also be used for work tasks. Customer satisfaction – the ability to respond quickly to customer queries of any type can improve the overall satisfaction of the customer. Being contactable at all times, and improving response times is very desirable. Flexibility – incorporating a ﬁxed mobile convergence strategy can encourage more ﬂexible working patterns. This can also reduce hardware overhead in the organisation by removing the ﬁxed terminal requirement for voice. By integrating existing Wi-Fi and PBX capabilities, it is possible to implement a “one phone, any location” philosophy.
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Adnon Dow. Mobility communications extends business needs management and the delivery of structured content to the ﬁngertips of bankers irrespective of access, device or location. The synergies associated with improved business processes through leveraging IT and extending the touch point is among the strongest beneﬁt of mobility communication solutions in any ﬁnancial institution irrespective of the size. Mobility communications solutions have become an invaluable tool for any modern ofﬁce where employees on the move use varying devices and tools of mobility communications seamlessly to access necessary resources and assets. More and more ﬁnancial institutions are freeing their employees from the shackles of the desktop computer in order to better deliver real-time information and superior customer service to their customers and enabling traders, agents and bankers to stay ahead of the competition. FST. Can the implementation of mobile communications provide measurable ROI? During a time when the industry is under so much pressure, why should companies invest in such technology? Alan Giles. It is possible to gauge ROI on a product by product basis, but a rounded view should be taken on the overall mobility solution that is to be implemented. Looking at a handset in isolation is not as powerful as determining the ROI when fully utilising the solutions and capabilities available on the handset. An example of this is to look at mobile email. It is important to look at improved productivity achieved and balance it against any technology requirements (servers/handsets etc.) It is also important to recognise the ease of integration with existing technology assets. Adnon Dow. The implementation of mobile communications provides a very real and clear ROI. Traditionally, deployment of a traditional corporate voice/data network tended to be costly to implement and inflexible to evolution and integration, each user required a voice and a data cable/port to access resources and this proved costly per port and even more costly for operations and maintenance in covering adds, moves and integrations. A mobile communications network eliminates cabling costs and unshackles employees from their desks. Often, unshackling resources alone provides for a compelling ROI in a very short period. For a fraction of the time and cost, implementing new users, services and technologies can be dynamically in a wireless enterprise. In a challenging economy, this can drive bottom line improvements and reduce OpEx. Businesses are trying to compete more effectively by providing employees and customers with ubiquitous access to data, resources and applications. By investing in mobile communications, enterprises can harness new ways to sense, monitor, control and streamline supply chains, improve business processes, and deliver unprecedented levels of secure services and content to their customers. Alain DeSouza. The BlackBerry solution provides users with a host of tools to help them work and communicate more effectively, including email, phone, internet, organiser and business critical applications. The beneﬁts and ROI of BlackBerry smartphones have been illustrated by research from Ipsos Reid that shows that BlackBerry smartphone users can save up to 60 minutes a day by increasing efﬁciency.
More than 70 percent of RIM enterprise customers have deployed BlackBerry applications beyond email. Applications are gaining increasing popularity as they empower users to be more productive and retain a competitive edge while out of the ofﬁce. FST. What are the main challenges of implementing the mobile enterprise? How do you see the ﬁeld developing over the coming months and years? Adnon Dow. A main challenge in implementing the mobile enterprise involves a shift from the centre of gravity being the business of communications in a wired/wireless architecture to the need for seamless technologies and disparate information systems to evolve into one and to allow for a total and inclusive seamless experience. Achieving the vision of the mobile enterprise requires technical innovation on many fronts, along with a strong orientation to the implications of the business transformation and user experience. Today, the decline in the worldwide economies, limited IT budgets, service cost and the wildly inﬂated next generation technologies, enterprises have been slow to implement mobility. Nevertheless, many companies continue to focus resources in creating and delivering the devices, protocols, networks, standards, and the applications necessary to bring this vision in full reality. Already, we see a revolutionary shift that is creating a more natural communications experience, boundaries separating spatial domains and communication nodes dissolving into one seamless, self-healing, aware network. Whether on the move or within the four walls, it is not hard to imagine that tomorrow our mobile phone, our home ofﬁce systems, and/or our ofﬁce resources, and all the systems that surround us will communicate seamlessly. Alain DeSouza. As more and more ﬁnancial institutions mobilise business critical applications to offer new services and differentiate themselves in the market, they need to ensure that opening up corporate systems does not compromise security. Security is, and will continue to be, the most important consideration for an organisation deploying a mobile solution. The BlackBerry solution uses robust encryption technology based on AES-256 bit or Triple-DES standards, which means that ﬁnancial institutions can rest assured that information sent to and from a BlackBerry smartphone cannot be read by third parties. RIM actively engages with certiﬁcation bodies such as the Common Criteria and the Fraunhofer Institute SIT, who test and verify the security credentials of the BlackBerry solution. Alan Giles. There are some challenges that an enterprise faces when implementing a mobility strategy. The understanding of the solutions and capabilities that exist in the market can be a challenge, as it is a constantly evolving area. From a handset perspective, there is a move towards open operating systems with the wide array of application support that this brings. This should enable the choice of handset based on usage proﬁle rather than choice based on limited availability. There are also a number of companies offering hosted solutions for enterprises. This reduces the total outlay on technology assets required, and is particularly attractive in smaller organisations. In general terms the market would appear to be progressing towards greater security, higher data transfer speeds, greater bandwidth, increased ﬂexibility of usage and wider choice. n
TRANSFORMING CUSTOMER SERVICE Research In Motion’s Rory O’Neill talks about how mobile solutions will change the way financial institutions work and the improved services that can be offered to customers inancial institutions of every ﬂavour need to ensure they are operating efﬁciently in today’s environment. With the pressure of intensiﬁed competition, as well as further focus on regulatory procedures, organisations need to ensure that they continue to adopt the compelling technologies that will help pioneer innovative services to their customers. It is clear that customer expectations have jumped. Customers expect real-time information and real-time responses. Nothing less will do. Switching providers has never been easier. Institutions are expected to provide what the customer wants, when he wants it, in the manner in which he wants to receive it. So even at a time when it makes sense to aggressively cut costs, stem losses and consolidate, many institutions are actively looking at ways to improve their core customer experience as a way retain their most valuable and proﬁtable customers. One way to achieve this is to take front ofﬁce services right up to the point of delivery. Enterprise mobility improves communications and data ﬂow and automates key processes to
such an extent that without them it is next-toimpossible to be competitive. Properly-implemented mobility gives your ﬁrm a permanent connection to customers, and ensures you are ready to capitalise on opportunities, maximise service and revenue potential and maintain competitive advantage.
A different set of returns Until recently, the impetus behind the advance of enterprise mobility had been employee productivity, getting more value from the performance of busy people. Mobile solutions seem to be able to empower workers to cut loose from the ofﬁce and work from wherever they want. But in today’s marketplace, mobility initiatives are delivering a different set of returns to forward-thinking institutions. Mobile enterprise solutions that meet appropriate criteria for usability, functionality, security compliance, IT integration and scalability are today opening up new worlds of possibility in areas like business intelligence, customer relationship management, real time market intelligence and business continuity planning.
This, in turn, is opening up exciting new channels to reach customers. The ability of mobile staff to connect to and interact with enterprise systems whilst sitting in a customer’s ofﬁce, or walking through an airport, offers ﬁrms the chance to develop their own differentiated services. This obviously beneﬁts customers by enabling them to make informed and immediate decisions, give better advice,and execute client instructions immediately. What’s not to like?
“The quality of service provided to the customer will remain the key battleground for the financial services market; the differentiator will be mobility” Nowadays institutions expect to get a signiﬁcant return on investment within six months on any technology investment. Success is usually measured by how much value they create for the organisation. That is why ﬁrms seek solutions that can be implemented quickly, which integrate and mobilise their existing technology investments enabling more value to be derived from them, and that can demonstrate that they meet and exceed the stringent security needs and compliance requirements of the ﬁnancial services industry of tomorrow.
Security and compliance Industry anxiety around the control of data has never been more apparent, especially considering regular news reports of government laptops and data cards being lost or stolen.
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Of the mobile offerings that are available on the market, the BlackBerry solution stands out for its robust security features and encryption technology. Using industry leading AES-256 bit encryption, the BlackBerry solution ensures that information sent outside a company’s ﬁrewall cannot be read by anyone other than the intended recipient’s BlackBerry smartphone. The BlackBerry Enterprise Solution is also renowned for giving customers the control they need to effectively manage employees’ BlackBerry smartphones over-theair. The BlackBerry solution also facilitates IT decision-makers to wirelessly enforce more than 400 policies, which can be set to allow, stop or limit certain features, such as disabling the device’s camera function. In the circumstance when a BlackBerry smartphone is lost or stolen, IT administrators can lock or wipe the device of information to ensure that information stays conﬁdential. The BlackBerry Enterprise Solution is certiﬁed by the Common Criteria, which is recognised by over 25 governments across the world. In November, leading technology testing body Fraunhofer Institute SIT also certiﬁed the BlackBerry Enterprise Solution. In the UK, the BlackBerry solution is approved by CESG, the government’s security authority, for use with restricted data and is also used by NATO. Perhaps of even more relevance to ﬁnancial services than the most robust security architecture available on the market is that the BlackBerry Enterprise Solution also offers a communications platform that is fully auditable, and therefore simpliﬁes compliance with current and anticipated market regulation. All transactions, actions, data inputs and keystrokes can be automatically recorded and retrieved as required for compliance, signiﬁcantly reducing the need to record events and communications manually.
Mobilised business processes Today’s enterprise mobility solution means a whole lot more than mobile email. There is no reason today why a ﬁnancial services executive traveling between clients and trading ﬂoors, airports and conference rooms, ofﬁce and lunch, cannot stay completely in touch and in control. Customer relationship tools (CRM) can be accessed and worked on
through a mobile device, bringing a new level of real-time mobile information distribution to key mobile people like sales staff, client reps and account managers. Better data availability means better sales strategy means better data collected. The same people can easily access product catalogues and manage client or company portfolios using the latest smartphone. Technically it is possible to keep key people almost permanently on the move with-
plications are not just limited to internal use: mobile banking and brokerage, remittance and ultimately payments can serve as a new way to drive bottom-line growth and extend an institution’s reach and brand.
The future of mobility In the current ﬁnancial services environment, institutions are casting a critical eye over their technology investments, scouring them
Rory O’Neill is the Director of Solutions and Alliances Marketing, EMEA at Research In Motion (RIM). He is responsible for building compelling propositions for the BlackBerry platform that meet the needs of key enterprise target segments. These include organisations that operate in the professional services, financial services, manufacturing and public sectors.
out losing touch. But to do this well, you also need a mobile strategy that will hold water. Organisations need to invest in a mobile platform that can cost-effectively support the launch of mobile initiatives while adhering to the growing regulatory environment that is surely ahead.
Taking applications mobile Financial services were one of the earliest adopters of mobile technology. Applications were quickly developed as it became apparent that mobile access to information like market data could be easily monetised. Mobile services in this area rapidly developed, from simply extending market data, to correlating that data with customer or institutional holdings to display portfolios and charts, and to displaying the status of orders and trades in real-time. The potential of mobile applications has also been realised in many other areas of business. Leading enterprise application vendors such as SAP have strengthened their mobile offering to differentiate themselves from the competition, and serve as a proof point that mobile applications are indeed in demand. Ap-
for evidence of returns and seeking optimum efﬁciency and value in every pound spent. This level of scrutiny is very likely to endure, whatever the outlook for ﬁnancial markets and the industry as a whole. As the speed of mobile networks continues to increase, and the mobile web begins to start fulﬁlling some of its enormous potential, the mass-market allure of the smartphone is set to continue growing. Arguably there is no other device that packs so much functionality and potential into such a small and functional form factor. With omnipresent high speed connectivity, mass smartphone usage and a ﬂourishing market for software and middleware developers and vendors, ﬁnancial services ﬁrms are set to be in the forefront of a revolution of mobilised applications. The quality of service provided to the customer will remain the key battleground for the ﬁnancial services market, the differentiator will be mobility. The immediate challenge for ﬁnancial services ﬁrms today is to invest in a platform that will meet security, regulatory, infrastructure and, most importantly, their customers’ needs – today and in the future.
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he current financial crisis gripping the investment industry in the US and other parts of the world reminds me of â€˜the pass the parcelâ€™ game that children play at birthday parties. You probably know the game â€“ a parcel is passed around and whoever ends up with it in their hands when the music stops, wins the prize. However, in the case of the investment industry, the parcel called Credit Default Swaps (CDS), which were being passed by one bank to another, contained a ticking time bomb in the shape of contaminated assets that no bank bothered to look at since there was plenty of money to be made from this game. Credit default swaps provide insurance against the potential losses on the investments in certain assets such as municipal bonds, corporate bonds, mortgage securities, etc. CDS are similar to taking home insurance to protect against losses from fire and other causes. The credit default swaps market is not regulated and as a consequence, CDS contracts can be traded or swapped
With its enthusiastic trade in credit default swaps, the financial industry is playing a deadly version of pass the parcel, says Sunil Poshakwale
by one investment bank to another without anyone overseeing the trades. Thus there is no oversight to ensure that the holder of CDS has the required financial capital to meet losses in case the underlying security defaults. In the last few years, CDS became very popular with investment banks as an easy way to make money. In the booming economic period that we experienced in the last decade or so, the general perception was that big corporations and/or banks whose credits were insured via CDS markets were unlikely to fail. No wonder then that the CDS market has grown very fast and according to the International Swaps and Derivative Association (ISDA), it is worth more than US$60 trillion which is approximately twice the size of the US stock market and also dwarfs the US$12 trillion US mortgage market and US$6 trillion US treasuries market. It is worth mentioning that the American Insurance Group (AIG) which was recently rescued by the US Federal Reserve through a capital injection of US$85bn had written off US$450bn worth of CDS. Besides the CDS, the market for securitised assets such as the
Collateralised Debt Obligations (CDO) has also been growing over the profit making potential began to dominate the hedging motive and greed years. CDOs are attractive investments for investment banks and hedge overtook rational behaviour. The results are for everyone to see. Besides funds because of the high potential to make large profits. Like CDS, marthis, in the quest for more profits, investment managers and traders startkets for CDOs are unregulated. CDOs comprise a portfolio of fixed-income ed to develop clever trading strategies in a bid to outsmart each other. This assets which are divided into different tranches based on the credit ratled to development of proprietary investment strategies that became too ings of the underlying mortgages. For example, AAA rated CDO is considcomplicated to price for the rest of the market. ered safer compared to a BB rated CDO because the exposure to losses The vast profit potential led to excessive greed to make maximum money is greater in the BB rated in the shortest possible CDO compared to the time. This short-termist beAAA rated CDO. Over the haviour was encouraged years, CDOs have beby the compensation packcome an important vehiages that were available to cle for funding of the investment bankers The CDS market is worth nearly €50 trillion fixed-income assets. and trading community Around April 2006, the since more profits directly rating agencies began to translated into higher re-rate the BB rated bonuses. Years of good bonds as they sensed that economic conditions with given the higher risk, relow inflation and low interturns on these bonds est rates further fuelled the were not high enough. As growth of financial markets a consequence, the and encouraged excessive spreads on mortgages risk taking by investment began to widen and the banks. Investment success investors began to leave was lavishly compensated the BB rated bond marby Wall Street and London ket. Around the same peand plagued rational deciriod, the sub-prime sion making. residential mortgage Central bank and regmarket in the US started ulatory bodies have been to experience high debadly exposed in the curfaults which caused rent crisis. To some extent €690 billion lenders to become more the criticism of these instirisk averse. The investors tutions that have primary €1.7 trillion perceived higher risk in responsibility to regulate €2.9 trillion holding CDO backed the banking sector and fi€6.3 trillion bonds. Consequently, nancial market operations availability of credit beis justified. In my view, reg€12.9 trillion came scarce and bond ulators can only effectively €25.9 trillion yields (return required by regulate if they understand €46.8 trillion investors from investing in what they are regulating. bonds) started to rise. Therefore, it is not a ques€41 trillion One of the reasons for the tion of more or less regula2001 2002 2003 2004 2005 2006 2007 2008 2009 downfall of Lehman tion but rather how Brothers was that it had a ‘effective’ the regulation is. high exposure to the CDO market. It is estimated that Lehman’s exposure to Regulatory authorities allowed investment banks to race ahead with trading all outstanding corporate CDOs is nearly 60 percent. of complex products and deals without making sure that both the regulator Many commentators and financial experts have been blaming the deand the banks doing such deals understood the risks and that the counterrivative markets for the current financial crisis. However, in my view derivparties involved had the necessary capital base to take those risks. There is ative products such as options, futures, swaps, and their complex an urgent need for governments to ensure that those who are responsible for combinations were primarily invented to hedge risk. However, since most regulation are either appropriately qualified or trained so that they have a derivative instruments principally rely on leverage, the investment indussound understanding of the underlying risks. try started to use derivatives to make money and quite rightly so. Soon the One of the central tenets of the free market economy is that the markets
CREDIT DEFAULT SWAP GROWING FAST
are generally efficient. It is believed that markets are able to price risks apThere are some serious implications of the credit crunch for the real econpropriately and therefore reflect correctly the fair value of assets being tradomy. To start with, there will be reduced availability of capital to businesses. ed in the market. However, markets are made up of small investors and some This may adversely affect new investments and growth. The slowdown resultvery large and influential investors. Unfortunately, the system has allowed ing from the scarce availability of capital for businesses may lead to higher some investment banks to become too powerful. This in itself is a breach of future job losses. The scarcity of finance would lead to increases in the cost basic investment management principle which of capital which will mean that businesses will suggests that diversification is the key to reduchave to tighten their operating costs or else they ing risks. When some institutions and investwill be reporting lower future profits. Prospects ment banks become too influential, the of lower corporate profits will adversely affect the systemic risk increases since they dominate stock values. Thus the stock markets are unliketrading volumes and are able to manipulate the ly to reach the heady levels that we have experiasset prices. enced in the last few years. There would be widespread implications Large falls in the equity markets are bad of the financial markets meltdown in the US news for the average person on the street even if and the UK. One of the reasons for the recent he/she had nothing to do with the sub-prime takeovers (Merrill Lynch by Bank of America in mortgages. Losses on equity investments would the US and HBOS by Lloyds TSB in the UK), was reduce the value of portfolio investments held by that both Merrill Lynch and HBOS would have pension funds and this is the next problem the found it difficult to raise further capital on their governments around the world will have to deal own. Both have perfectly viable and possibly with. If pension funds suffer losses on their inprofitable businesses but because of the credvestments then those who are dependent on the it crunch, they would not have been able to borpension income are likely to suffer too. Many othrow required money from the market because ers who may have bought additional residential of the lower capital base caused by the writeproperties with an aim to use the sale proceeds downs of bad assets in their balance sheet. Sunil S Poshakwale BCom DCMA MBA in lieu of pension income in the next five years or Some European banks, for example, Fortis in PhD is Professor of International Finance, so will find that they may not be able to afford the Europe, Bradford and Bingley in the UK, Cranfield School of Management luxurious holidays they had planned. Worst hit Wachovia in the US (and the list is growing will be those who cashed in by releasing equity every day) have found themselves in a similar predicament. It is worth notfrom inflated house prices since they would find themselves with an expening that collectively, European banks together have €258bn worth of matursive loan that they would have to repay in case the house prices do not reing debt in 2008 alone. In the case of HBOS, it needed to rollover debt worth gain the same levels which existed before the onset of the sub-prime crisis. €1.6bn maturing in 2008. Thus one of the major consequences of the credit Less credit availability will also mean a less luxurious life style since people crunch is that the banks will have to de-leverage their balance sheets. Dewill find it difficult to borrow money to spend on luxury goods. This may be leveraging would require infusion of additional capital so that maturing debts good news since less demand will lead to fall in prices and those who have could be paid and debt to capital ratio is lowered. the cash will be able to get the best bargains. After all ‘cash Second, because of the high levels of debts on banks’ balance sheet, the is king’ as they say. It’s a shame that banks did not heed shareholders will demand higher risk premium on the banking sector shares. to this age-old advice or else we might not have been It is not surprising therefore, that the banking stocks have in this current financial mess. been the loss leaders on Wall Street and London as well as in other markets. Third, though bonds are considered much safer compared to investing in equity shares because bondholders have the first claim on a company’s assets, currently high levels of defaults on bonds would make it very difficult for banks and corporations to raise capital by issuing bonds. As a consequence the bond yields will continue to rise and so will the cost of borrowing. Fourth, the whole finance industry will shrink in size because as the market values of overvalued assets fall, the value of capital required to finance the new levels of investments will also have to fall. There will be consolidation, as we are witnessing, and fewer big players in the banking industry in future.
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f you’ve ever thought that the ﬁnancial markets as the equivalent of a giant global casino, then you’re not alone. Karel Janecek, Board Member of Prague-based investment bank RSJ Invest, certainly sees the similarities. “I think that it is very much related,” he says. “The point is, of course, the ﬁnancial market is a much bigger game. But the basic idea, the basic psychology, is very similar. You need to be able to take the risk and you need to be able to accept occasional losses. You need to be able to go for the long run to ﬁnd the proper patterns.” Janecek knows what he’s talking about. During his days as a student, he designed and created a piece of software that simulated the game of blackjack, still considered to be the last word on the subject. Understanding and modelling the multiple outcomes of the card game is something which has stood Janecek in good stead during his subsequent career. The work he does at RSJ Invest centres around mathematical ﬁnance, using statistical information to make moves in the market and manage risk. For the uninitiated and those without an MSc in Mathematical Finance, it can seem an insurmountably complicated ﬁeld, but it’s clearly one where there are big
Janecek on the impact the financial crisis will have on the derivatives market. “I hope that it will move it in the right direction. The derivatives markets are very important as they allow you to transfer risk. But the thing is that derivatives should be traded more transparently. One of the ways to make a market transparent is to move the OTC market to derivative exchanges. I hope that in the future, it will be more the case that most of the financial products, including derivatives, will be traded in exchanges, so there will be no opacity anymore, and it won’t be hidden. If this type of thing is hidden behind the doors of various financial institutions, then it can become a problem. That’s what we’ve already seen happen.”
High stakes Karel Janecek of RSJ Invest tells FST that the casino and trading floor are not that far removed
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gains to be made. To his credit, Janecek does his best to break the process down into terms we are able to understand. “If you look at the markets, it’s a stochastic process,” he says. “Anything that’s being traded is part of a stochastic process.” In essence, it boils down to trying to understand the movement of random variables. No easy task. “Any stochastic process involves you trying to ﬁnd opportunities which are proﬁtable and that are trading at a positive expected value, so that you make money on average,” Janecek continues. “Another big element is risk management. Because it's a stochastic process, it can move randomly. The point is that you need to be able to properly estimate these processes to manage risk and also to be able to ﬁnd predictable results.” So what are the most difﬁcult aspects of making such a system work? “What is deﬁnitely challenging is ﬁnding a good model for the price process,
a good mathematical model,” Janecek explains. “There are a lot of practical issues, such as how to have the correct data, so that there is a lot of work behind this modelling. But the biggest issue is probably working out the logic of the ﬁnancial markets, building the models and trying to calibrate them.” If investment is a kind of gamble, then we’re currently in a period where the dice are loaded very much in the house’s favour. With so much uncertainty rolling around the ﬁnancial markets, getting a clear understanding of what might happen in the future must is difﬁcult than ever. “The impact on us is that our models need to be updated more regularly to take into account the changing risks,” conﬁrms Janecek. “We need to be able to quickly change the parameters and assumptions, because the risks are in the order of maybe ﬁve or more times larger than they were a year and a half ago.” Janecek describes an ongoing process with models being updated on a daily basis to take new factors into account. Key to staying competitive in such a challenging environment is powerful technology. “It’s a major part of what we are doing,” Janecek explains. “We do high frequency ‘black box’ trading. For this you not only need to “It was after my graduation have good models and risk management but also you from high school, I started need to be as fast as possible. You cannot be behind your university in the Czech competition. So the technology is crucial for us, and we Republic and after one or can say that we have we have probably the best technoltwo years I got a scholarship ogy or the best connections that are possible, in most in the US and went there to cases at least.” study for an MBA. I learned
Computer games How Janecek applied himself to simulating blackjack
blackjack there. I read in a book that you could beat blackjack, and I didn’t really know if I could trust the results of the book. That was the motivation for writing software. So I wrote some simulation software but it is not for playing but instead for simulating the game. So it was able to find the correct strategies. It turned out that actually my software was quite well-written. It was fast, which was a very important feature in at that time. It was the mid-nineties, and computers were considerably less powerful than today. Because my software was fast, that’s why it was successful. I used to play blackjack quite a bit, but nowadays, I just play for hobby. The last time I played was in France on vacation. Nowadays, I tend to do if maybe once a year, just for fun.”
“We need to be able to quickly change the parameters because the risks are five times larger than a year ago”
Returning to the idea of gambling and trading being two sides of the same coin, Janecek is clear that there is plenty of common ground, even telling us that some of his employees at RSJ Invest are keen poker players. The big difference is that you can’t count cards on the ﬁnancial markets and the risks are that much bigger. “If you play any game, be it blackjack, poker or anything, you know the probability. You know exactly what the risks are,” Janecek says. “In ﬁnancial markets, you never know for sure.” Even the best players can have an off day, as Janecek tells us. “When I was a student, I didn't have any money. The ﬁrst US$3000 that I made by selling my software, I lost in a casino, because of bad luck.” It’s a sobering lesson, particularly at a time when so many in the ﬁnancial industry are in the midst of a major losing streak. Ultimately though, Janecek remains positive: “I had extremely bad luck, and I lost this money. But you need to overcome that, so in the long run you win.” n
CSC DAVID KOHN:DEC08 15/12/2008 16:49 Page 86
ASK THE EXPERT
Much more than a compliance exercise CSC’s David Kohn explains the SEPA journey so far
ecause most banks have viewed the ﬁrst ‘credit transfer’ phase of SEPA as little more than compliance, implementation projects have mostly been kept to the minimum. Surprisingly few have seen it as an opportunity to earn new revenue or reshape payment offerings. And that’s a shame, because if they’d been geared up to offer value added SEPA services, this could have helped to offset the revenues lost through harmonised domestic and cross border euro payments. And bank customers are seeing little value in migrating to SEPA – unless they have to – meaning that credit transfers are generally only being used for low volume, cross border payments. However, this masks another problem. Many of the software-based solutions that banks have implemented to date around SEPA, whether developed through third parties or in-house, will have difﬁculties in handling industrial scale volumes with the necessary degree of performance and resilience. SEPA direct debit is much more complex than the credit transfer, the notable difference being that the new SEPA direct debit will have a special effect on creditors. In fact, creditors have some potentially onerous new responsibilities, including the requirement to manage the mandate and furnish mandate details with every claim. The banking community has not really communicated these changes to the creditors and certainly hasn’t provided sufﬁcient services
to help creditors migrate and adjust. They’re missing a trick. Here is an opportunity to earn extra revenue through providing services that customers will really value, as well as getting some much needed volume through the system. Many product vendors are offering their banking customers ‘frameworks’ rather than comprehensive solutions to the direct debit processes. This is giving banks more work, within a compressed timeframe, and is inherently unhelpful. Uncertainty in how to implement or interpret the rulebook requirements and achieving a representative and complete end to end test of direct debits, involving both creditors and debtors, will be an immense challenge to achieve by the go live date of November 2009. David Kohn is the Associate Director of CSC and has over 20 years experience in the retail FS sector, specifically banking & payments. He joined CSC in 2001 having previously worked at Citibank & at PricewaterhouseCoopers. He contributes to business development for CSC payment related products and services as well as helping to create innovative payment based solutions for CSC clients and partners. These include SEPA-related opportunities, business to business collaboration, trade facilitation services, as well as mobile banking and payment solutions.
Direct debit is important for creditors. Even today, with multiple disparate national schemes, it offers opportunities to achieve low operational costs, better cash ﬂow certainty and accurate reconciliation. There are opportunities for corporates to move to consolidated shared service centres for their payment processing. This would be facilitated by a single SEPA direct debit mechanism for euro payments. However, corporates are understandably reluctant to make the investment and take the risk if the business case isn’t strong and if it involves signiﬁcant transformation costs and effort. Consider the beneﬁts if corporates are provided with support for their migration and ongoing operational responsibilities under SEPA DD, along with help in constructing the business case. That should be motivation enough for them to adopt SEPA. Otherwise they will wait until the national direct debit schemes are withdrawn, forcing them to migrate to SEPA. This would be bad news for banks, who would then face unacceptably long payback periods for the investments they’ve made in providing the SEPA DD infrastructure. 2009 is going to be a telling time for corporates, raising many questions. For instance, what is my business case to migrate to SEPA? Do I have sufﬁcient information on my customers to make the switch? Do I need new mandates from my customers? What’s the best way to consolidate my payments infrastructure? How can I set up my systems and processes to comply with banks’ requirements? How can I use SDD to enhance service levels to my customers? The challenges for payment users and banks are considerable, but the strategic opportunities present very attractive beneﬁts – that holy grail of harmonised processes and true straight through processing for one. It’s still early days but if the banks listen to their customers and provide the services that they really need (rather than just what’s in the SEPA rulebooks), it is do-able. n
PAYMENT PLANS PAYMENT PLANS Paul Styles explains that there’s still a way to go before SEPA’s goals are truly achieved
ine years ago, the European Union set out a plan to create an November 2009) – has been disappointing to date. It is clear that acinternal market for financial services by 2010. The first steps tion needs to be taken so that a business case can be built for corpotowards turning the idea into reality included removing differrates to migrate to SEPA and also so that banks receive greater ences in costs of Eurozone cross-border card guidance and support in their SEPA planning. payments, ATM withdrawals and credit transIn recent years, the initial enthusiasm “As long as these rules fers to ensure that bank customers see no among banks, authorities and especially the are not clarified, French practical difference between domestic and corporates for the SEPA project has slowed banks, like many cross-border transactions. As such, the condown. This has become particularly evident as European banks, cannot cept of the Single Euro Payments Area startthe introduction of SEPA Credit Transfers (SCTs) start work on the ed as a framework to benefit corporates and early last year went largely unnoticed. In fact, timetable because like all consumers, but since those early days has the SCT take-up stands at less than two percent businesses, banks need morphed into an interbank framework that of transactions as corporates continue to rely to know their economic has been moulded primarily by the banks on the domestic payment systems. What’s and legal risks” with little guidance from the European more, in December 2008 the French Banking Central Bank, the European Commission or Federation (FBF) announced that its members – FBF Statement any other regulatory body. Most parties now have suspended work on SEPA pending clarifiagree that SEPA migration – both in terms of cation from European authorities on interuptake of SEPA Credit Transfers (which went live earlier this year) and change fees, for services that banks supply to each other. “As long as preparation for SEPA Direct Debits (which are due to launch in these rules are not clarified, the French banks, like many European
banks, cannot start the work on the timetable because like all busiing together the banks, the market infrastructures and, more impornesses, banks need to know their economic and legal risks,” said a tantly, the corporates, to agree practical ways forward involving the statement from the FBF. setting of standards and formats acceptable to all parties, all in a Banks across the European Union are concerned about how the realistic business context. new services will be paid for; for example, the Commission has said The time could well be right for SWIFT to play a role in reversing MasterCard’s interchange fee on its cross-border credit cards and the present situation and, as an external body, it could have an imporMaestro debit cards violates EU competition rules. The Commission tant role to play in helping the banking industry formulate a business and the European Central Bank (ECB) have case for corporates’ SEPA migration. Such an stated that banks could use an interchange approach would also help avoid the ‘minifee on direct debits but only for an interim SEPA’ dreaded by the regulators, where sigperiod and if it was justified. This shortnificant regional or country-specific variations term proposal regarding the Multilateral exist that contradict SEPA’s original purpose. Interchange Fee from the ECB is not satisIt might also achieve one of the other items factory for the French banks, which say the on the ECB’s wish list: more innovation in paymove has “destabilised” their planned ment systems spurred on by SEPA. SEPA business models and see the issue as Secondly, it is important to set an enda long-term one that demands a long-term date for the retirement of the legacy payment answer. That is not yet forthcoming. instruments. Many in the industry have been It is clear that greater clarity is still rediscussing the need for a SEPA deadline for quired around many aspects of SEPA. The some time and the ECB now acknowledges ECB does however, recognise the current that this is a requirement and “will work on challenges associated with SEPA implethe modalities – self-regulation or regulation mentation and migration. In fact, its frustra– as well as the end-date itself.” Against the tion at the lack of progress towards SEPA current economic backdrop and without a cuthas forced it to revisit its fifth SEPA off point to aim for, the banks and corporates progress report from July 2007. The ECB’s are struggling to make the business case for Paul Styles is Business Solutions recently published sixth SEPA progress rea change-over onto the new SEPA instruManager at ACI Worldwide and is report welcomes the efforts made so far ments. This has been clearly witnessed sponsible for wholesale banking around SEPA implementation but underthrough the poor take-up of the SCT services within the Business Solutions group stands and emphasises that work urgently and these lessons must be learnt before the of ACI in EMEA. remains to be done to ensure the success SEPA Direct Debit go-live later in 2009. Prior to ACI, Paul joined of the Europe-wide project. The report conWithout such a deadline, the current domesMidland Bank International in 1974, tains a list of 10 necessary steps for SEPA tic payment traffic has little incentive to move serving in UK, Belgium and Spain. migration including the development of a to adopt the SEPA standards and instruments, He joined Banco Santander, European card scheme to challenge the which will otherwise largely be restricted to London, in 1987, and in 1989 dominance of MasterCard’s Maestro systhe cross-border transactions. moved to Madrid opening a new tem, and clarification of the rules governing Thirdly, there must be further discussion office for National Data Corporation, the launch of the new SEPA Direct Debit of how the basic SEPA product can be ena cash management/electronic (SDD) payments instruments set for hanced without creating market fragmentabanking company. November 2009. tion – the very antithesis of SEPA. It is widely It is now abundantly clear that new accepted that the SEPA instruments fall short impetus is required to ensure the sucof many domestic products in terms of socessful implementation of SEPA and, building on the ECB’s recomphistication and functionality. Moreover, additional optional services mendations, I would suggest that there are three main areas that need to be offered in order to bring the corporates on board. However, need to be urgently addressed. First of all, the ECB itself has recogthe SEPA instruments cannot be enhanced at the domestic level – nised that the European Payments Council, which is effectively the there has to be Euro standardisation. banks’ answer to self-regulation, has made considerable progress It is becoming increasingly obvious that self-regulation by the but “there is still considerable room for improvement as regards inbanks with regard to SEPA may well have delivered all it can. volving the full range of stakeholders.” As such, an industry body However, appropriate levels of regulation might just be the right inneeds to bring together all stakeholders to move the European paygredient needed to help move along SEPA implementation and paint ment industry and all its end-users to the next critical stage along a clearer picture for the financial services industry and its corporate the path to a full SEPA environment. This industry body could be customers of the benefits of migrating to SEPA. Benign regulation is represented by SWIFT, which has an improving track record of bringoften more welcome by the banks than they care to acknowledge.
DOW JONES:DEC08 15/12/2008 16:49 Page 90
Cleaning up Rupert de Ruig of Dow Jones tells FST that strong anti money laundering practices are the best way for financial institutions to avoid more regulation FST. What are the potential implications for those that take inadequate steps to protect against money laundering and financial crime? Rupert de Ruig. Massive fines are simply the tip of the iceberg. Reputational damage and the huge costs of managing the remediation process decreed by a dogmatic and unreasonable regulator, is often the real story behind the headline. However, organisations that take the correct steps to put in place basic systems and processes will dramatically decrease the risk of falling foul of the authorities. Inadequate implementation of AML systems can have catastrophic consequences for institutions, exposing them to dealing with someone that represents a legal or reputational risk. The global trend is therefore moving away from simply having an AML system in place to comply with regulation towards ensuring that these systems are both robust and cost efficient. FST. Though AML programs are growing in popularity, research shows that many institutions are still unsure of how to respond to the challenges of AML. Why is this topic such a difficult one for financial institutions to get right? RdR. Putting an AML program in place can seem a monumental and daunting task. Client screening is an essential component, and I believe one of the key issues lies here. Regulated institutions are required to screen their customers for Politically Exposed Persons (PEPs), but as yet, there is no globally recognised definition as to exactly who should fall into this category. The Third EU Money Laundering Directive requires that institutions screen for senior PEPs, but many organisations are still unsure about where to draw the line in terms of seniority. Institutions need to fully understand their PEP exposure by conducting a comprehensive risk assessment, and tailor their client screening programs accordingly.
â€œIf banks fail to implement appropriate procedures, the burden of preventing illegal transactions will fall on regulatorsâ€? Rupert de Ruig is Managing Director, Dow Jones Risk & Compliance. He has over 13 years experience in the information industry, working with large global financial institutions on data management, market intelligence and Anti-Money Laundering projects. He has written numerous articles for international publications and worked with global regulators and financial institutions to tackle the Politically Exposed Person definition challenge.
FST. With the third AML Directive now in place within European markets, what effect is this having on the market? What are the long-term effects of this directive likely to be? RdR. Whilst the directive has been in place for some time, Belgium, Ireland, Spain and Sweden have yet to transpose it into the national laws. The transposition process is also an opportunity for some countries to revise and clarify some of the text in the directive. At time of going to press it appears that Spain is considering adding additional PEP job role categories to their definition. Some of the job proposed categories such as local councillors would add thousands of additional records to commercial databases. Due to the fact a name is an imperfect identifier, the more names in a database the more hits and false positives financial institutions will get. In the long term the regulation will make it harder for corrupt PEPs to enjoy their ill-gotten gains, however until regulated firms also have to monitor domestic as well as foreign PEPs, there will always be suspicious activity going unreported. FST. Finally, how important is it for financial institutions to be able to carry out the kind of due diligence that is necessary to prevent illegal transactions? What tools are available to enable these requirements? RdR. Financial institutions without effective due diligence procedures in place risk becoming a haven for illegal activity. If banks fail to implement appropriate procedures, the burden of preventing illegal transactions will fall on regulators. The consequences of this would be increased scrutiny of a financial institutionâ€™s business dealings, leading to friction and a non-cooperative approach between regulated institutions and regulators. Financial institutions seeking to put in place effective due diligence procedures should screen clients against a good quality commercial watch list and conduct ongoing due diligence of high risk customers. They must also understand the true background of an individual or entity through effective research and analysis, put in place technology to monitor transactions across the entire business and leverage crime typologies and other suspicious activity alerting tools to be able to recognise these high level illegal transactions. n
END LINE OF THE
PayPal CISO Michael Barrett explains how the online payments giant is shutting out fraudsters and winning the war on phishing joined PayPal about two and a half years ago. When I got here, I think it’s fair to say that the company had a ﬁnancial strategy that resulted in very low fraud rates online expressed as a percentage. But by ﬁ xating on the ﬁnancial strategy, we created something of a rod for our own back. Essentially, in making our fraud models as efﬁcient as we had, we seriously impacted the criminal’s ability to make money. If you are a criminal and you’re not making as much money as you want to out of phishing, what do you do? The answer is, you generate more phishmail. We realised that our strategy, while it was ﬁnancially effective, was generating a negative user perception, particularly among lowtransacting PayPal users. Their experience of our brand was essentially the one of having phishmail in their email inbox. It generated what most PayPal employees refer to as the ‘cocktail party problem’, which is to say you go to a cocktail party or other social event, and people ask, ‘Who do you work for’, and you say ‘PayPal’. They then always ask a question along these lines of: ‘When are you going
to stop sending me those fake emails?’ So round about summer of 2006, we realised that this was a signiﬁcant issue. At that point we re-strategised how to deal with phishing and came up with a very coherent and integrated plan and we now have got substantial evidence that it is working quite niftily. The ﬁrst thing to remember is that there is no silver bullet. There’s no single solution to phishing that you can look at and exclaim, ‘Why didn’t we think of that three years ago?’ As far as we can tell, no such thing exists. Rather, it’s the standard information security approach of devising a series of defensive layers and putting the right investments into each layer. Any given layer may only have a certain amount of impact, but taken collectively, they have a big impact on the crime. The ﬁrst point is user education. At this stage we now have substantially more than one billion users on the internet, and probably half of them have come on in the last ﬁ ve years. They’ve had no formal education about what represents safe behavior and what doesn’t. Our view is that it isn’t just us but also the rest of the indus-
Michael Barrett Ed P92,94,96.indd 92
try that needs to be in this for the long haul, trying to educate and make sure users understand how to protect themselves online. The next basic hypothesis is that if a phishmail doesn’t arrive in a consumer’s email inbox, it’s rather difﬁcult for the criminal to victimise that particular individual. We started thinking about strategies to prevent phishmails arriving in email inboxes, and we pretty rapidly arrived at the notion that there was some good technology that had been around for a long time but had got tied up in the inevitable industry standards war – in particular, the whole concept of email signing. We’re pretty pragmatic at PayPal, and so we decided that if the industry can’t agree on a single protocol we’d just use what’s out there. We’d rather use just one, but we’ll certainly use two if we have to. Since around Christmas 2006, we’ve been digitally signing all of our outbound email using both SPF and domain keys initially, and we’re now switching to Domain Keys Identiﬁed Mail (DKIM). The problem with digitally signing in its own right, is that even the geeks rarely check
URGENT PROBLEMS It might sound surprising that business process reengineering would have an impact on the fight against phishing, but it really does. We reengineered our blacklist handling processes to make sure that we got those blacklists out to the rest of the industry as quickly as we could. The bad guys were all trying to convey a sense of urgency. Going back to consumer education, that’s one of the things I always highlight. If you ever see an email and it’s trying to convey a sense of urgency or you yourself feel as though you need to take action right now, then it’s probably a phishing email. One of the things the bad guys are trying to do is persuade you subliminally that this is urgent and you have to act now because they know that guys like me are out there trying to get those phishing sites taken down as quickly as possible. They want to get victims as quickly as they can, so this whole sense of urgency is actually one of the primary litmus tests.
Working with ISPs, PayPal has blocked
85 million phishmails
digital certiﬁcates, and nobody else even knows what one is. While you can be happily signing emails, it doesn’t do you any good if consumers don’t actually know how to look at that information. So rather than just using signing on its own, we saw that it really made sense when delivered in the context of blocking. We started working with ISP’s because there’s about half a dozen of them that make up about 50 percent of the world’s email addresses. Those are the usual suspects: Yahoo, Gmail, AOL, MSN, Hotmail and so on. Because that’s a fairly constrained set, we’d be able to essentially test this whole idea of email signing and blocking with them, and if it worked, we’d continue rolling it out. We announced blocking with
“The first thing to remember is that there is no silver bullet to phishing”
Yahoo several months ago and we announced blocking with Gmail more recently. The results are actually pretty unequivocal. Since we’ve announced the partnership, we’ve blocked 85 million emails from consumers’ inboxes – that’s 85 million people who didn’t get victimised through that channel. The next layer in the strategy is one of stronger authentication. What we’ve done is implement a PayPal security key. So far, it’s been rolled out in the US, Germany and Australia, but we’re in the process of rolling it out globally. At this point, the classic form factor is the sort
Michael Barrett Ed P92,94,96.indd Sec1:94
“People have a tendency to say phishing is insolvable. We like to think that’s just way too defeatist”
ally, but also to harmonise legislation so that there is a very similar framework on a global basis. Because culturally it hasn’t been that long since we were a startup, we’re prepared to take risks on things. We’ll try stuff, and if it works, great. If it doesn’t, we’ll try something different. While we’d love everything we did to work, there are times when you place bets, and you don’t always win. I think we have more tolerance for taking those kinds of risks, and I also think we have more tolerance for actively making ourselves heard. I’ve spent most of my career in ﬁ nancial services and one of the things I’ve noticed is that this company is a lot less shy about getting out there and lobbying, not just for its own good but on behalf of the industry overall. We’re absolutely prepared to get out there and work with the rest of the industry. This strategy is proving itself very effective. It’s taken us from being in the top 10 most phished brands list on a regular basis in 2006 to a position where, most of the time, we’re not there. What we believe we’re seeing is that our brand is being phished less. Unfortunately we don’t believe these bad guys are taking up legitimate jobs and are now gainfully employed rather than simply victimising other brands. But we believe that our strategy is what made the difference and the corollary to that is everybody else needs to adopt essentially this same broad set of strategies. If they do that, we actually can start really choking down on the crime of phishing. People have a tendency to say, ‘Phishing is insolvable’. We like to think that’s just way too defeatist and that actually the problem is surmountable. Education, technology and industry partnership will be the answer to the phishing problem. By partnership I mean standardising these things and the industry coming together and agreeing on approaches. Every company doesn’t have to implement everything we’ve done, but if every company implements a few of them, then collectively it will make a signiﬁcant difference. Additionally, collaboration with law enforcement and government will have a huge impact. It’s going to require a blended strategy.
of token one where you press a button and it generates a six-digit code that is transformed every 30 seconds. You just attach the thing to your key ring and as long as you’ve got your keys with you, you can always access your PayPal account through it. The advantage is if you ever get your account phished and the credentials are 21ST CENTURY EDUCATION stolen, it isn’t as easy to log on without that security key, so the bad guy wouldn’t be able to take your account over. Since we ﬁrst deployed it we’ve essentially discovered that fraud One of the things we’ve discovered is just boring old text on web on security key protected accounts is pretty much zero. From pages isn’t necessarily the best way to educate consumers. For a usability perspective, you can still get in if you don’t have instance, we’ve tried quizzes, and they work fairly well. There’s your security key with you, but you have to go through the also some academic research that says cartoons work really secret question-and-answer process. We think that for those well. We haven’t deployed a cartoon on our website yet, but we consumers who are really worried about security, it’s an exmight. We’ve also tried video, and video actually works very well cellent tool because it gives them much more control. for certain kinds of problems. A good example can be seen in We’re also experimenting with different form factors. that phishing relies on the fact that consumers don’t understand The next one out of the door is in fact not going be a physical how to parse a URL and don’t know what a domain name is. In security key at all but rather will be a couple of different apthe tech industry, we find that problem remarkably easy, but the proaches. One is downloadable software that you can run on average consumer doesn’t. It’s really difficult to describe that in a smart phone. Alternatively if you don’t have a smart phone, text but remarkably easy to show somebody on a screen. We we’ll simply SMS a message to your registered cell phone slung together a video of that and stuck it on YouTube, and it’s with a one-time code when you want to log on. actually quite popular. If you’re going to do consumer education, We’re always working with policy makers globally on you have to think outside of the ‘text on web pages’ paradigm. not just funding for law enforcement for cyber crime glob-
Michael Barrett Ed P92,94,96.indd Sec2:96
In the middle of the worst downturn in years, Erste Group is posting some of its best ever results. FST editor Huw Thomas spoke with COO Herbert Juranek to find out what went right n the age of layoffs, shrinking budgets and scaled down objectives, talking about expansion seems slightly strange. But for Erste Group, growth has become something of a habit, and it’s going to take more than a global ﬁnancial crisis to slow them down. This at least is the impression given by Herbert Juranek when we speak to him at the group’s Vienna HQ. “This year will be the year where we have the biggest or the best results,” he says. “On the P&L side, we will most probably end the year with the highest Tier 1 and core capital.” It’s a sentiment so sunny it seems positively alien in the grey days the ﬁnancial industry is currently weathering. So how is Erste Group managing to swim against the tide? To understand that, we need to look at a little history. Founded in Austria 1819 as a savings bank, it carved out a respectable if unspectacular niche in its home country for nearly two centuries. Erste’s deﬁning moment came in 1997 when the group implemented a strategy to expand its retail business in Eastern and Central Europe. Cannily recognising that it was a region ripe for development, the group has grown its customer base from 600,000 to 16.6 million in little over a decade. “The whole group has developed over the last 10 years,” explains Juranek. “We started as a small savings bank in Austria, and on average we bought a bank every year, so now we are active in eight different countries and are consisting of eight banks with the holding company.” It’s an impressive period of sustained growth. Furthermore, the fact that this work has continued right through a period when the global economy has been so uncertain is further testament to Erste’s strategy. The ﬁnal shift to eight regional banks and a holding company was completed within the past year and was perhaps the biggest project Juranek has recently dealt with. “We had a big de-merger of the Erste Bank Austria, split the bank into the holding company and created a
bank for Austria,” he says. “So now we have a new structure, consisting of the holding bank, and below that all the local banks.” Considering that in all eight territories in which they operate Erste occupies a position in the top three banks by market share, the growth strategy implemented just over a decade ago has been soundly vindicated. So what challenges has Juranek encountered during this period of extensive expansion and acquisition? “Most of the banks, at the time we bought them were making a loss,” he says. “With most of the acquisitions, the main target was to make them proﬁtable and increase the amount of services. So the challenge from the IT perspective was to transform each acquisition into a modern bank and to change the overall environment.” To achieve this objective, the group pursued what Juranek describes as a local strategy. For each acquisition a speciﬁc and locally designed roadmap was put together, focused on transforming the organisation in line with the group’s business plan. It’s a strategy that has paid off. “We were very successful in turning these banks into proﬁt making entities,” Juranek continues. “We are now looking at the synergy potential on a group level, so the ﬁrst step was the conversion on the local level, and now we are aggregating things on a group level and looking for additional synergy potential.” Inevitably a key part of this process concerns the technology inherited in each acquisition. With so many different systems, the risk is that the group could end up struggling with the equivalent of a modern day Tower of Babel, a cacophony of disparate technologies each speaking its own language. “Each country has its own bank, and we are talking about large institutions,” says Juranek, acknowledging the scale of the challenge. “In countries like Romania, Slovakia or the Czech Republic, we already had a big heritage of systems. In various countries we have up to eight different core banking systems. One
Cultural exchanges Keeping a staff comprised of eight different nationalities together is a challenge in the best of situations. In a crisis it can become a major headache. Juranek. We are in difficult times because, if you work in banking and you open up the newspaper, every day there are negative stories about what is going on. Inevitably, people are reacting to that. I think our key message to the employees, and to our management is that the bank is in a really good position. We have a stable position in our markets, we are in markets with strong potential for the long-term growth, and we believe that if we do things right — and we will do things right — we will get out of the crisis even stronger than we were before. But culture is a big issue. If you acquire banks on a yearly basis with different languages and different backgrounds then it’s very important to create a kind of group spirit, where people know and people feel that they belong to the same group, to the same team. We are doing a lot with our management; we are doing a lot with the people onsite so they can feel connected to other people from the group. This starts from big management conferences which we are combining together, and it ends on the day-to-day business where the approach is content orientated, client orientated and customer focused. The main thing is you know the result that you are working towards. You have to be very focused on the outcome.
of the ﬁrst activities was to harmonise on a local level. We now we have an environment by country, and we’re trying to harmonise on the next level.” Juranek explains that wherever it makes sense to have a uniﬁed group-wide system, such as in treasury for example, then that is what is done, but that in many other respects the individual banks retain much of their autonomy. “In retail, for instance the responsibility is locally orientated because we believe in the local entrepreneurship in the various countries,” he continues. “Therefore, we have different models within the countries in order to be able to react quickly to client needs.” The foundations of Erste’s recent success rest squarely on the fact that the group spotted emerging opportunity in Central and Eastern Europe and did all they could to seize it. Juranek explains that this is only the beginning and, despite the current situation, these markets still offer new opportunity.
Growth spurt The past decade has seen Erste Group expand from a modest Austrian retail bank to one of the biggest financial institutions in Central and Eastern Europe. In all eight of the territories in which it operates Erste is in the top three by market share.
CZECH REPUBLIC Clients: 5.3m Branches: 642
UKRAINE Clients: 0.1m Branches: 119
SLOVAKIA Clients: 2.6m Branches: 272
HUNGARY Clients: 0.8m Branches: 200 AUSTRIA Clients: 2.8m Branches: 993
CROATIA Clients: 0.8m Branches: 117
ROMANIA Clients: 4m Branches: 607 SERBIA Clients: 0.2m Branches: 67
“The main advantage of Central and Eastern Europe was up to now, and we hope in the future, the growth potential was better than in the Western European markets during the past years,” he says. “We still believe that long-term potential is still there.” He gives the example of economies such as Spain, Portugal and Greece, all of which have gone through major political and social change in the latter part of the twentieth century and all of which have seen strong growth in the ensuing years. Compare these states to many of the places where Erste operates and there are plenty of parallels. Many have emerged as free market economies since the fall of Communism and are passionate about reinventing themselves as new and modern states. Many have also joined the European Union with all the fresh opportunities that can bring. If history can be trusted, then Erste’s investment in this territory should pay off in ways that will dwarf the successes they’ve already experienced. It is perhaps a symptom of the times that so much optimism and conﬁdence can become a little wearing. Surely the news can’t all be good? There surely have to be a few dark clouds somewhere on the horizon? We are currently embroiled in a global ﬁnancial crisis. Given the fact that Erste does its business here on Earth, it has to be having some impact on operations? “I have to admit the current environment for banks is not the best, and the overall situation in banking changed dramatically the past three quarters of the year, and especially the past weeks and months,” Juranek conﬁrms. “But anyhow, we believe that we are in a very good position in our market. What we have to do now is concentrate more and more on where we focus our investments.” Juranek at least concedes that riding out this period will require a clear shift in priorities from what went before. “In recent years, leverage was important, and each and every investor was very interested in how much leverage you have and how much return on equity you produce,” he says. “Nowadays, it’s liquidity and your core capital which has become more and more important, along with how you allocate your capital to the various businesses. For us, that means that we will concentrate on the areas where we
Herbert Juranek joined Erste Bank in 1999 after working for GiroCredit Bank AG and Reuters Ges.m.b.H. Austria. He has been appointed as Member of the Management Board until June 2012, where he has been since July 2007.
have really good returns and good margins and allocate the equity, but also the investment, into those areas.” In essence, Juranek describes a wait and see policy, particularly with reference to technology investment, which gives the group room for maneuver in a quickly changing marketplace. The main issue with such an approach is that it leaves little room
operating cost. These things will certainly continue, and we will also continue to work on efﬁciency gains and make the whole organisation more effective.” Another part of the picture lies in the careful use of outsourcing, an approach that has found much favour in these cashstrapped times. Juranek confirms that outsourcing plays a part in Erste’s strategy, particularly in areas such as cash processing and handling and in certain parts of the group’s software portfolio. However, he is clear that third-party providers can only do so much and if something can be done better in-house, then that is the way to do it. The example of card production is one such area where Juranek believes Erste can outperform any outsourcing company. As should be clear by now, Erste Group is not an institution lacking in conﬁdence. Though it might be possible to dismiss a little this attitude as mere bravado, the results pretty much speak for themselves. At a juncture when many banks are staring down the barrel of record losses and are scaling back plans until the situation improves, Erste are forging ahead with an impressively robust transformation. There’s even the possibility that they could turn the situation to their advantage. Asked if the credit crunch might provide the opportunity for the group to snap up ailing institutions and increase their empire, Juranek refuses to rule anything out. “If good opportunities appear, we will take
“We believe that we are in a very good position in our market. What we have to do now is concentrate more and more on where we focus our investments” for long-term multi-year projects. Perhaps unsurprisingly, Juranek doesn’t seem fazed by this. “If the economic circumstances in a country change dramatically, we will have to adjust the business model, and adjust the investments adequately,” he continues. “But at the same time I do believe we can pursue those long-term strategies, such as the consolidation of our data centre capabilities. For those types of projects you need to invest on a one- or two-year horizon in order to get a long-term return and to reduce the
that into consideration,” he says. “If timing, size and price is right, we will certainly think about it.” As we wrap up with a question about Erste Group’s priorities in the immediate future, it comes as no surprise that there is not a hint of retreat in the response. “Coming back to the operation for the next two to three years the aim is to strengthen ourselves in a way to even increase our share of the business and to even increase our position in our markets,” Juranek says. “This is the clear target for us.”
BARCLAYCARD:dec08 15/12/2008 16:58 Page 102
As one of the UK’s biggest lenders Barclaycard is at the sharp end of the credit crunch. But that hasn’t stopped it from investing millions of euros in contactless payment technology. Diana Milne meets CEO Antony Jenkins to find out why he predicts the death of plastic in a decade and how Barclaycard will weather the economic storm
T may have been the ﬁrst company to launch credit cards in the UK – but today Barclaycard is investing in technology that could ultimately lead their demise. Plastic will soon be a thing of the past according to Antony Jenkins, CEO of the company responsible for introducing UK customers to credit cards for the ﬁrst time in 1966. The future, he says, lies in contactless payments and he has put his money where his mouth is by investing a seven-ﬁgure sum in the development of the technology. Barclaycard launched its combined Oyster travel and debit cards, OnePulse, in London last year and it has since issued over one million of the contactless cards. Earlier this year it teamed up with O2, Transport for London, Nokia and Visa to become the ﬁrst credit card provider to trial mobile phone payments. It is also investing in biometric technology, which could make it possible for customers to make payments using their ﬁngertips or via an iris scan. In fact, so conﬁdent is Jenkins in the future of contactless payments that he predicts that in a decade plastic credit cards could be extinct.
BARCLAYCARD:dec08 15/12/2008 16:58 Page 103
“In many ways we could see plastic cards as the shortest lived payment mechanism in mankind’s history”
BARCLAYCARD:dec08 15/12/2008 16:58 Page 104
“In many ways we could see plastic cards as the shortest lived payment mechanism in mankind’s history,” says Jenkins. “I think it’s always difﬁcult to be precise about timings but in the next 10 years could we see the death of plastic? Absolutely.” He says he believes that within the next two years, a mass roll out of mobile phone payments using NFC (Near Field Communication) technology will have taken place. Barclaycard’s pioneering six-month trial of the technology saw 500 customers receive O2 Wallet mobile handsets equipped with inbuilt Oyster cards for travel in London. Of the participants, 250 were provided with UK£200 to spend using their mobile phones. The pilot, which ended in May this year, was hailed a success with nine out of ten participants claiming they were happy using NFC technology on a mobile phone and 78 percent saying they would be happy using contactless services if these were available. “Everybody carries a mobile phone with them. I don’t get out of bed without a mobile phone let alone leave the house,” says Jenkins. “At the same time, everybody would like to have less to carry around with them so there’s a real convenience factor associated with being able to make payments using a mobile phone.” He goes on to say that further capabilities could be built into the phone such as the ability for cus-
A SHORT HISTORY OF BARCLAYCARD
1966 - 1967
■ Barclaycard launches the first all-purpose credit card in Europe. ■ Barclaycard becomes the first ATM card used in the UK.
■ Company Barclaycard (now Barclaycard Business) is introduced. Barclaycard becomes a founder member of the international Visa system.
tomers to check their balances or find out information about the products they have purchased. “You can really let your imagination roam with this sort of technology. You could even get to the point where when you’ve bought your groceries at the supermarket the phone could keep track of the amount of calories you’ve purchased in total. I would expect that in the next two years we will begin to see more large scale roll outs of this kind of technology.” In comparison large scale deployments of payment methods using biometric technology are some way off, admits Jenkins, who says he believes it could be up to six years before customers are paying for groceries using their ﬁngertips. He is conﬁdent however that the technology will be a success, referring to the fact that is it widely used in airports across the world. “Biometric technology is now at a stage where it is ready for mass deployment. I’m a huge fan of the technology they have at the airports where they have retina scanning instead of a passport. This technology presents real beneﬁts to the customer – in terms of speed, convenience and security. I deﬁnitely think we will see adoption and I do think the technology is at a scalable level right now. But this is in more like a 24-month to 72-month time frame as opposed to the mobile payment technology which is more near term.” Key to the success of Barclaycard’s contactless payment innovations is a positive response by customers and merchants alike. And perhaps one of the biggest challenges it faces is creating conﬁdence on both sides. “With any new technology like this you always have the chicken and the
■ Barclaycard launches
■ Barclaycard is
the UK’s first credit card loyalty scheme, Profile Points.
launched in Italy.
■ Barclaycard is
■ Acquires the UK credit
launched in Germany.
card arm of Providian Inc, a top 10 credit card company in the US.
■ Becomes the first UK
credit card company to go on the internet with Barclaycard Net link. ■ Expands its European
operations to Spain and Greece.
BARCLAYCARD:dec08 15/12/2008 16:58 Page 105
egg situation,” says Jenkins. “Retailers will install terminals when there’s of the UK’s largest lenders and the eighth largest credit issuers in the US – it is a lot of customers using the technology and customers will use the techat the sharp end of the credit crunch. nology only when they see there are a lot of terminals.” He goes on to say In the ﬁrst half of last year the company’s proﬁts fell 17 percent partly as a that customers are “inherently conservative” when it comes to using new result of bad debt and it was forced to shut a Manchester-based call centre technology – an attitude that will prove the biggest obstacle to the wideslashing over 600 jobs. Jenkins is under no illusions about how the worsening spread adoption of biometric payment methods. economic conditions will affect customers’ use of credit cards: “In the short So far however, retailers have been highly receptive to contactless payterm we would expect customers to be more cautious in their use of ment initiatives with “tens of thousands” of outlets acceptcredit cards and that’s appropriate – we would encourage ing OnePulse cards and partnerships between Barclaycard that,” he explains, adding that Barclaycard too has adoptand the likes of Argos and Thomas Cook. Barclaycard can also ed a more cautious approach to lending. “I think the eco“In the short leverage its existing base of 10 million retail customers counomic conditions require us and any provider in the term we would expect customers pled with its network of 96,000 merchants across the UK to market to act as responsible lenders. We’re very cautious to be more speed up adoption of the technology: “We have a very large about who we extend credit to and we are mindful of our cautious in their customer base on the card side but we also have a very large responsibilities to help customers as they get into diffiuse of credit merchant acquiring business in the UK,” he says. “We have culties as some of them will in the current climate.” The cards and that’s about 96,000 merchants across the UK so putting together our situation makes it all the more imperative for Barclaycard appropriate” large merchant base and our large customer base we will be able to protect and grow its market share – with the introducto catalyse and kickstart the whole process.” tion of contactless payment technology, being a key eleJenkins is coy about just how much money Barclaycard has ment of its strategy. “We’re happy with our brand position. invested in technology that will ultimately kill off the plastic credit card – reWe’re happy about how customers perceive us, but of course we know vealing only that it is a “seven ﬁgure sum”. And while this strategy may seem a we have to earn that every day. We have to earn that through the new sharp departure from the company’s original raison d’etre, he insists this is a technologies that we roll out. We’d like customers to think of Barclaycard logical step for Barclaycard. “If you look at the heritage of Barclaycard from its as the best way to make payments.” establishment in the 1960s, it’s always been an innovative and market leading Staying one step ahead of the competition and ﬁghting hard to win cusbrand. It’s in our DNA and we think this is the next wave.” There are also comtomers has become imperative to Barclaycard’s international expansion stratpelling market forces driving Barclaycard’s investment in contactless payment egy. The company operates across Europe, the US, Asia Paciﬁc and Africa and technology. It now operates in a very different market from the one where it ﬁrst to date the company has issued 8.8 million cards outside the UK and in 2006 launched credit cards in 1966. Competition for customers is tough and as one two thirds of its new cards were issued overseas.
■ Deal signed with
■ Acquires US credit card
■ Acquires the majority
■ In the US, Barclaycard
Manchester United, giving Barclaycard global rights to issue Manchester United branded credit cards.
firm Juniper Financial Corporation.
stake in ABSA Group Ltd in South Africa, through which it now has 1.9 million existing cardholders.
launches the Barnes and Noble Member MasterCard with the world’s largest bookseller.
■ Announces the
■ Reveals joint ventures
■ Launches Classic and
Gold Visa credit cards in Portugal.
■ Acquires Clydesdale
■ Signs a joint venture
formation of EnterCard, a deal with the retailer House joint venture with Swedbank, one of the of Fraser, to issue leading banks in Sweden consumer finance and Norway, to provide products. credit cards across the Nordic region.
with Argos and Thomas Cook.
2007 ■ Starts issuing cards in India and the United Arab Emirates. ■ In the UK, Barclaycard
launches Barclaycard Breathe, a card that donates 50 percent of its profits to carbon reduction projects. ■ Launches Barclaycard
OnePulse, the UK’s first contactless payment card. ■ Begins trialing
contactless payments using mobile phones. www.fsteurope.com
BARCLAYCARD:dec08 15/12/2008 16:58 Page 106
THE DEATH OF PLASTIC? Antony Jenkins on the future of plastic credit cards: “I would say that I do think the future of the plastic card is limited. Conceivably you could completely do away with plastic. If you think about what the card is, all it is is a mechanism for containing some pretty basic information, principally the customer’s account number. And that could be done in various different ways. “Companies now use cards a lot for travel and expenses but many have virtual cards in the corporate space today where there is no plastic. They simply use an account number to book travel and hotel accommodation. The pervasiveness of these kinds of payment methods is increasing but I’m sure though that we’ll still have cash and probably cheques long after plastic cards have gone because these technologies are better for the consumer in terms of the sort of payments they can make.”
Speaking about the European side of the business, Jenkins says: “We have a good set of European businesses. I am very happy with our German business where we are number two in the market and number one in the revolving credit market in Scandinavia. We’re the third largest credit card issuer in Sweden, the second largest in Norway and the sixth in Denmark. We also have businesses in France, Portugal, Italy and Spain. Obviously that growth will moderate in the current economic climate but as economies recover across Europe the growth will resume.” The company is well established in the US and last year it announced plans to issue credit cards for the first time in South Africa as well as in Dubai and India. “We would like to see Barclaycard becoming increasingly global over the next five years, building on the strong footprint we have.” He says he hopes that once adoption of contactless payment technology is underway in Europe, the technology will be become a valuable tool in its efforts to win global market share. “Our ability to transfer skills and expertise and some of the learning around the technology that we’ve discussed into those markets is a key factor in our success. I think Europe can lead the way with those types of technologies.” Jenkins claims the technology that has been developed so far is just the tip of the iceberg and that he has many more ideas for creating even more high-tech payment methods. For now though, his lips are sealed on what those technologies will be. “Of course we have a broad and deep innovation pipeline. We have some things that are just gleams in our eye at this point and I think I’m going to keep them as gleams in our eye.” n
Antony Jenkins started his role as CEO of Barclaycard in January 2006. He joined from Citigroup where he worked since 1989 in a number of roles based in London and New York. As General Manager and Executive Vice President, Citi Brands, he was responsible for most of Citi Cards with US$90 billion in receivables. His portfolio included Platinum, Universal Cards, Drivers Edge, Dividend, Diamond AAdvantage, Small Business, Premier Pass and College. Jenkins was educated at Oxford University and has a Masters in Philosophy, Politics and Economics. He also has an MBA from the Cranfield Institute of Technology. Barclays is where Jenkins started his financial career back in 1983, when he completed the Barclays Management Development Programme before going on to hold various roles in retail and corporate banking.
ASK THE EXPERT
CUTTING CROSSCURRENCY COSTS While often considered a nuisance for financial cial institutions and their corporate clients, a new approach to cross-currency payments could yield benefits to both, says Matthew Richardson, Director at Deutsche Bank hanks to continued growth in global trade and increasingly mobile workforces, transactions that cross national borders continue to show strong growth – both in absolute and relative terms. However, while high-value ﬂows will account for a signiﬁcant proportion of the total, many of these payments are likely to be of a relatively low value. And processing large volumes of relatively low-value cross-currency payments has traditionally caused a number of difﬁculties for ﬁnancial institutions and instructing corporations. Indeed, sometimes termed ‘nuisance payments’, these transactions can be costly in terms of both time and expense. Regardless of the issues, many different types of institutions will be making these payments and for a range of reasons: institutions that maintain operations in several different countries; banks acting as paying agents for government, charities or pensions administrators; and – on the retail side – banks making over-the-counter foreign exchange payments and sending remittances for migrant workers. All these institutions will encounter problems such as having to hold multiple accounts to pay beneﬁciaries in different jurisdictions and a perceived lack of transparency with the foreign exchange element of the transaction. Indeed, this issue in particular can often stem from the
practice of handling the payments and foreign exchange elements of the transaction separately, a practice that also increases the number of bank interactions – and possibly fees – for the instructing institution. Many current practices will also be presenting ﬁnancial institutions with signiﬁcant risks. Aside from the reputational issues presented by any perceived lack of transparency, the problems of ageing technology and infrastructure may also present some operational risk. Indeed, a great deal of the infrastructure used by ﬁnancial institutions to process payments relies on infrastructure that is now several decades old and was not designed to cope with current volumes and new regulations and standards. This is a problem that will continue to get worse as volumes increase and the regulatory landscape continues to change over the coming years. Any failure of these systems could be catastrophic for the bank in question, undermining conﬁdence and even creating systemic difﬁculties for the global economy.
A new approach This is certainly an issue that the leading transaction banks have been seeking to address, and Deutsche Bank is no exception. Developed over several years and bringing together expertise from the divisions of
FST Deutsche ATE.indd 108
the bank responsible for foreign exchange and payments processing – Global Markets and Global Transaction Banking respectively – FX4Cash is a recently launched platform designed to offer a range of end-to-end cross-currency payment solutions for both corporates and ﬁnancial institutions.
FX4CASH IN ACTION
ease with which it can integrate with ERP systems and enable them to process individual payment and bulk ﬁles side-by-side, using live FX marker pricing. And the modular ‘plug-and-play’ design means that clients can implement the solution quickly and easily through a range of access channels including SWIFT, Eurogiro and others.
From the standpoint of a ﬁnancial institution, partnering Initiate Trade via web-based platform - db-direct internet with Deutsche Bank for FX4Cash Customer Autobahn FX Base Currency A offers a range of advantages, not By the end of day, customer least allowing them to mitigate sends MT103 payment , referencing the Trade: some of the difﬁculties associ:72/FX4CCT/12345 ated with ageing payments Execute FX Trades infrastructure. However, aside Beneficiary from the issue of technology and Credit Currency B infrastructure, the payments Release Instructions processing sector of the banking for Payment Processing industry is becoming increasPay Beneficiary ingly competitive. The demands via Wire, ACH or Payment 4 Debit Customer’s Base Currency posed by changing standards Draft in a Different Systems Acct for FX Settlement Currency and regulatory initiatives such as the Single Euro Payments That this initiative brings together these two areas of the bank is Area (SEPA) and Payments Services Directive (PSD) – as well as price signiﬁcant. Global Markets maintains autobahnFX, Deutsche Bank’s compression from increased competition – have left many instituproprietary foreign exchange trading platform, which allows the best tions struggling to make returns from this type of business. Howrates to be sourced from 18 funding currencies into over 75 local currenever, diminishing fee income from activity of this type can often be cies. And Global Transaction Banking has invested heavily in building a complemented by new sources of revenue. And partnering with one of new payments infrastructure to cope with high volumes and new stanthe leading transaction banks to offer cross-currency payment soludards. By bringing these two areas of expertise together for FX4Cash, tions to corporate clients could yield new streams from the foreign the bank has sought to address exchange spreads on these types of transactions. the common practice of treating the foreign exchange element of a transaction separately. For example, institutions will often process a client’s payment and then provide the foreign exchange information afterwards in order for them to make the necessary reconciliations. However, demand from corporates for more efﬁcient tools to manage working capital and short-term liquidity means that this situation is now unacceptable to many. The thinking behind FX4Cash is, Indeed, FI clients who have recently gone live with FX4Cash therefore, to give clients equal access to the bank’s foreign exchange have reported a range of benefits. For example, some FIs have seen capability alongside the payments capability. increases in higher value payments thanks to being able to offer By giving clients this equal access to the two elements of the transup-front transparent pricing to their customers. And several banks action, the number of interactions the instructing corporate is making have noticed immediate increases in transaction flows thanks to is reduced, potentially diminishing the fees they incur. Indeed, the being able to offer new payment options in currencies as diverse as new system’s ease-of-use has been especially attractive to corporate Philippine pesos, Lithuanian litas and Brazilian reais – something clients and has certainly contributed to the impressive levels of take that should give food for thought to those banks that cannot curup FX4Cash has seen since its launch. For example, many corporates rently offer certain payment currencies to its corporate or retail – including recent sign-up Anglo-Eastern Group – have welcomed the clients.
“The payments processing sector of the banking industry is becoming increasingly competitive”
FST Deutsche ATE.indd 109
A SWIFT connection Paul Nicholls, of Alliance & Leicester Commercial Bank, outlines the recent developments of Eurogiro – the younger brother of SWIFT he offerings of SWIFT are, for many, where the provision of electronic communications services and international payments begins and ends. However, the Eurogiro network also deserves attention. Founded in 1992 – 19 years after SWIFT – Eurogiro has often been in the shade of its thrusting sibling, yet has certainly kept its place at the table. Indeed, it now processes 30 million transactions each year, with member institutions in 61 countries and counting. Eurogiro started as a channel for European postal banks, which were not eligible to join SWIFT. These institutions often lacked access to an electronic network, necessary if they were to provide competitive cross-border payments services to customers. Eurogiro, a network of these postal banks, was therefore created as a remedy, with international payments provision its focus. Indeed, a cost effective bulk payments handling service remains one of the company’s key offerings. This is enabled through the bundling of multiple standardised transfers into envelopes or ﬁles. This reduces transfer costs – an important differentiator for the high-volume, low-value payments that both traditionally characterized the postal banks’ needs and remain a core requirement of the contemporary membership.
came through the takeover of Girobank, the former British equivalent. Yet the changes to the structuring and membership of Eurogiro go much deeper than through acquisition activities. Eurogiro now deﬁnes itself as “a commercial company that actively promotes and catalyses bilateral and multi-lateral business opportunities among its customers in retail ﬁnancial services and wholesale banking worldwide”. In addition, Eurogiro realised that organic growth could logically only take it as far as the sum of Europe’s postal banking institutions (albeit with the inclusion of their new parents, in the above instances). The network accepted the necessity for modiﬁcation to its structure, and greater levels of engagement with remittances specialists and large ﬁnancial institutions – essentially organisations responsible for high levels of cross-border transfers. Thus it has moved beyond its original mandate. In the words of Tjeerd Rienstra, Chief Executive Ofﬁcer, Eurogiro Holding A/S, it has developed from “a closed membership structure into an open group structure”. One of the main aims of the restructuring was to make it possible for all ﬁnancial institutions to join the network. It has therefore split itself into three companies, with different areas of specialisation. One manages the IT services and infrastructure requirements across the group; another handles global network coverage and the management of existing customers; the third, Eurogiro NCIP A/S, is responsible for the offering of new, multilateral remittance solutions for large banks and payment operators – the ﬁnancial institutions that Eurogiro is keen to court. While Eurogiro is now emphatically a commercial company, with banks and other ﬁnancial institutions as its customers, it has retained some of the sentiment of a club ethos, where member institutions make governing decisions. In this way, the reforms currently being
30 million Number of transactions Eurogiro processes each year
Restructuring Since its foundation, Eurogiro has expanded and changed considerably. Some of the original postal banks have merged with, or been taken over by, other ﬁnancial institutions. For instance, Deutsche Bank recently acquired a stake in Deutsche Post, the German post ofﬁce bank; while in the UK, Alliance & Leicester’s Eurogiro membership
THE HISTORY OF EUROGIRO
1992 Eurogiro founded
1998 Partnership agreement with Western Union made
2007 New structure agreed for Eurogiro 2007 Eurogiro restructured to form a holding company
rolled out have come from the founding members all agreeing on the need for change.
Partnerships The newfound openness of membership provides manifold beneﬁts to all concerned. Already, important elements of the Eurogiro offering are provided via its partnerships, which are formed with the aim of creating mutually beneﬁcial and complementary services for the network and the new member alike. For example, a partnership has been formed with Western Union, the remittances expert. This enhances the services offered by Eurogiro members, as they can provide their customers with Western Union’s cash-to-cash product, whereby funds are transferred within 24 hours. Eurogiro meanwhile can provide Western Union with access to its wide network of payments venues – an extensive array across Europe and further aﬁeld. Further, through ‘nostro’ accounts – accounts held on behalf of Eurogiro – with both Deutsche Bank and Deutsche Postbank, Eurogiro member institutions can streamline the way in which they settle US Dollar and Euro payments. In other words, Deutsche Bank is the US Dollar Settlement Service Provider (USSP) for Eurogiro members. It provides a single point of entry for Eurogiro members settling US Dollar payments, removing any need for the members to hold US Dollar accounts. Deutsche Postbank performs the same function for Euro transactions as the Euro Settlement Service Provider (ESSP). Also, Eurogiro maintains a close relationship with SWIFT. The two networks are far from mutually exclusive and, indeed, a quarter to a ﬁfth of the younger network’s trafﬁc is transmitted via SWIFT.
Worldgiro Another facet of the new Eurogiro model is geographical expansion. Indeed, from a previously Eurocentric base, Eurogiro has expanded to a stage where it arguably deserves to be renamed ‘WorldGiro’. This year saw the breaking of new ground, with the ﬁrst Eurogiro board meeting held outside Europe, in Singapore. And the last 12 months or so have seen new members including Paositra Malagasy, the Madagascan state-owned post and ﬁnancial services provider, and Bangkok Bank, the largest commercial bank in Thailand. There are also now member banks or postal organisations in Australia, Brazil, China, Japan, Mongolia, New Zealand, Philippines, South Korea, Sri Lanka and Togo – as well as, of course, the United States.
2007 Singapore office opened
2007 Co-operative agreement with Western Union
This sprawling list – far from exhaustive – gives an indication of the new dynamism coursing through Eurogiro. Particularly targeted is a deeper engagement in the emerging markets. When one considers that more than a third of global remittances – at least, those through legitimate channels – are now being sent to the Asia Paciﬁc region, a motivation for Eurogiro’s developments becomes apparent. However, in addition to a desire to obtain new revenue streams through this dissemination of funds, Eurogiro is also acutely aware of the contribution it can potentially make to the cause of global ﬁ nancial inclusion. One of the strengths of the network – which stems back to its roots in postal organisations – is its ‘ﬁrst mile’ and ‘last mile’ penetration. Indeed, in countries served by Eurogiro even individuals with little or no experience of formal banking can send or receive money easily, quickly and cheaply thanks to the postal service infrastructure of different countries linked through Eurogiro. Every new Eurogiro venture or offering is developed and implemented with one eye on costs. This is, again, part of a longstanding approach taken by the network, which has seen excessive bureaucracy shunned in favour of a lean organisation and management structure. It seems that with a strong heritage and well considered development plans, Eurogiro is strongly positioned to play an ever more signiﬁcant role in the future of electronic cross-border payments services.
Paul Nicholls joined Alliance & Leicester Commercial Bank (then Girobank plc) in 1987 after graduating from The University of Manchester. He has worked in the bank’s International Department since 1991, where he has occupied a variety of business development and relationship management roles, and currently heads up the international sales team. Paul has been actively engaged with Eurogiro and its members for the past 15 years.
2008 Eurogiro board meeting held outside Europe, in Singapore
2008 Eurogiro reaches 61 members, across 50 countries and processes 30 million transactions
Raise your defences Dimension Data’s Scott Petty explains how organisations can still address current economic challenges without compromising on other core responsibilities
FST. The recent economic downturn has brought a host of new challenges to bear on today’s IT organisation. Would you agree? Scott Petty. There is pressure on all companies, but ﬁnancial services organisations especially are trying to reduce operating expenditure. In the midst of a downturn, it is natural for companies to change their emphasis and shift more of their resources to focus on the crisis at hand. Battle-worn executives may be tempted to place less focus on issues such as network support. But taking your eye off the service levels is something you do at your peril. IT’s role in the business is critical and downtime equates to wasted productivity, lost sales, user frustration and more, none of which you can afford during lean times. The challenge is to ﬁnd ways to trim costs without impacting the operating ability of the business. FST. Is it possible to reduce operating expenditure while maintaining the level of service your clients expect? SP. Making hasty cuts in the short-term can result in irreparable damage to the business in the medium and long-term. It’s a critical balance to manage. Now more than ever it’s essential to keep existing clients and at least maintain current business, if not grow it. Opting into a support and managed services contract is one tactic to consider. Often outsourcing these services to a third party can reduce the monthly operating costs and a single, predictable monthly payment can be seen as a real beneﬁt in this current climate. FST. How should an organisation go about selecting what IT services to outsource? SP. The ﬁrst step is to take an end-to-end view of your entire IT estate. It’s possible that there will be some areas that you consider your area of core competence that you
wish to keep complete control over, others you won’t. Maintenance or ‘break-ﬁ x’ of equipment on the network is often seen as a standard area to outsource. Organisations often couple maintenance contracts with regular network infrastructure assessment services, giving them peace of mind that their networks are operational and that they have visibility of any technology that is due for a refresh. FST. At this time, there must a temptation to ‘sweat assets’ to avoid any capital expenditure? SP. It’s important that you establish which assets can be sweated – and where your risk lies. Safeguarding your organisation against downtime requires that you maintain your infrastructure at recommended levels and deploy security best practice features. If you lack the resources required to investigate, scope, plan and execute upgrades, feature conﬁguration and deployment, it may be worth investing in a secure network infrastructure assessment. This service can help you understand what you have and what is putting you at risk. Once you understand your risk – you can prioritise your action plans.
FST. What criteria should organisations consider when evaluating potential outsource partners for network support? SP. Again, the ﬁrst step is to assess your business and existing IT estate and evaluate potential partners according to how well their capabilities map to your requirements. Many of Dimension Data’s clients are opting into our global IT support service called Uptime Powered by Cisco Services, which is a joint offering between Dimension Data and Cisco. The reason this support solution is proving to be so popular is that it gives companies a global IT support service backed by the commitment of both companies. Should there be a network outage, the client has a single point of contact and accountability until the incident is resolved – a Dimension Data Global Service Centre. Faster restoration time is also enabled by the fact that incidents escalated by Dimension Data are prioritised by Cisco. FST. What are the fundamentals of a successful outsourcing engagement? SP. It’s important to ensure that your outsource partner understands your business objectives and the criteria you will be using to evaluate the success of the engagement. Organisations should also be mindful to look at the service delivered as a whole – not just the price tag. By all means, work with your provider to develop a costing model that works for both parties, but remember that when it comes something as businesscritical as your network, you don’t want to be confronted by the truism, ‘You get what you pay for.’
Scott Petty is Group Executive: Services at Dimension Data and is committed to valuecreation. He believes in leading by example, exceeding the expectations of clients and creating a team of highly effective and outstanding individuals as a key differentiator for Dimension Data. Given his extensive and in depth understanding of the economics of the technology industry, Petty is aware of the critical contribution of the services as an essential component of the company’s overall value proposition.
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THE CUSTOMER IS ALWAYS RIGHT FST speaks to LogiCRM’s Mike Driver to discuss the importance of CRM investment and the challenges of maintaining it during difficult times FST. It might be easy for hard-hit ﬁnancial organisations to defer investment in technology such as CRM in favour of short-term initiatives. Do you believe that would be a mistake and what are the risks for companies that fail to pay proper attention to the needs of their customers? Mike Driver. Obviously things are tough now. Organisations are ﬁnding that they have serious ﬁnancial restrictions, which can affect programmes. We understand that and it may be the case that you can’t make a full CRM investment; however our advice is to make best use of what you have – both in systems and resources. We know that improvements in process and data management can be made in your organisation. These improvements will also help different teams work better as well. Companies that fail to pay proper attention to their clients are not only missing opportunities right now but will suffer in the good times. Clients remember those who looked after them when times were bad. FST. Can CRM be viewed as purely a technology issue or are there other elements that need to be considered if is to be employed successfully? MD. CRM must not be viewed as a technical only issue. If it is, and if the business absolves itself from any responsibility, it will fail. CRM is a collaborative effort between many departments, including business and IT, all of which have important roles. There are two main reasons why the business must be involved, take ownership and provide strong support and sponsorship. First, it must make sure that the business objectives remain the central theme of the project and that requirements are met in the most efﬁcient way from a business perspective. It also needs to continue to make the business realise that they are the owners and they must assume their responsibility for ownership. When the project is over and the
project team leave, the transition to the business will be smooth with no doubts about what is required from them. FST. How are ﬁnancial institutions using CRM solutions to distinguish themselves from their competitors? What are the challenges facing ﬁnancial companies in getting the best from CRM? MD. Institutions are doing this by maintaining complete awareness of all aspects of their business with clients. It is also important to operate in alignment with agreed levels of security when sharing data, leads and opportunities. Financial institutions are looking to amalgamate data from all divisions of the business
Mike Driver is a passionate CRM professional, who has worked in the banking/ finance sector for many years. He has international sales and marketing background with Reuters and has run various project types – all business led. He believes in team collaboration for embedded success and enjoys working with visionaries who want to institute change.
to get single view clients and are now able to analyse by client, product, market, product, salesman and trader. They are also looking to set benchmarks for activity and performance levels (based on easily measurable criteria) to set targets for all to follow. The major challenge with CRM is for senior management to decide to put customer needs ﬁrst and push through a programme to make this happen, without affecting the day-to-day business. Having a set of clearly deﬁned stages that give quick wins to all business units and start to bring systems and people together is also important.
FST. What are the beneﬁts and drawbacks of in-house versus externally hosted CRM solutions? MD. Beneﬁts include the fact that in-house solutions can be built ﬁ t for purpose and that they can match speciﬁ c needs exactly. Other factors include that through in-house implementation, you are not connected to other vendors and a degree of ﬂexibility is created. What’s more, systems can be developed and integrated with existing operational systems and an opportunity to be different from the crowd is presented. Of course, the drawbacks are that management may be reluctant of such an investment and that too much IT ownership may present additional problems. FST. How do see the CRM space developing with reference to the ﬁnancial industry? Do you foresee any particular developments and innovations? MD. In the future the role of CRM will be to move beyond its current limitations and to bring systems together. CRM will be able to integrate with and develop around existing trading, fund management, ﬁnance, compliance and other regulatory systems. Taking into account security considerations, the focus will be to provide one place to view all relevant information about a client’s business, revenues, products taken, creditworthiness, interactions, touchpoints, relationships etc. It is also to enable operational and admin processes to be carried out seamlessly, with each department to view data required and process status when required. In addition, CRM solutions will need to incorporate Web 2.0 functionality, add unstructured data into the database environment and be able to enable rich externally and internally generated data (such as RSS feeds, news, blogs and wikis) to be viewed in the same way, from the same place as current client data.
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Customer satisfaction Bo Lykkegaard, Programme Manager for European Enterprise Applications at IDC, reveals his CRM predictions he ﬁeld of Customer Relationship Management (CRM) has had a turbulent life over the past 15 years, since Tom Siebel founded Siebel and began to elevate what used to be contact managers for sales people into broader enterprise solutions for customer management. After experiencing meteoric growth rates during the 1990s, the global CRM market declined signiﬁcantly during the 2002 and 2003 period as a result of the dotcom collapse and highly publicised CRM failures. Today, CRM is on the rise again. Current customer adoption is mainly driven by three key factors. Firstly, new delivery and licensing models, known as ‘software as a service’ and pioneered by Salesforce.com, shorten global implementations from years to months, reduce upfront cost and risk due to a monthly subscription model, and enable faster product development cycles because the developers control the deployment environment. A second driver is the improved user interface, emulating design principles of familiar user interfaces such as Microsoft Outlook and beneﬁting from dotcom innovations such as task-based and procedure-driven user interaction, similar to when making a book purchase at Amazon.com. A third driver is built-in integration between CRM and industry-speciﬁc applications, for example customer service, billing, and service provisioning for telecommunications companies or sales and marketing tied into trade promotions management for consumer packaged good vendors. Such integration supports extensive business process automation and improves decision-making capabilities. Where will CRM go from here? IDC certainly believes the three factors mentioned above will continue to drive CRM adoption. However, four additional factors will boost CRM demand further over the next three years: Social CRM – Social CRM is the expression of the Web 2.0 innovations such as
blogs, wikis, and user ratings into an enterprise CRM context. Consider the sales representative querying his/her CRM application to scan social networking sites to assemble a personal proﬁle of a new, customer decision maker prior to a critical meeting. Or imagine a customer portal where customers can post
Bo Lykkegaard new ideas or requests and promote/demote the ideas of other customers. Or a self-organising sales/marketing intranet where all collateral is displayed in order of usage, ratings, and age. At a time in which lack of end-user adoption remains the number one threat to CRM success, social CRM represents a very valuable way to increase employee productivity and CRM usage at the same time. Upgradeable customisation – Some say the days of custom-built CRM systems are over. IDC tends to agree with that when it comes to core components such as pipeline management, contact management, campaign management, and so on. However, a large proportion of companies have CRM
needs that are unique and critical to their organisation. New CRM applications will offer customisation extensions, built-in development frameworks, and standardised web services interfaces that will greatly simplify the addition of industry-speciﬁc extensions to support the needs of, say, the subscriber management of a publishing house or an auto-service membership association. Since the customisation is carried out within the CRM application framework, the customisations are easily upgradeable. Mobile CRM – The idea of employees accessing their CRM application from a mobile device has been around for a while. However, recent innovations in mobile computing such as mobile broadband, RIM Blackberry, and the Apple iPhone, will turn the dormant vision of mobile CRM into reality. Service technicians, travelling sales representatives, and consumers are examples of key CRM users that are typically not carrying a laptop or PC. Virtual suites and ecosystems – Customers do not want to tie best-of-breed CRM applications together with back ofﬁ ce applications and industry-speciﬁ c applications. This means that best-of-breed CRM applications will increasingly be consumed as part of larger, pre-integrated offerings. The ‘virtual suite’ is one way to create such larger solutions, in which SOA technologies are used to integrate what used to be stand-alone CRM applications with other enterprise applications. Oracle, Infor, CDC, and Sage are following this approach. Other vendors are relying on ecosystems in which vendors pre-integrate complimentary solutions, such as Salesforce’s AppExchange and SAP’s Business Process Platform. Bo Lykkegaard is Programme Manager at IDC for the European Enterprise Applications research, market analysis, and related consulting. He focuses on the composition and developments of the Western European applications software market, in particular ERP, CRM, HR, and payroll applications.
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MTB MAG AD:nov08 15/12/2008 14:34 Page 117
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Optimising customer technology Laurence O’Hagan is Chief Technology Officer for Pitney Bowes Group 1 Software. He has been in the electronic printing and publishing space since the late seventies. A physicist by background, O’Hagan originally conceived and architected DOC1, Pitney Bowes’ flagship solution for Customer Communications Management, now used by leading bank and insurance organisations across the globe. He is an expert in the field of document automation and related technology.
How to keep and attract customers in a recession BY LAURENCE O’HAGAN imes are tough. In the ﬁnancial services industry, credit committees have tightened lending policies, and a retail slowdown has reduced credit card earnings from in-store and online sales. The big question is ‘how to do more with less’. I know of several organisations – retail banks and general insurers – who are doing more with less by tightening up their enterprise data quality so that their marketing activity is better targeted, helping to contain customer defection and improve campaign response rates. There is still considerable room for marketing improvements in ﬁnancial services. After all, the average number of ‘products per customer’ in European ﬁnancial institutions is only around 2.5, despite the fact that they each offer a wide range of products.
Improving the data basics So what improvements can be made to the underlying customer data that helps improve customer targeting in order to produce more result from marketing activity, with the same, or less, expenditure? Address and postcode are frequently the common data piece linking all sorts of customer in-
letters, statements and so on) to satisfy an enquiry straight away. This requires a ﬂexible, enterprise-wide data integration function that can gather, standardise and combine all those key customer data pieces. Documents also need to be presented to the call centre agent in the same format the customer has received them, so that both parties are looking at the same thing, and can therefore have a sensible and efﬁcient conversation. At the same time, such systems can also introduce business rules that control which parts of the resulting correspondence with the customer have to remain standard and which the agent can personalise. Finally, because the output is printed in a production centre, the print and mail costs are radically reduced.
formation. However, other fuzzy matching techniques are used to recognise different versions of the same person’s name, or even misspellings. Synonym databases help overcome the fact that different people use different words for the same thing; such as mail, post, letter, note, notice, etc. This is important, for instance, when linking channels, so that common preferences or attributes, expressed slightly differently, can be spotted and acted upon. Then, when it comes to accessing all this customer data, single standardised repositories are now much easier to create. You used to have to write special and expensive interfaces to line of business systems. That barrier no longer exists thanks to software that allows non-technical people to build new data input connections on the ﬂy, and inexpensively.
The subject of products-per-customer also raises a recently rejuvenated marketing technique that the technology analysts have christened ‘transpromo’. This refers to the ability to include personalised cross-selling offers on a customer’s bill or statement. Again, the effectiveness of such advertising is reliant on segmentation underpinned by rich, relevant and accurate customer data. The fact that this technique is now possible, and being practised by a handful of pioneer organisations, is very interesting to CXOs in the current economic climate, as it can serve to boost sales and increase share of customer wallet.
Improving call resolution
Producing more commercial result with less expenditure is also being achieved in two other areas – call centre (customer service) efﬁciency, and transpromotional advertising. In a tight economy, there is even more pressure to resolve as many queries as possible on the ﬁrst call, in order to reduce call handling costs. First call resolution demands that the call centre system be able to access all sorts of data and documentation from across the enterprise (such as customer transactions, customer proﬁle, customer service
Times may be tough, but nevertheless there are a number of areas where the magic combination of improved productivity along with cost savings can be achieved. However, high standards of data accuracy, richness and accessibility are essential to introduce such initiatives, whether they are improved customer segmentation, transpromotional advertising, call centre efﬁciencies or deeper customer insight.
To learn more about optimising your customer technology visit www.g1.com/link/engageoneinteractive
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here are no single big players who want to change it, but the internet has become the place where Generation Y live. They read blogs instead of newspapers, watch YouTube instead of TV and listen to podcasts instead of the radio. They simply use all the tools available on the internet and they utilise them heavily. They have grown up in this era and they require every piece of information or activity to be available online. Any social networking site is extremely popular, not only among the young but even elder people. Financial institutions have not really used this media before and are now learning how to utilise this further. Some banks have created a proﬁle page for themselves, done networking with customers and published bank advertisements, but it is not a successful model. People are looking for personal voice, opinions and explanations and this is where banks can get a jump-start in the social media: have some responsible employees create blogs that really help customers with their ﬁnances, make text or even video blogs to explain how a complex mortgage works, how to save money in the economic crisis, register for the mobile banking service or let the customers comment on these blogs and have their questions answered by experts. Other channels that Generation Y are using include instant messaging as a substitution for email. It can be Windows Messenger, ICQ or Skype, but Generation Y reach for it much sooner than opening an email program. The messages are delivered even if their friend is ofﬂine and there is a wide range of emoticons available to express feelings in short forms. There is a huge advantage of instant messaging: it is silent and anyone can use it in an open-ofﬁce without being heard. This characteristic makes this channel an excellent way of banking customer service, an extension of contact or call centres. The customer authentication and simple transactions can even be made automatically (like the IVR on phones), and when it comes to explanations or complex transactions then a contact centre operator can take over the conversation. Of course there are challenges. Online ﬁnancial sites are popular nowadays and
THE EVOLUTION OF
ONLINE BANKING Online and mobile banking are once again hot topics as new business concepts like P2P lending, online personal finance and internet-ready phones hit the market. József Nyíri of IND Group explains further
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József Nyíri is the CTO of IND Group, delivering the banking front-office technology to banks in the EMEA region. He leads the Innovation Lab of IND Group and he is an evangelist in the online banking innovation arena. This 30-year-old’s interests include sports, nu jazz and good wine. You can read his fintech blog at: www.bankfutura.com
gregation service and spending reports are customer needs, so they launched their own personal ﬁnance management tools within the online banking, and this way they do not loose the online customer contact. could threaten banks. Financial product comparison services, for example, like moneyaisle.com or ﬁlife.com are more an opportunity than a threat to the banks, and if a bank has good products or conditions the customers will choose it by browsing on an independent site. This means a minimal investment of listing from the bank and, of course, the presence can be boosted with more ads or other online marketing tools. On the other hand, account aggregation and personal finance management
Personal finance management The main goal of personal ﬁnance management is to consciously spend money. All the customer’s transactions are categorised automatically or manually to tags like ‘food’, ‘travel’, or ‘cycling’, and for any past period the client can see and nail down how much money was spent on a category or subcategory. The spending is compared to the income each month, so the customer will realise if they are overspending. Knowing
tion. And let’s not forget, in these troubled times financial awareness is even more important. Using tools like this, banks can teach their customers how to stay in a healthy financial position. Furthermore, mobile banking is in its renaissance. It started with the handsets and over the last two years the phones on the market have become very smart. They are fast, have built-in memory, a good CPU and internet connection. The colour-screens have good resolution and the navigation buttons are highly usable. All of this has provided the possibility to create really enjoyable applications on the phone. Inevitably, mobile banking popped up as clients need to have access to their banking accounts anywhere. SMS alerts worked before but today the browser-based mobile internet banking is the trend. The same security schemata can be used on the mobile as in internet banking. Unfortunately, the same internet banking does not work on mobile devices because of the limited screen size and the lack of the full keyboard. So banks launched phone-optimised versions of internet banking, where the ‘on-the-go’ functionality is emphasised, like checking account balance, making one-off payments and looking for the nearest branch or ATM. During the credit crunch it has become extremely important to watch the value of
“The internet has become the place where Generation Y live. They read blogs instead of newspapers, watch YouTube instead of TV and listen to podcasts instead of the radio” sites like mint.com, wesabe.com or yodlee. com can be a replacement for online banking, and this possibility is dangerous for the banks. Today, customers can watch their aggregated account balances and analyse their spending at these providers. They might visit these sites more often than online banking, especially when paying bills and making other transactions becomes available. Bank of America, Wells Fargo, BBVA and others have already recognised that the ag-
the amount spent on the different categories monthly, quarterly or annual budgets can be set up. If a budget is about to be exceeded, the bank can alert the customer in an email or SMS regarding this situation. While it seems very helpful for the customers, it is also an investment for the bank. Knowing what the customers are spending money on is a powerful sales opportunity. Hundred percent matching of financial products can be offered to customers with a pre-calculated configura-
one’s investments in real-time. Most customers are simply unable to watch tickers and charts in front of their computers all day long. They need quick alerts on market changes and their portfolio value and ability to easily react. The problem is that the market information and order screens of current online trading sites are too complex, therefore, putting the information on a mobile device screen is much more difﬁcult than it was with mobile banking.
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Istanbul's Levent financial district
In the midst of the global credit crunch, Turkey is positioning itself to as a market leader in technology investment. Mehlika Ertas tells FST’s Matt Buttell why Turkey is top of its game for IT innovation t the beginning of this month, in a televised address to the nation, Turkish Prime Minister Recep Tayyip Erdogan expressed unfounded optimism regarding the consequences for the Turkish economy during the deepening global ﬁnancial crisis. Erdogan claimed the crisis has reached its climax and that its effects will now begin to decline. While the Turkish government may have been under ﬁre over recent months — particularly from Turkey’s bourgeoisie — there can be
no denying that the nation’s banking and ﬁnance sector has experienced rapid expansion over the last few years. Mehlika Ertas, Assistant General Manager at Garanti Technology, the IT company of Turkey’s GarantiBank, understands such development. “GarantiBank is the third largest bank in Turkey,” she explains, “and within Garanti Technology, I’m responsible for the software development team, which currently covers over 200 people.” She continues: “Our strategy as a software development
department is to develop applications for our customers that leverage their market share to meet their business requirements. We are gearing up the latest technology to align their businesses and increase their efﬁciency.” Take a quick look over the history of Garanti Technology and you see that the company has consistently been the ﬁrst to implement the newest innovations and the latest software across its nation. You could even say the company is something of a pioneer within its market. “Of course, to be a real pioneer not only means being present in the technology area, but also in the business side too,” notes Ertas, “and as Garanti Technology’s top management is very experienced in the banking industry, we are able to lead business people in their processes and in their organisations.” Generally Turkish banking continues to push forward and work in innovative ways, and in many cases, banks across the nation are considerably further ahead with technological investments than their counterparts in Western Europe or the US. “I think the reason behind that is intrinsically linked to our culture,” suggests Ertas. “The Turkish society can be very open to new things and new ideas and it’s often the case that whatever you do, it is widely accepted. Top management at our banks are very open to new technology and when they see new applications they are willing to invest in them.” She adds: “If you don’t have the technology, then whatever you ask for or whatever you are waiting for is impossible to implement. You need that technology and people are investing in technology an awful lot throughout Turkey.” One of the most interesting technological advances that the Turkish banking system has witnessed over recent years is how many now provide services through a plethora of channels. Take ATMs, for instance. While for many end users ATMs are simply cash withdrawal machines, most Turkish ATMs allow you to do almost any banking function through that one machine – for example, your investments, buying/selling mutual funds, or paying your bills. This is a concept that, for now at least, would seem a little alien to many Western European banks. Ertas also explains how, at Garanti, customers who use internet applications can practically access a fully functioning banking branch online – “there’s everything except cash withdrawal,” she jokes. But, again, processes such as these are not uncommon across Turkey and this remains the basic functionality of all Turkish banking: everything is done in real-time, so that at the time you transfer money to another client or another bank is transferred immediately. There’s no delay. The numbers that support Turkey’s technological investment are quite astounding. Today, more than 80 percent of Turkey’s general banking transactions are completed through alternative channels to the traditional method of in-branch banking, and more than 60 percent of those are conducted over the internet. There’s one simple
way to explain this trend, as Ertas notes, “Our customer base is quite young. The majority of our customers are between 30 and 40 years of age, and the other massive group of customers we have are university students, so, obviously, they are more willing to use technologies to gain access to the bank.” She adds that it remains the bank’s role to provide convenience. “We save our customers’ time, and time is very valuable, particularly in this day and age.” In fact, on peak days, GarantiBank has over one million customers logging on to use its internet banking functions, and the bank currently operates 2500 ATMs across Turkey. “People are demanding this technology,” notes Ertas, “and we’re here to provide them with those services.”
“Top management at our banks are very open to new technology and when they see new applications they are willing to invest in them”
The simple fact is, in cities across the globe, people are addicted to technology. Keeping up with that fact in turn poses several problems for banks that are trying to remain innovative. “It’s very hard to develop applications if you do not have standards around you,” notes Ertas. “You need to deﬁne and discover your own way.” At Garanti, customer expectation is often their biggest challenge and Ertas explains that there is a certain degree of pressure to keep up that promise of being ﬁrst to deliver on products, especially within this current environment.
Capital: Ankara Population: 71,892,808 GDP: €620,380 EU Accession: N/A Gross national income (per capita): €1861 Public debt: 64.7 percent of GDP
But despite these challenges, the Turkish banking sector has gotten to place where IT can truly be used as a competitive differentiator, and that’s especially true at GarantiBank. That fact alone is very different from most Western European and US banks because, for them, a differentiator is about products rather than the back-end services. “We really are quite different,” continues Ertas. “In some areas, technology is dominating and leading the business. If you look at our history, it was back in 1998 when technology was initiated as a business-process within GarantiBank. We were fortunate because the bank’s CEO has always supported our technology and promoted us to lead that BPR process, and that is quite different to other banks.”
Change What’s more, this is a time for change in our banking world. Governments across the globe are injecting cash to rescue some of the biggest ﬁnancial institutions and not a day seems to pass us by when there isn’t more news regarding cutbacks, job losses, or bailouts. Subsequently, compliance has become a major issue for banks, more so than ever before. “We now have Basel II and other regulations coming to the fore. There are acronyms all around us in the global banking sector, and that’s the same for us in Turkey as it is for the rest of the world,” notes Ertas. At Garanti, concentration over the last 12 months has been on the adoption of Basel II compliance applications and the focus on regulations coming through on the risk side of the business as well as the assessment and proﬁle of customers. “Compliance is everywhere,” adds Ertas. “In IT, in business, everywhere.” Aside from compliance, outsourcing issues have also seen a massive rise in popularity in recent years. For Garanti Technology, which works as a part of GarantiBank, Ertas doesn’t see that there is much scope for the company to be used in an outsourcing capacity – but then, she doesn’t take umbrage to this fact. Actually, she views it as offering the bank a competitive edge. “GarantiBank is our primary concern and our major customer,” she explains. “We don’t really favour outsourcing, and with regard to our core business we certainly don’t promote it.” So the ﬁrm isn’t going to be partnering with, say, HSBC anytime soon then? “No, no, no, not at all,” Ertas laughs. “We have our priority customers along with GarantiBank for which we provide several services in different areas, but we want to keep our experience and knowledge inside the group. We believe that’s the competitive edge, and we wouldn’t want to share that with the rest of Turkey.” So what are the advantages of developing technologies in-house? “Our applications’ qualities are like a boutique, and by developing systems in-house we are able to completely fulﬁll our customer requirements,” says Ertas. “When you develop in-house applications you can easily make changes at later stages in the development. For
example, if the technology starts to move on to something new, we can easily move the application because it is our own product and we understand it, but if that was done through a third party then we have to wait for the third party to launch that new technology, and then you are falling behind.” The CEO of Garanti Technology is also an EVP within GarantiBank so the situation works a little differently. The duality of this role means that a huge advantage is generated. “We use that advantage a lot,” comments Ertas, “we have a very close relationship with the CEO of the bank. He’s always open to us, and we are always in touch with him to share our projects and I think this sets us in good stead because its certainly not the sort of relationship that we’re used to hearing about within other institutions.” For GarantiBank, and for Ertas at Garanti Technology, the future looks pretty simple. She believes that the Turkish banking system will continue to move toward a virtual environment, and will continue to supply convenience-led applications to meet consumer demand. “The development of a banking application is quite standard,” says Ertas. “You develop it and implement it and that’s it. But in the future, I think new technologies will require more analytics and, with more analytics, we will be able to generate differentiation among our customers.” Meanwhile, reactions to the Prime Minister’s comments have been strong. Many Turks – including many of his previous supporters – believe Erdogan is wrong in his claim that the worst of the crisis has passed. The standard response is that it many believe it would be difﬁcult for the recovery to start today or tomorrow. Doubts about whether the government has underestimated the potential impact of the crisis have gained momentum as the Turkish government recently postponed a standby agreement with the International Monetary Fund that would increase conﬁdence and supplement foreign exchange reserves. Furthermore, the Turkish government also delayed the announcement of an emergency programme to stimulate the economy and control the damage from a domestic ﬁnancial crisis. It is still unclear whether Erdogan will be proved right or wrong, or whether the Turkish banking system will continue to prove itself as a forward thinking, innovative space. In the long-term though, Ertas’ way of thinking at least suggests that Turkey can look forward to a bright future. In fact, when we do ﬁnally reach the other side of this economic downturn, Turkey may indeed be the key place of innovation for our industry. “At GarantiBank and Garanti Technology we are used to lots of visitors coming to us from the States or Europe,” says Ertas. “They look at our applications and they investigate our applications and they really are shocked with the functionality and the richness in that functionality. Sometimes it’s hard for them to believe in the functionality, too. It’s just totally different. It’s very hard to explain, but that’s the case in Turkey.”
of Turkish banking transactions are completed online
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The Finnish capital, Helsinki
Online billing is on the rise, and banks in the Nordic countries are leading the way. Bo Harald and Antti Larvala tell FST’s Marie Shields why Finland is the shining star of e-invoicing o-one like paying bills. When an invoice lands on the doormat, it is not only that fact that you will inevitably have to part with money that causes annoyance, but also that the process of actually making a payment can be so cumbersome. While there is little anyone can do to mitigate the ﬁnancial impact of invoices, the technology already exists to make the transaction far more simple. The European Commission has put e-invoicing on the top of its productivity agenda. Both the European Commission and the Euro-
pean Central Bank have been driving e-invoicing as a part of the Single European Payment Area. There are ﬁ ve countries in Europe where the public sector has declared a ban on paper invoicing, which means that all incoming invoices to the public sector in Finland, Sweden, Denmark, Italy and Spain now have to be in electronic form. 30 years in banking have given Bo Harald a unique view of the development of e-invoicing in Finland. Currently Head of Executive Advisors for TietoEnator, a leading North European IT integrator, Harald
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is convinced of e-invoicing's importance to the European ﬁnancial they are often seen as resistant to new technology. However, in the industry. “Think about the cost reduction for enterprises,” he says. case of e-invoicing, this is not the case. “Various estimates put it in the band of something like €200 billion “More and more elderly people like to use e-invoicing, particularly to €300 billion a year together. And then there’s the climate change if they are travelling or have a second home in somewhere like Spain, issue. The CO2 effect of paper invoicing in Europe today is 2,800,000 for example,” Larvala says. “It means they don’t have to worry about tons a year, which is obviously very expensive. whether or not they have received their bills or if they remembered to “The third aspect is that when people learn to send electronic inhave them redirected.” voices they also learn to do other things electronically; it’s learning by doing. The electronic invoicing experience is Moving ahead a step to the next experience, and the next In Europe, there are two different seglayer is where you can save hundreds of ments addressed by the same electronic billions doing e-orders and e-conﬁrmations invoicing tool: consumer invoicing and busiand real time accounting. ness-to-business invoicing. In consumer “The ﬁfth, step is demographic. The invoicing, Harald says that Norway, Sweden number of people of working age in Europe and Finland are leading the game, and Eswill drop by 35 million by 2020. We simply tonia is also pretty advanced. In business won’t have the staff to do paperwork in the invoicing, according to Harald, Finland is future, which is why we have to do away with clearly number one, then Sweden, Norway, it. We don’t have an unemployment problem Denmark and Spain. in Europe, we have a scarcity of workforce “There’s also Belgium and Italy,” he problem, which is much worse.” says. “Italy has a very good base, as its Antti Larvala, Director of Cash Managebanks have agreed to move into this busiment Sales at Aktia Bank is also in favour of ness jointly. It’s very much a question of the move to e-invoicing. Aktia has recently banks understanding that they need to take introduced e-invoicing for Finland’s biggest responsibility, and of course also seeing the credit card company, which has 80 percent of business opportunity.” the market share in Finland for credit cards. Larvala agrees that the Nordic countries He explains that as well as saving paper, e-invoicing allows are generally forward-thinking on e-invoicing. All the banks are using users to avoid manually inputting a sometimes lengthy series of the same core system in Norway so it’s easy to introduce new services reference codes. for all the banks at the same time. Denmark is also a good example – “In Finland when we pay bills, we use quite a lot of reference they have a big trend to change the direct debits to invoices, but it’s codes, and with e-invoicing, you don’t have to manually put in every more related to government. In Finland, we do have a pretty similar payment. They go in automatically. system, although of course when it comes to business there are other “If you’re a company that sends 21 million invoices every year, players in all of these markets, not just the banks. that’s 56,000 invoices every day, and if the customer is using reference codes 80 percent or 90 percent of the time, that’s a huge savings, and you Capital: Helsinki don’t have to manually put everything in your ledger system. When a customer gets an e-invoice, the only Population: 5,325,644 thing they have to do is accept the invoice and put their conﬁrmation code on their online banking system.” GDP: €191,310 Larvala points out that this still involves making a payment, EU Accession: 1 Jan 1995 which most people don’t like doing, and there can be some scepticism around whether there will be a Gross national income (per capita): €18,288 charge for the service in the future. When the words ‘skepticism’ and ‘online’ come together, many people Public debt: 37.7% of GDP would link this to older people, as
"Customers like it because when you get an e-invoice into your e-bank you can just approve it with one click or with your mobile phone"
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“Here in Nordic countries when it comes to retail customers, then it’s our business, but when it comes to B2B business then we are competing with all the operators. But more and more operators and banks are coming to terms understanding that there will be a bigger value chain if we work together. What about the reaction from consumers? Has there been any resistance to the introduction of e-invoicing among banks’ customers? Harald says no. “I don’t think there is any resistance at all. Customers like it because when you get an e-invoice into your e-bank you can just approve it with one click or with your mobile phone. You don’t have to key in any numbers or dates or references. It’s a big added convenience and usually you are not charged extra for it. Consumers are very, very eager to move into this as we have seen from both Norway and Sweden and now increasingly in Finland. “The other aspect is that in those countries already sending einvoices, senders are being transparent in their pricing, showing that they charge extra for paper invoices. Some of them charge several euros extra per paper invoice, and that’s a stick that makes people realise that they have been paying for this all along, but they haven’t seen it. When it becomes visible, they react in their own interest and move to electronic invoicing.” As with the introduction of any new system, there is bound to be an initial start-up cost, but both Harald and Larvala say that these costs are relatively small. “Large companies do have to implement new systems if they want to use e-invoicing,” says Larvala. “But for small to medium-sized companies a lot of the banks here in Finland have done a very good job of introducing an online version of e-building systems so they don’t have to invest any new software.” Harald agrees. “The investments needed by service providers are not that big, and particularly in the banking sector and also for service providers, especially large enterprises that already have invoicing systems. It’s just a question of tweaking the system a little bit so that it connects to the network and you can send your invoice ﬁle instead of printing it to send it to a service provider.” Larvala does point out, however, that some small and medium sized companies remain skeptical and are waiting to see what will happen with e-invoicing and whether customers are asking for it, which then becomes, in his words, a chicken and egg situation. This begs the question of whether there will be a big customer take-up of e-invoicing across the Nordic countries'. “It can sometimes be a case of carrot and stick,” says Larvala. “One of the mobile operators here in Finland introduced e-invoicing and at the same time told their customers that if they wanted a paper invoice, they would now have to pay a fee. Another way of doing that would be to give people a discount for choosing e-invoicing. What we do is have a draw for a free mobile phone or free online banking for two years, to get customers interested.”
Harmonisation One initiative currently exerting a big inﬂuence on the banking in Europe is the Single Euro Payments Area. Larvala says there has been some resistance among some Finnish banks SEPA’s plan for payment harmonisation.
PAPER VERSUS DIGITAL: IT ALL ADDS UP Paper invoicing costs €200-€300 billion per year and generates 2.8 million tons of CO2 30 billion paper invoices are sent each year, using 400,000 tons of paper and 2700 tons of ink Using e-invoicing in the business to business sector could save €238 billion annually E-invoices currently account for just 2 percent of all those issued in Europe
“The main responsibility for direct debits here in Finland is with the banks. Companies give us the information and we are in charge, whereas in other areas the companies are in charge and the banks are just pulling the transactions. “The main idea of SEPA is really good but getting all the parties together around Europe, and understanding what the payment is, will be hard. It’s been watered down for many countries. I’ll be talking with my colleagues in different countries and everybody says SEPA is a good thing, but the technical solution is not a good thing at all. Everybody has a different argument as to why it’s not good. “There is resistance here in Finland to harmonising payments under SEPA. What the Nordic countries are trying to do is to introduce e-invoicing instead of direct debits, although there will be some crossover. There will be more and more adoption of the good parts of both, but it will take years.” Because e-invoicing is an emerging technology, there are currently several options available, but these are likely to consolidate as the technology matures. “There are going to be a lot of options out there for a while, and a lot of talk going on without much action. There has to be a lot of chasing the ideas, getting the ideas together, consolidating those ideas, and having a good solution that will be beneﬁcial not only for the banks but for the customers and all the other players. “I hope it will be a bottom up solution, but I believe it will actually be more top down. When it comes to top down, this will always take a lot more time. I hope all the players will understand that we are not competing when we are creating technical solutions, we are only competing when we are offering services for the customers. E-invoicing could well be the start of the end for paper invoicing in the banking system. As Harald puts it, a lot of things that could follow from this. “Banks can add real time accounting and risk mitigation services, ﬁnancing companies can buy receivables automatically and improve ﬁnancing costs as well as the risk management of the currency positions. All together it means that the amount of invoice receivables will go down because there will be possibilities for invoice centres to do it much more frequently. It is cost efﬁcient for the receiver, and many beneﬁts for the sender.”
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AWAY ON BUSINESS Rising sun
One of the key global centres of financial services, Tokyo is also a dazzling, neon-soaked city of the future. FST checks out what’s on offer once work is over
About Along with New York City and London, Tokyo is one of three ‘command centres’ for the world economy. Tokyo has the largest metropolitan economy in the world and houses several headquarters of some of the world’s largest investment banks and insurance companies. It is also the main hub for Japan’s transportation, publishing and broadcasting industries. 50 companies listed on the Global 500 are based in Tokyo, almost twice that of the second-placed city.
Tokyo Disneyland was the first Disney Park to be built outside of the US and celebrated its 25th Anniversary in April of this year. Special celebratory events are expected to continue into 2009. As one of the most overcrowded cities in the world, men known as ‘pushers’ are recruited to pack people onto the city’s trains. In the 1920s the University of Tokyo became one of the first Imperial universities and houses institutes for earthquake research, cosmic ray research, nuclear study, solid-state physics, applied microbiology, ocean research and Asian culture.
Getting around A network of trains and subways dominate the public transport system in Tokyo, with buses, monorails and trams playing a secondary feeder role to the most extensive urban rail network in the world. The Yamanote Loop, which circles the centre of downtown Tokyo, carries an estimated 3.5 million passengers between its 29 stations every day. By comparison, the New York City Subway only carries 5.08 million passengers per day across its entire 26 lines.
From the airport Narita International Airport handles the majority of international passenger trafﬁc to and from Japan, and is also a major connecting point for air trafﬁc between Asia and the Americas. Located just 60 kilometres (37.2 miles) from downtown Tokyo access to the city centre is recommended via rail service and while taxis and buses are available, the trains provide a cheaper and quicker option. The airport currently has two rail connections, but a third line is scheduled for 2010.
Where to make the € The Tokyo Stock Exchange is the second largest stock exchange in the world, second only to New York. At present, it lists 2271 domestic companies and 31 foreign companies, with a total market capitalisation of over €3.7 trillion. Situated between Tokyo Station and the Tokyo Imperial Palace is Japan’s business district, Marunouchi. Along with neighbouring Otemachi, this is home to many of Japan’s largest companies, particularly those from the ﬁnancial sector. Other business areas include West Shinjuku, which houses the Metropolitan Government ofﬁces. With recent deregulation easing market entry for foreign companies, Makuhari Messe, halfway between the city centre and Narita Airport, and the new Tokyo Big Sight complex in Tokyo Bay have also made the city Japan’s major trade fair venue.
Where to spend the € Shibuya – a major shopping area in Tokyo – is a deﬁnite place to visit for anyone interested in Japanese fashion. Omotesando – a broad, tree-lined avenue leading downhill from the southern end of the JR Harajuku station – shows the other side to Harajuku fashion and is not only full of cafés and international brand clothing boutiques, but it also includes the up market Omotesando Hills. This stylish centre is full of the who’s who of world fashion brands including Yves Saint Laurent, Dolce & Gabbana, Porsche Design, Dunhill, Jimmy Choo and Adore. The centre covers six ﬂoors and has a very fashionable interior design. While Paris and Milan may be the centre of world fashion design, Omotesando is the centre of world fashion consumption.
Eat Casita Carving its own niche by creating a tropical atmosphere and a year-round outdoor deck. Set dinners: €75 Higashiyama Gantan An industrial-minimalist bar, with private dining rooms. Popular with fashionistas. Dinner for two: €63
Sleep Four Seasons Hotel Tokyo Located in the Marunouchi central business district, Four Seasons offers a striking, contemporary setting, luxurious rooms, privacy and exclusivity. 57 rooms available Double rooms from €522 Keio Plaza Tokyo Five blocks from Shinjuku Station and across the street from the Tokyo Metropolitan Government Building, this hotel is located in the heart of the city’s business and political centre. Over 1440 rooms Japanese Tatami Suite from €710
THE KNOWLEDGE First Class Airport Lounges
Still travelling on business despite the credit crunch? stop off at one of these luxurious airport lounges
Lufthansa First Class Terminal, Frankfurt
Virgin Clubhouse, Virgin Atlantic, San Francisco
Lufthansa First Class Terminal, Frankfurt
The Wing and The Pier Cathay Pacific, Hong Kong
Virgin’s Clubhouse lounge at San Francisco Airport boasts spectacular views of the city’s iconic landmarks. To best reﬂect the bright harbour lights and distinctive buildings of the city, it features moving glass panels which are coloured to create different atmospheres within the same space. Five monitors displaying digital art and a magniﬁcent view across the Bay further embellish the setting. For the busy executive, there are laptop points throughout and 24-hour business facilities. The centrepiece of the Clubhouse, the bar made of glass, has won a string of prestigious design awards.
Lufthansa has taken the lounge concept one stop further at Frankfurt International Airport by creating an entire all First Class Terminal. Features include private spaces with daybeds and luxurious bathrooms. Private ofﬁce units with a telephone and laptop are also provided for those who are unable to clock off. The restaurant hosts a seasonal menu and ﬁrst class wines, and an extensive buffet is also available.
Located within Hong Kong International Airport, The Wing and The Pier premier lounges both offer exceptional ﬁrst class facilities. The lounges pay attention to individual details, and feature six DayBreak rooms and Personal Living Spaces. Relax in an armchair with a private television, or take full advantage of the top of the range broadband-connected personal computers. There are multiple places to dine within the Lounge: The Haven offers a stylish menu and interior or choose a meal at the Noodle Bar. For a concierge service, the Marco Polo Club is available.
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Premium Lounge, Abu Dhabi
The Wing and The Pier, Hong Kong
Club Lounge, Heathrow
Golden Lounge, Kuala Lumpur
Golden Lounge, Malaysia Airlines, Kuala Lumpur
Club Lounge, British Airways, Heathrow
Premium Lounge, Etihad Airways, Abu Dhabi
Designed with families in mind, the Golden Lounge at Kuala Lumpur International Airport features a manmade rainforest, a river and a Creative Kids’ Corner. There is even a slumber room for tired children. For adults, there are also plenty of opportunities to unwind, including massage chairs and an extensive drinks and food menu. Busy executives can take advantage of wireless LAN, meeting rooms and Malaysian stock market update displays on screens around the lounge.
BA’s newly opened Terminal 5 hosts six lounges within its new Galleries area. The BA Club Lounge, which opened in September 2008, features luxurious furniture classically tailored in rich velvets and herringbone fabrics. A restaurant menu is provided, with waiter service allowing passengers to dine before boarding their ﬁghts. Also located within Terminal 5 is the Elemis Travel Spa, which provides spa therapies for both men and women to refresh and relax passengers.
Elegant, warm and welcoming, Etihad’s lounge offers the comfort, space and facilities to make your journey through the airport a pleasant experience. The lounge is well equipped with laptop connections, high-speed internet access and fax and telephone facilities. There’s also an excellent range of audio and video programmes to keep you entertained, as well as a ﬁne selection of refreshments and hot and cold buffet dishes to choose from. Situated on the ﬁrst ﬂoor of the airport, it offers a stunning view of the runway.
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Backchat FST takes a look at what’s being said by those in the know
“The situation in our securities unit is still dire. Despite challenging market conditions, there is no acceptable excuse for the operating loss” Commerzbank Chief Executive Klaus-Peter Mueller after the investment bank unit lost €171 million in Q3.
“We’re in danger of getting to a situation where inflation expectations turn deflationary, and monetary policy becomes less effective” Sarah Hewin, Senior Economist at Standard Chartered Bank in London, on central banks in Europe slashing their benchmark interest rates by record amounts.
“I did express, at some point, my concern about the use of leverage and was politely told to mind my own business” Former fund manager James O’Shaughnessy at Bear Stearns, of his warning to Stearns’ bosses in 2007.
“We’re starting to see a couple of early signs that we’ve reached the bottom in housing, or close to it” Wells Fargo & Co. President and Chief Executive John Stumpf advising that although the economy is likely to get worse before it gets better, the housing industry is showing some signs of improvement.
“China’s problem is not losing competitiveness but that demand has disappeared” Dong Tao, Chief Economist Greater China for Credit Suisse admits the emergence of serious economic crisis in China.
“If a burglar has ransacked your house, you don’t normally invite him back to fix the security locks. The concept that Gordon Brown, who has presided over this train wreck, is the person to put right what he got wrong strikes me as being ironic to say the least” Former British Prime Minister Sir John Major rejects the idea that Britain’s new leader has all the answers.
“My colleagues and I do not lightly recommend the transactions that we are here to discuss today. I should say how sorry I am about what has happened and in particular the impact on shareholders” HBOS Chairman Lord Dennis Stevenson apologises for the situation that led to the bank’s takeover by LloydsTSB.
IN REVIEW Hot off the press
FST takes a look at this quarter’s best business books
Chasing The Rabbit How Market Leaders Outdistance The Competition and How Great Companies Catch Up and Win, by Steven J. Spear In this insightful book, Spear examines the internal operations of dominant organisations, including Toyota, Alcoa and top-tier teaching hospitals. These are organisations that are operating in vastly differing industries, but with one thing in common: the skillful management of complex internal systems that generate constant self-improvement at rates faster, durations longer and breadths wider than anyone else. FST says: Chasing The Rabbit contains ideas that form the basis for continuous learning and improvement in every aspect of our lives. It is an important book that will challenge and inspire executives in all industries and help leaders generate better results using less capital leaving competition in the dust.
Schneier On Security By Bruce Schneier
Today, people are doing more in the name of personal security than at any other time in history. But, is it really making a difference? Are people really safer? In this challenging book, Schneier unveils the reality behind current security practice in a collection of his most recent and important writings. The collection features some of the most informative security issues and looks at the price people pay when security fails. FST says: Schneier on Security not only explores the digital aspects of this important issue, but the behavioural side too. Topics include everything from identity theft, to the threat of unchecked presidential power, to why some risks are overestimated and others underestimated. This is a book for all IT and corporate professionals and those individuals with security concerns.
Warren Buffett And The Interpretation Of Financial Statements The Search for the Company with a Durable Competitive Advantage, by Mary Buffett and David Clark This simple guide clearly outlines Warren Buffett’s strategies in a way that will appeal to newcomers and seasoned professionals alike. Inspired by the seminal work of Buffett’s mentor, Benjamin Graham, this book presents Buffett’s interpretation of ﬁnancial statements with anecdotes and quotes from the man himself. FST says: Written both for the laymen and the serious investor, chapters begin with clear deﬁnitions and explanations of what the master investor is looking for when he sits down to explore a company’s ﬁnancial statement. This book is the perfect companion to other titles in the already acclaimed Buffett series and is likely to become a classic in the world of investment books.
Financial Services Technology Summit 16Th-18Th March 2009 Le Méridien, Al Aqah Beach resort, Fujairah, UAE The Financial Services Technology Summit is a three-day critical information gathering of C-level technology executives from the financial services industry.
“This event continues to be one of the most worthy of the time and expense expenditure for the development of networks and an overview of what is on the minds of other financial services companies.
Robert Kee, Bank of America
“The organisation was excellent with easy transition from private meeting to workshops. Quality of participants was outstanding. Thomas Butler, Anglo Romanian Bank
A Controlled, Professional & Focused Environment FST ’09 is an opportunity to debate, benchmark and learn from other leaders. FST ’09 is a C-level event reserved for 75 participants that includes expert workshops, facilitated roundtables, peer-to-peer networking, and coordinated technology meetings.
A Proven Format This inspired and professional format has been used by over 100 CIOs and CTOs as a rewarding platform for discussion and learning.
Find Out More Contact FST at 292 066 3626 www.fstsummitmena.com
OPINION The onus on bonus
As one of the toughest calendar years our economy has faced comes to an end, many executives are learning that keeping their job is the only bonus they’re going to get. FST’s Matt Buttell investigates further
ast year, end of year payouts on Wall Street were up 14 percent compared to what they were in 2006. Goldman Sachs, Morgan Stanley, Lehman Brothers and Bear Stearns – then the four largest investment ﬁrms on Wall Street – amounted nearly US$30 billion in bonuses. To put these kinds of earnings into perspective, the entire budget for the city of New York, which employs a quarter of a million people, was only US$59 billion for ﬁscal year 2008. In other words, last Christmas, Wall Street bonuses alone far surpassed the combined funds available for the city’s ﬁre and sanitation departments, education, health, hospital, welfare, homeless and children’s and social services for this entire calendar year.
What a difference 12 months makes. With governments across the globe now gearing up to inject billions in an effort to bankroll our ﬁnancial institutions, there is a renewed focus on how these organisations are spending their money – especially in relation to executive pay. It would surely take a lot of gall to be openly accepting massive injections of public funds with one hand and be dolling out billions in executive bonuses with the other. Wouldn’t it? Apparently so,
as Goldman Sachs – one of only two US investments banks left standing through the crunch – has announced that its seven top executives have refused year-end bonuses. According to the ﬁrm, the seven executives made the decision themselves because they felt it was the right thing to do. Those involved, who, along with CEO Lloyd Blankfein, include Presidents and Co-Chief Operating Ofﬁcers Jon Winkelried and Gary Cohn, Vice Chairmen John Weinberg, J. Michael Evans and Michael Sherwood and Chief Financial Ofﬁcer David Viniar, have all decided to receive no cash bonuses, no stock and no options for 2008 – just their salaries. Meanwhile, over on this side of the Atlantic, Swiss banking group UBS was the ﬁrst to join Goldman in forgoing year-end bonuses for top executives. The bank’s chairman and chief executive, as well as other members of the board, are now set to only receive their ﬁ xed salaries this year. After UBS shares slumped to a new all-time low last month, and with the Swiss government stepping in to assist the ailing bank, it is not overly surprising that such a decision has been made. What is surprising though is UBS’s announcement that next year they will introduce a new compensation model that is set to bring about a huge cultural shift within the company.
BYE, BYE BONUS A closer look at what our industry’s biggest players are doing about year-end bonuses
Chairman Sir Win Bischoff has not ruled out the chance that leaders will go without bonuses. “Watch this space,” he has said on the subject
CEO Martin Blessing said his pay would be capped at €500,000 and he will receive no bonus
Top executives are set to get bonuses – if only in shares Barclays CEO, investment-banking chief, consumer banking head and Finance Director will forgo their 2008 bonuses Executives will waive their bonuses
Yet to announce any bonus dodging for executives, but has come off more lightly than other banks during the meltdown
In this new model, while top management will still be eligible to receive both variable cash compensation and variable equity compensation, a large portion of this will be held in escrow and will only be paid out if the results of UBS warrant it. Only those who deliver good results over several years, without assuming unnecessary high risk will be rewarded. While other major European players including Royal Bank of Scotland, Lloyds TSB, HBOS and Barclays have all dragged their feet in canceling bonuses, UBS bank is the ﬁrst European lender to introduce such a radical overhaul. The change does come amid rather scathing criticism, however, with reports now suggesting that the Swiss National Bank is set to manage a fund of as much as US$60 billion in illiquid UBS assets. What’s more, UBS has been forced to discuss their new payment structure with the Swiss Federal Banking Commission (SFBC) after the government demanded cooperation in return for the aid it had offered. From my seat, it seems that the greed of our ﬁnancial institutions over the last few years is ﬁnally catching up with them. Nine of the largest ﬁnancial institutions on Wall Street – Bank of America, Citigroup, Bank of New York Mellon, JP Morgan, Merrill Lynch, Goldman, Moran Stanley, State Street and Wells Fargo ¬– were also the ﬁrst nine to receive a combined US$125 billion in capital from the US Treasury Department. And there’s a similar tale of relinquished greed happening over at UBS, too. CEO Peter Wufﬂi, investment-banking head Huw Jenkins, and ﬁnancial chief Clive Standish may have received a combined SwF33 million in compensation last year, but Wufﬂi has since pledged to forfeit SwF12 million of this. While it is still unclear
Have declined to comment, saying payouts haven’t been set
how much of that is representative of his 2007 pay or whether this ﬁgure includes any amount due in 2008 it certainly seems to set a new tone for our banking systems. What’s more, UBS is said to be looking into legal grounds for clawing back bonuses made over the past few years and the pressure is subsequently mounting on former executives such as Marcel Ospel, the bank’s longstanding chairman, who was recently forced to step down. UBS claims that it is in talks with other undisclosed former executives and expects to get back further past payments. It’s beginning to feel a little like we’re in a Hollywood movie. In Oliver Stone’s 1987 smash Wall Street, Michael Douglas’s character Gordon Gekko tells us ‘Greed is Good’. While on some level this still may be true, it seems greed also has a tendency to come full circle on us – with grossly negative implications. Perhaps this point can be best illustrated by looking at a speech recently made by Australian Prime Minister Kevin Rudd. The speech, looking into the state of the global ﬁnancial crisis, was entitled ‘The Children of Gordon Gekko’, and in it, Rudd stated, “It is perhaps time now to admit that we did not learn the full lessons of the greed-is-good ideology. Today we continue to clean up the mess of the 21st-century children of Gordon Gekko.” Rudd makes an illustrative point – albeit a melodramatic one. Just mentioning the words ‘banker’ and ‘bonus’ in the same sentence seems to trigger a political furor these days. But he is right, no one can deny that we face a global ﬁnancial mess. And this year at least, it looks like executive bonuses are going to be the ﬁrst spillage of that mess that is likely to be cleaned up. And many, I imagine, will be happy to help scrub the ﬂoors.
FACE OFF The time is now
Jean-Claude Trichet, President of the European Central Bank
Angela Merkel, German Chancellor
n December 4th this year, Trichet delivered the biggest interest rate cut in the ECB’s 10-year history, noting that the economy in the euro region is set to shrink in 2009. “Global and euro-area demand are likely to be dampened for a protracted period of time,” Trichet went on to say. The ECB lowered its benchmark by three quarters of a percentage point to 2.5, having previously only restricted itself to just two 50-point cuts since October. Trichet had previously stressed how the bank had an important role to play as an “anchor of stability”. He added: “Since September, there has been an intensiﬁcation and broadening of the ﬁnancial market turmoil. Tensions have increasingly spilled over from the ﬁnancial sector to the real economy, and the world economy as a whole is feeling their adverse effects.” Looking further ahead, on the basis of current analysis and assessment, Trichet commented that the global economic weakness and sluggish domestic demand will persist in the next few quarters. It is crucial that all parties concerned make their contribution to lay sound foundations for a sustainable recovery,” he concluded, adding, “for this to materialise as early as possible, it is of the utmost importance to maintain discipline and a medium-term perspective in macroeconomic policy-making. This is the best way to support conﬁdence.”
or years, Merkel has been a popular leader, active on the world scene. But as the crisis deepens, sceptics believe that cracks are developing in her usually well-polished image. The biggest issue has been the perception that Germany is stumbling over its response to the collapse of global financial markets. “A general cut in VAT is the response chosen by some countries but is not the right answer for Germany,” said Merkel at a conference earlier this month. “Germany will keep all its options open to combat the impact of the global crisis effectively. What we won’t do is undertake a structural overhaul of the tax system to act as an immediate, shortterm stimulus.” She added: “Instead we will be holding more discussions on how to provide targeted aid to the economy.” She noted that she wanted to emphasise “all options” were open and that her party, the Christian Democratic Union (CDU), “must have the courage to swim against the tide”. Critics argue that Merkel’s desire to reserve tax cuts as promises for policy in the upcoming 2009 elections are both irresponsible and a grave mistake. They worry that not enough is being done to pull Germany out of its financial troubles. Merkel’s economic recovery plan has already fallen far short, and she hasn’t given a major speech on the economy since the crisis began.
European leaders convened in Washington last month to discuss action plans that will tackle the global financial crisis. FST takes a closer look at opposing views about what it will take to beat the turmoil
CATALOGUE PAGE FST EU:dec08 15/12/2008 14:55 Page 143
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FINAL WORD:dec08 15/12/2008 17:36 Page 144
FINAL WORD Leading by example
Perhaps we shouldn’t be so quick to judge employees who break the rules By Marianne Sorensen
f you knew you were about to lose your job, what would you do? It seems that many would make the pre-emptive move of grabbing all the company data they can get their hands on so that it won’t just be the severance package they walk out with. A new survey called The Global Recession and its Effect on Work Ethics by IT Security firm CyberArk suggests that a surprisingly large number of employees are prepared to break the rules in times of crisis. The figures are striking, more than half of the respondents, drawn from workers in London, Amsterdam and New York, admitted that they had already downloaded sensitive data that they planned to use as a bargaining tool in their search for a new job. Slightly surprisingly given their reputation for being laid back, the Dutch were the worst offenders. A staggering 71 percent of respondents in the Netherlands admitted that they would do this if their job was hanging in the balance.
But this willingness to bend the rules also has some more positive impacts, at least from a business perspective. About one third of those polled said they would accept 80-hour work weeks, if that was the only way to keep their jobs. Around a quarter would accept pay cuts rather than face redundancy in such a harsh climate. All this serves to demonstrate exactly how uneasy workers feel about their current prospects. Predictably though, it is the stats about staff stealing data that will draw the strongest reactions. But perhaps we shouldn’t be so shocked by these revelations. Desperate times call for desperate measures and there is very little a human being won’t do if it feels threatened. There’s also the uncomfortable feeling that business has to bear some responsibility for this. The reason so many workers are currently living in fear of losing their jobs is because of a crisis brought on in large part by irresponsible business practices. While few are suggesting that anything outright ille-
gal went on, it’s generally accepted that many of our current problems spring from certain companies and individuals operating at the very limits of acceptability. Huge levels of toxic debt were racked up, while essentially worthless financial products were traded with wild abandon. Since everything started falling apart, the standard statement has been that no one could have seen this coming. As explanations go, it’s pretty weak. The average worker in the financial industry is no idiot, so the idea that the credit crisis is one massive surprise is pretty hard to swallow. If that’s the case, then you have to accept that these business strategies were pursued even though the risks involved were understood by those who were meant to be in charge. Now put yourself in the position of an employee who is facing the sack. Chances are it’s not your fault that your company is cutting back. The decisions that led to this predicament were likely taken way over your head. As the prospect of walking out of the front door with your possessions in a cardboard box becomes ever more likely, why wouldn’t you seek to give yourself every possible advantage? After all, many of the top people in the industry have managed to hold onto their jobs during this crisis. Even those that have walked the plank have often done so with a chunky payoff in their pockets. It hardly seems fair. Culture is something that has recently taken on increasing importance in the business world. A company’s culture is often held up as a key differentiator in a competitive market. But culture comes from the top. If leaders bend the rules for their own short-term gain, we shouldn’t be too shocked when employees do so as well. n
Published on May 13, 2010
Published on May 13, 2010
Financial Services Technology Europe magazine. Issue 9. January 2009. Covering the new Credit Suisse CIO’s first six months on the job and a...