Let me start this blog by confessing that I have never worked in the wealth management function of any bank. I remember that earlier high net worth clients (HNC) used to get a dedicated "relationship manager" (RM) to ensure quick and efficient service. Of late, in the last few years, the RM has got substituted with more appealing term - Wealth Manager (WM).
Banks have gone about slicing their customers based on relationship value into 2-3 levels of HNC. As the relationship value increases, a higher level of WM is assigned to the client. The attempt of all banks seems to be to retain and enhance the relationship value of the clients by getting a higher "share of wallet".
Banks should not be inward looking when dealing with HNC. For example, the very definition of HNC should not be based on existing relationship value but on potential value. It does not matter that the customer hsa a small balance in the savings account if you know that the customer is a high potential / high profile client. So, some amount of local knowledge and some amount of research would be required while defining clients.
When dealing with HNC, many banks make a classic mistake of looking at things from their own perspective rather than the client's. What does the client seek from the bank? Given below are some of the key expectations of HNC:
1. Recognition without introduction
2. Exclusive service in terms of speed & treatment
3. Security & confidentiality of personal information
4. Information on opportunities to increase wealth based on risk appetite
5. Solution for all banking requirements - domestic & international
6. Advisory services
Without identifying the needs of the HNC, wealth management cannot make much progress. Many banks make a mistake of not securing the customer's confidential information. Also, a lack of coordination between marketing, sales and service departments can prove disastrous.
A classic mistakes some banks do is try to target all segments of customers and increase its numbers of customers. While this may look exciting in the short run, it results in confusing the customers about what the brand stands for. A bank needs to create exclusive zones / branches / channels for its HNC. If it tries to mix up the HNC with ordinary customers, the HNC might feel delineated and upset.
The other interesting fact is that most HNC do not come themselves to the branch but send a representative who could be a domestic servant, a driver etc. The banks should have an ability to 'spot' such proxies and serve them well. An error or oversight here could have indirect repercussions.
Many banks are happy to have large savings balances from the HNC as it helps reduce their cost of funds. However, if the bank does not attempt to educate the customer or give options to improve his earnings, it can boomerang in the long run. Similarly, banks should always feed information to the HNC on opportunities to increase wealth. Exclusive offers, special schemes, off market deals etc. which are not ordinarily available to regular customers should be offered. The customer should be made to feel that the bank is working for him and is interested in increasing his wealth.
Banks with strong research capabilities stand a better chance of impressing its HNC with their timely information, insightful analysis etc. The bank should be in a position to Suo Motu offer specialist advice to the HNC on every significant event that occurs which can impact the HNC's portfolio.
Wealth management is not every bank's cup of tea. Unless the bank is prepared to work smartly towards it and does everything necessary to stay clued on with the customers needs and the latest developments in the market place, it may have a wealth management function only on paper.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
Saturday 13 November 2010
Wednesday 10 November 2010
Call center basics
Most banks have realised the importance of having a call center to address customer requirements. Banks do realise that servicing customers at branch can be an expensive affair for the bank and inconvenient for the customer. Many have either set up or are planning to set up a call center.
There are several basics to be kept in mind while setting up a call center and I try to capture a few of the important ones below.
1. Should ideally be accessible 24 x 7 - If not, should be available during normal working hours.
2. Should ideally be centralised but not necessary. Centralisation helps in managing costs and standardising output.
3. If centralised, should have at least 2/3 locations to manage disruptions
4. Should have adequate staff to cater to incoming calls. Optimising is required.
5. Staff well trained on
- Different products & technologies used
- Customer handling skills
- good listening / comprehension skills
6. Multi lingual staff capabilities
7. Top notch technology which can give
- On line status of accounts
- Status of deliveries
- Current offerings
- Single view of customer's various accounts
- ability to divert customer to correct desk depending on status, need etc.
- recognise the customer based on number
- authentication of customer
- speed in capturing requirements
- trail information of all past calls to / from customer
- ability to assign and track tasks till completion
- Recording calls for audit / training purposes
Banks have to take a hard look at the services that they would like to continue at the branch and those that they wish to migrate to the call center. While some essential services need to be done physically at the branch, there are many opportunities to innovate and migrate most of the activities to the call center.
Although, servicing of customers is the key activity of call centers, it is also used by banks for recovering loans, reminder management, selling products, market research activities etc. While inbound calling forms the bulk of the activities of call centers, outbound calling is also resorted to on 'need basis'.
One of the key challenges in the call center would be to ensure that customer calls are closed, to the satisfaction of the customer, with high level of speed and efficiency. In general, customers desire to have a quick resolution and an end to the call. The whole process at the call center should be designed to make this happen. For example, the IVR (Interactive Voice Response) system should follow the 'KISS' principle (Keep It Simple and Short). Customers would get irritated if there are too many options or if they are not clear. Also, there should be no loops or dead ends.
The staff capacity should be managed so as to keep the 'wait time' to the minimum. Of course, this can be adversely impacted by sudden or unexpected surges of call volumes. If the customer finds the wait time unreasonably long, it will result in dropped calls and increased 'walk ins' by irritated customers in the branches. Also, if the wait time is too long, it may result in more calls coming in during 'office hours' when customers call call from their place of work without worrying about the call duration. This results in bunching of calls and a vicious cycle of delays.
Keeping the staff energetic, enthusiastic and motivated can be a challenge esp. if they are dealing with complaints or delinquent customers. A lot of counselling and hand holding may be required with regular breaks interspersed with recreation. Staff should be encouraged to share experiences and learning. Replay of recorded conversations is a useful method of imparting and enhancing call handling skills.
Staff should also be trained to identify / prevent potential frauds. The processes should be robust to ensure this is continuously monitored and improvised. Data security is a challenge and steps must be taken to prevent data thefts. This can be done in a variety of ways like preventing data copying facilities, non-use of pen & paper in the work stations, non-use of mobile phones at work stations etc.
If managed well, a call center can enhance the bank's efficiency and profitability significantly. It can also enhance the bank's reputation and help it sell and recover more.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
There are several basics to be kept in mind while setting up a call center and I try to capture a few of the important ones below.
1. Should ideally be accessible 24 x 7 - If not, should be available during normal working hours.
2. Should ideally be centralised but not necessary. Centralisation helps in managing costs and standardising output.
3. If centralised, should have at least 2/3 locations to manage disruptions
4. Should have adequate staff to cater to incoming calls. Optimising is required.
5. Staff well trained on
- Different products & technologies used
- Customer handling skills
- good listening / comprehension skills
6. Multi lingual staff capabilities
7. Top notch technology which can give
- On line status of accounts
- Status of deliveries
- Current offerings
- Single view of customer's various accounts
- ability to divert customer to correct desk depending on status, need etc.
- recognise the customer based on number
- authentication of customer
- speed in capturing requirements
- trail information of all past calls to / from customer
- ability to assign and track tasks till completion
- Recording calls for audit / training purposes
Banks have to take a hard look at the services that they would like to continue at the branch and those that they wish to migrate to the call center. While some essential services need to be done physically at the branch, there are many opportunities to innovate and migrate most of the activities to the call center.
Although, servicing of customers is the key activity of call centers, it is also used by banks for recovering loans, reminder management, selling products, market research activities etc. While inbound calling forms the bulk of the activities of call centers, outbound calling is also resorted to on 'need basis'.
One of the key challenges in the call center would be to ensure that customer calls are closed, to the satisfaction of the customer, with high level of speed and efficiency. In general, customers desire to have a quick resolution and an end to the call. The whole process at the call center should be designed to make this happen. For example, the IVR (Interactive Voice Response) system should follow the 'KISS' principle (Keep It Simple and Short). Customers would get irritated if there are too many options or if they are not clear. Also, there should be no loops or dead ends.
The staff capacity should be managed so as to keep the 'wait time' to the minimum. Of course, this can be adversely impacted by sudden or unexpected surges of call volumes. If the customer finds the wait time unreasonably long, it will result in dropped calls and increased 'walk ins' by irritated customers in the branches. Also, if the wait time is too long, it may result in more calls coming in during 'office hours' when customers call call from their place of work without worrying about the call duration. This results in bunching of calls and a vicious cycle of delays.
Keeping the staff energetic, enthusiastic and motivated can be a challenge esp. if they are dealing with complaints or delinquent customers. A lot of counselling and hand holding may be required with regular breaks interspersed with recreation. Staff should be encouraged to share experiences and learning. Replay of recorded conversations is a useful method of imparting and enhancing call handling skills.
Staff should also be trained to identify / prevent potential frauds. The processes should be robust to ensure this is continuously monitored and improvised. Data security is a challenge and steps must be taken to prevent data thefts. This can be done in a variety of ways like preventing data copying facilities, non-use of pen & paper in the work stations, non-use of mobile phones at work stations etc.
If managed well, a call center can enhance the bank's efficiency and profitability significantly. It can also enhance the bank's reputation and help it sell and recover more.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
Thursday 28 October 2010
The human element
It is an undeniable fact that the human capital is the most critical for any organisation especially one in the service industry as a bank.
I had an interesting episode with my bank recently. I discovered that my son's account opened a few years ago was misspelled in their records due to a data entry error. When I tried to get this rectified, I was asked to fill up a new form. I asked them to check their records but was informed that the records were lost in the floods in 2005.
I escalated this issue to their head of service who deputed a junior officer to deal with me. She called me several times for routine information like account number, name of the officer I spoke to earlier etc. Yet there was no progress.
I then went to the bank and checked out in their system. There, I could see the scanned image of the original form which had the correct spelling. When the officer called me yet again for some minor detail, I told her that this info. is already available in the bank in the scanned image.
She had more questions for me like where did I see this, which branch, which desk etc. When I expressed my irritation with the delay and approach, she gave me a piece of her mind !! Rather than being apologetic, she seemed to be the one who was offended.
My bank later rectified the problem without any further communication with me, after I spoke to their head of service again. Yet, the whole incident left a bad taste and reduced my confidence and comfort with my bank.
A bank may have great technology, seamless systems, on line information etc. However, if it does not have the right people, it could end up losing clients. In my case, the operations staff were bureaucratic and not keen to find a solution. The customer service staff was not trained to look through the system and had an attitude problem too.
It is imperative for every bank to make sure that its staff are customer centric and sensitive. It is not enough for a bank to talk about service and it should also take steps to ensure this. Training and close supervision is critical. Every complaint and customer issue needs to be taken up earnestly to find a solution and fix the root problem. Every staff member who is found to be lackadaisical in approach needs to be retrained. If this is not bringing about a change in the attitude and performance, it is best to weed out such people.
In the long run, for a bank to survive and out-perform its peers, it needs to be filled with high quality people and the right culture in place. Any bank ignoring this key area will become unattractive for its customers.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
I had an interesting episode with my bank recently. I discovered that my son's account opened a few years ago was misspelled in their records due to a data entry error. When I tried to get this rectified, I was asked to fill up a new form. I asked them to check their records but was informed that the records were lost in the floods in 2005.
I escalated this issue to their head of service who deputed a junior officer to deal with me. She called me several times for routine information like account number, name of the officer I spoke to earlier etc. Yet there was no progress.
I then went to the bank and checked out in their system. There, I could see the scanned image of the original form which had the correct spelling. When the officer called me yet again for some minor detail, I told her that this info. is already available in the bank in the scanned image.
She had more questions for me like where did I see this, which branch, which desk etc. When I expressed my irritation with the delay and approach, she gave me a piece of her mind !! Rather than being apologetic, she seemed to be the one who was offended.
My bank later rectified the problem without any further communication with me, after I spoke to their head of service again. Yet, the whole incident left a bad taste and reduced my confidence and comfort with my bank.
A bank may have great technology, seamless systems, on line information etc. However, if it does not have the right people, it could end up losing clients. In my case, the operations staff were bureaucratic and not keen to find a solution. The customer service staff was not trained to look through the system and had an attitude problem too.
It is imperative for every bank to make sure that its staff are customer centric and sensitive. It is not enough for a bank to talk about service and it should also take steps to ensure this. Training and close supervision is critical. Every complaint and customer issue needs to be taken up earnestly to find a solution and fix the root problem. Every staff member who is found to be lackadaisical in approach needs to be retrained. If this is not bringing about a change in the attitude and performance, it is best to weed out such people.
In the long run, for a bank to survive and out-perform its peers, it needs to be filled with high quality people and the right culture in place. Any bank ignoring this key area will become unattractive for its customers.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
Friday 8 October 2010
Diversify risk
The last blog was about the importance of market share as well as product focus. We also saw how single product organisations like HDFC have done so well over the past few decades.
It is not true, however, that all single product companies will do well or have done well. In many ways, success depends on a variety of factors like vision, strong plan, processes, people, focus etc. Success also depends on the products chosen and how well the products do in the market place.
The housing sector, in India, has seen very few blips in its upward journey - thanks to the ever growing population and a growing economy. There have been a few 'corrections' in the past due to over-heating of the sector but overall the scenario has been good. As long as the organisation is conservative in its lending practices and not encouraged too much speculation, it is in a safe zone.
We are all aware that, in general, each sector has its cycle of ups and downs. When the going is good, every move that an organisation makes seems to be a winner. At the same time, when the cycle is down, a 'one-product-bank' soon finds itself in big time trouble.
Which brings us to the need for diversification of risk. Even though there are compelling reasons for product focus, the need to balance out the portfolio calls for a judicious mix of products which will help negate the effects of a bad cycle. The mix of products should be such that there is a support from one sector when there is a weakness in another.
Of course, when there is an overall weakness in the economy affecting most sectors, one can only fall back on the overall quality of the book in terms of selection and strong predictions / collection ability.
Each bank should analyse the source of its liabilities and assets to make sure that there is no over-dependence on any source. There should be a proper mix in terms of geography, sector etc. One thumb rule to be applied here is to be "mapped to market" - which means that the bank's sources would be similar to the demographic pattern of the market. For instances, if 80% of the savings accounts in the market comes from salaried individuals, the bank's pattern should match that. And within that if 10% comes from the IT sector, a similar pattern should be reflected in the bank. This rule does not apply if there are any emerging markets or new opportunities missed out by others.
Similarly, on the assets side also the mix of products and the sectors where the lending is done should be mapped to the market. When choosing product mix, attention should be paid to the mix between secured and unsecured assets. Within secured assets (which should normally form the bulk of any bank's assets), re-sale values and loan-to-value forms the bulk of the consideration. Ability to recover in the event of default either through collection or repossession is critical.
To summarise, product and market share focus is important for a bank to make best use of available band width of management and to avoid getting lost in a mire of products. Yet, diversification of risk is required to manage the inevitable market cycles.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
It is not true, however, that all single product companies will do well or have done well. In many ways, success depends on a variety of factors like vision, strong plan, processes, people, focus etc. Success also depends on the products chosen and how well the products do in the market place.
The housing sector, in India, has seen very few blips in its upward journey - thanks to the ever growing population and a growing economy. There have been a few 'corrections' in the past due to over-heating of the sector but overall the scenario has been good. As long as the organisation is conservative in its lending practices and not encouraged too much speculation, it is in a safe zone.
We are all aware that, in general, each sector has its cycle of ups and downs. When the going is good, every move that an organisation makes seems to be a winner. At the same time, when the cycle is down, a 'one-product-bank' soon finds itself in big time trouble.
Which brings us to the need for diversification of risk. Even though there are compelling reasons for product focus, the need to balance out the portfolio calls for a judicious mix of products which will help negate the effects of a bad cycle. The mix of products should be such that there is a support from one sector when there is a weakness in another.
Of course, when there is an overall weakness in the economy affecting most sectors, one can only fall back on the overall quality of the book in terms of selection and strong predictions / collection ability.
Each bank should analyse the source of its liabilities and assets to make sure that there is no over-dependence on any source. There should be a proper mix in terms of geography, sector etc. One thumb rule to be applied here is to be "mapped to market" - which means that the bank's sources would be similar to the demographic pattern of the market. For instances, if 80% of the savings accounts in the market comes from salaried individuals, the bank's pattern should match that. And within that if 10% comes from the IT sector, a similar pattern should be reflected in the bank. This rule does not apply if there are any emerging markets or new opportunities missed out by others.
Similarly, on the assets side also the mix of products and the sectors where the lending is done should be mapped to the market. When choosing product mix, attention should be paid to the mix between secured and unsecured assets. Within secured assets (which should normally form the bulk of any bank's assets), re-sale values and loan-to-value forms the bulk of the consideration. Ability to recover in the event of default either through collection or repossession is critical.
To summarise, product and market share focus is important for a bank to make best use of available band width of management and to avoid getting lost in a mire of products. Yet, diversification of risk is required to manage the inevitable market cycles.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
Thursday 23 September 2010
Market share focus
I recently visited the web site of a few banks. I noted that these banks take pride in making available all products for their customers. The idea seems to be that the customer need not go elsewhere to satisfy his financing needs. This is a strong proposition to make to customers and is no doubt very attractive.
In reality, however, it is found that most banks, which have multiple products and services to offer, do not have a process to manage cross sell or to fulfill the expectations of the customers. Most of their products are managed in silos and the staff do not care or are not aware of the other products. This results in dis-satisfying customers and leads them to move to competition.
This blog is not attempting to cover cross sell which will the topic in some future blog. This blog is aimed at driving the importance of market share and product focus.
No bank has unlimited resources - we all know that. Therefore, it is important for the bank to decide which products they want to focus on and how much capital is needed for that product. When any product / service is proposed to be offered to customers a lot of work needs to be done in the background before the launch. Some of the key activities is captured below:
1. Have a business plan in place
2. Recruit the team which has expertise in the product.
3. Buy / Make the system to run the product.
4. Have the policies and processes well defined
5. Train the staff and create internal awareness
6. Create the distribution channels - branches / sales points / agents etc.
7. Promote the product by creating awareness
8. Tie up with key stake holders
9. Create back end processing capabilities
10. Get regulatory / other approvals for launch
All of these result in a substantial amount being invested for launch. When one is investing in people / other resources like systems, one cannot afford to get inferior quality because these has a direct impact on the earnings / quality of the product / portfolio. All these investments can only be recovered if a certain level of market share is met.
Moreover, to sustain the interest of staff / channel in the product, one has to be an active player in the business. For example, if one were to lend against commercial vehicles, one needs to be a serious player to attract customers, dealers, manufacturers etc. to support and work together. If the stakeholders find that the bank is not serious to gain market share, they will move to other more serious banks.
Thus it makes a lot of sense to consider specialising in a few manageable products and gain market share there rather than be a "Jack of all trades, master of none" bank. With focus on a few products, it is possible to gain mastery over it completely and become the preferred brand for customers. Take Housing Development Finance Corporation (HDFC) in India as an example. They have been in business for almost 3 decades focusing only on housing finance. So much that they have become synonymous with mortgages and are really experts in it. Very few customers would think mortgages without considering HDFC. They have done this without compromising on quality or profitability or size.
In conclusion, I would like to state that it is not necessary to have multiple products to become successful or a sought after bank. It makes a lot of sense to focus on a few related products and become a dominant player it it rather than be a one stop shop.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
In reality, however, it is found that most banks, which have multiple products and services to offer, do not have a process to manage cross sell or to fulfill the expectations of the customers. Most of their products are managed in silos and the staff do not care or are not aware of the other products. This results in dis-satisfying customers and leads them to move to competition.
This blog is not attempting to cover cross sell which will the topic in some future blog. This blog is aimed at driving the importance of market share and product focus.
No bank has unlimited resources - we all know that. Therefore, it is important for the bank to decide which products they want to focus on and how much capital is needed for that product. When any product / service is proposed to be offered to customers a lot of work needs to be done in the background before the launch. Some of the key activities is captured below:
1. Have a business plan in place
2. Recruit the team which has expertise in the product.
3. Buy / Make the system to run the product.
4. Have the policies and processes well defined
5. Train the staff and create internal awareness
6. Create the distribution channels - branches / sales points / agents etc.
7. Promote the product by creating awareness
8. Tie up with key stake holders
9. Create back end processing capabilities
10. Get regulatory / other approvals for launch
All of these result in a substantial amount being invested for launch. When one is investing in people / other resources like systems, one cannot afford to get inferior quality because these has a direct impact on the earnings / quality of the product / portfolio. All these investments can only be recovered if a certain level of market share is met.
Moreover, to sustain the interest of staff / channel in the product, one has to be an active player in the business. For example, if one were to lend against commercial vehicles, one needs to be a serious player to attract customers, dealers, manufacturers etc. to support and work together. If the stakeholders find that the bank is not serious to gain market share, they will move to other more serious banks.
Thus it makes a lot of sense to consider specialising in a few manageable products and gain market share there rather than be a "Jack of all trades, master of none" bank. With focus on a few products, it is possible to gain mastery over it completely and become the preferred brand for customers. Take Housing Development Finance Corporation (HDFC) in India as an example. They have been in business for almost 3 decades focusing only on housing finance. So much that they have become synonymous with mortgages and are really experts in it. Very few customers would think mortgages without considering HDFC. They have done this without compromising on quality or profitability or size.
In conclusion, I would like to state that it is not necessary to have multiple products to become successful or a sought after bank. It makes a lot of sense to focus on a few related products and become a dominant player it it rather than be a one stop shop.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
Friday 27 August 2010
On managing risk
In banking, as it is in any enterprise, managing risks constitutes a very important aspect of the business. The longevity and even survival of the organisation depends on how well are risks managed. There are instances of otherwise well run organisations with long vintage facing bankruptcy due to misses in this important domain. And yet, we see many organisations treating this important subject with surprisingly low attention and priority.
This blog is no thesis on risk management and is rather a introduction to the subject. The objective of this blog is to create awareness and ensure due weightage is given to this important subject in the course of managing ones business.
There is a story of a man who once fell inside a well and was shouting for help. One good Samaritan, who was passing by, came to the well and offered to throw down a rope and pull the man up. The man who had fallen down asked the following questions:
1. What if the rope is not strong enough to bear my weight?
2. What if it slips off your hand when I am on my way up?
3. What if you are unable to lift me up due to lack of strength?
4. What if you too fall inside attempting to rescue me?
Obviously, he would have made a good risk manager. A good risk manager always thinks of the risks of any plan, process or strategy. He is always obsessed with failure possibilities. Besides thinking of known risks, he should also ponder about unknown risks. His objective, of course, is only to ensure success and come up with a fool proof plan. Under no circumstances should he keep thinking risks without offering solutions. Otherwise he risks staying inside the well !!
Risk management is covered under the following broad heads:
a) Operations Risk - Risks arising out of the operations of the bank due to failures in the design of the processes or in the execution of the same.
b) Market Risk - Risks arising out of changes in the market place which are beyond the control of the bank - for e.g. change in the interest rates or changes in share prices which can impact profitability of the book or reduce the security cover for credit lines.
c) Credit risk - Risks arising out of failure of the borrower to repay due to a variety of reasons like business failure or wilful default.
Each of the above needs to be managed differently and I will cover them at length in future blogs.
Every bank needs to have a structure in place to manage risks and I cover some of the key elements of a good structure below:
1. Well established process for creating and approving products, policies and processes.
2. Clear guidelines on trigger events which can cause alarm.
3. Systematic and objective analysis of data and periodic reviews of each product / portfolio.
4. Strong system of internal checks and controls including audit at regular intervals.
5. A proper system of delegation of authority and empowerment.
6. A process of reporting - frequency based on type and significance of transactions.
7. Fraud management processes.
8. An effective recovery system and process.
9. Good documentation and custodial function.
10. An overall control in form of limits.
11. A strong culture in the organisation which prevents problems.
The operative word for effective risk management is to have independence and objectivity in the process. Also, risk management needs to have independent reporting to the board to ensure that issues are highlighted to the appropriate level. Sufficient empowerment in form of veto rights may also be considered to prevent disasters from occurring.
Risk management is one of the pillars which give a solid foundation to any organisation and its importance cannot be belittled. An organisation which cultivates a strong risk culture will be able to deliver a steady and profitable growth with no surprises. At the same time, risk management should not forget the prime objective of the organisation - which is to do business.
To reach a port, we must sail – sail, not tie at anchor – sail, not drift – Franklin Roosevelt
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
This blog is no thesis on risk management and is rather a introduction to the subject. The objective of this blog is to create awareness and ensure due weightage is given to this important subject in the course of managing ones business.
There is a story of a man who once fell inside a well and was shouting for help. One good Samaritan, who was passing by, came to the well and offered to throw down a rope and pull the man up. The man who had fallen down asked the following questions:
1. What if the rope is not strong enough to bear my weight?
2. What if it slips off your hand when I am on my way up?
3. What if you are unable to lift me up due to lack of strength?
4. What if you too fall inside attempting to rescue me?
Obviously, he would have made a good risk manager. A good risk manager always thinks of the risks of any plan, process or strategy. He is always obsessed with failure possibilities. Besides thinking of known risks, he should also ponder about unknown risks. His objective, of course, is only to ensure success and come up with a fool proof plan. Under no circumstances should he keep thinking risks without offering solutions. Otherwise he risks staying inside the well !!
Risk management is covered under the following broad heads:
a) Operations Risk - Risks arising out of the operations of the bank due to failures in the design of the processes or in the execution of the same.
b) Market Risk - Risks arising out of changes in the market place which are beyond the control of the bank - for e.g. change in the interest rates or changes in share prices which can impact profitability of the book or reduce the security cover for credit lines.
c) Credit risk - Risks arising out of failure of the borrower to repay due to a variety of reasons like business failure or wilful default.
Each of the above needs to be managed differently and I will cover them at length in future blogs.
Every bank needs to have a structure in place to manage risks and I cover some of the key elements of a good structure below:
1. Well established process for creating and approving products, policies and processes.
2. Clear guidelines on trigger events which can cause alarm.
3. Systematic and objective analysis of data and periodic reviews of each product / portfolio.
4. Strong system of internal checks and controls including audit at regular intervals.
5. A proper system of delegation of authority and empowerment.
6. A process of reporting - frequency based on type and significance of transactions.
7. Fraud management processes.
8. An effective recovery system and process.
9. Good documentation and custodial function.
10. An overall control in form of limits.
11. A strong culture in the organisation which prevents problems.
The operative word for effective risk management is to have independence and objectivity in the process. Also, risk management needs to have independent reporting to the board to ensure that issues are highlighted to the appropriate level. Sufficient empowerment in form of veto rights may also be considered to prevent disasters from occurring.
Risk management is one of the pillars which give a solid foundation to any organisation and its importance cannot be belittled. An organisation which cultivates a strong risk culture will be able to deliver a steady and profitable growth with no surprises. At the same time, risk management should not forget the prime objective of the organisation - which is to do business.
To reach a port, we must sail – sail, not tie at anchor – sail, not drift – Franklin Roosevelt
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
Sunday 8 August 2010
Find, Win & Keep Customers
The title of this blog is based on a slogan I heard long ago while working for GE Countrywide. Essentially, it is a strategy for customer management. I will explain this in the following paragraphs.
In the retail banking space, one of the key challenges is how to identify customers. Products can only be successful if it addresses the needs of customers and are designed with the customer in mind. It is, therefore, essential to identify our target customers and their needs. We must remember here that we are not talking about 'a' customer but about segments of like minded customers. The find part of the title is all about how to identify customer segments.
This can be done in a variety of ways. The easiest of these is to look at competition and what they are doing and whom they are focused on. There is no need to 're-invent the wheel' in a mature market. However, by doing this, a bank is only successful in taking away share from competition with better offerings. Sometimes, one can discover flaws in the competitors products and improve on them.
The other approach would be to do a market research to identify possible segments. Market research can be a costly affair and time consuming and, with changing needs of the customer, may also not be the best method. Most of the time, the best method would be to 'hear' the voice of the customers through formal / informal feedback and move accordingly. Most effective organisations extensively use the method of making 'test' offerings and closely analysing the results.
Once the activity of finding customers has progressed, the task of winning the customer is upon us. There are many imperatives for this. I will try to capture them in the form of bullet points below:
1. Solid brand image built through past performance and not merely 'brand ambassadors' or marketing efforts
2. Well designed product meeting customer needs
3. Smooth and speedy processing of transactions
4. Convenience and reach through multiple channels
5. Simple documentation
6. Effective methods of reaching out to target customers
7. Motivated and passionate sales team
Winning customers is not easy especially when there are so many banks offering similar products. More often, the banks with an effective sales team and sales management process wins the battle. More on this in a future blog.
The costs of winning / acquiring customers is usually high. This can best be offset by putting efforts on retaining the customer. Also, when one retains a customer, it provides opportunities to increase income by cross-selling or up-selling more products to the customer. This where the 'keep' part of the title plays a role. Most organisations fail in this crucial area.
In order to retain the customer, banks have to make sure that the customers is delighted with its services. This includes things like speedy processing, transparent dealings, value for money, convenience, complaint redressal and tracking etc. This is also about understanding the need of the customer through regular communication and also about anticipating the customer's changing needs. An effective team with its 'ears to the ground' and focus on customer can make this happen.
There is a need to constantly monitor attrition levels and have triggers based on this. Tracking of customer longevity and share of wallet is also important. Every customer attrition, whether natural or voluntary, whould be treated with concern and attempts must be made to retain the customer. A useful method would be to have an exit interview with attriting customers to understand the causes. A bank which is sincere with the customer and has an empowered front desk stands a better chance of retaining customers than others without these.
Find, Win & Keep Customers is a simple and effective slogan capturing the essence of customer management.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
In the retail banking space, one of the key challenges is how to identify customers. Products can only be successful if it addresses the needs of customers and are designed with the customer in mind. It is, therefore, essential to identify our target customers and their needs. We must remember here that we are not talking about 'a' customer but about segments of like minded customers. The find part of the title is all about how to identify customer segments.
This can be done in a variety of ways. The easiest of these is to look at competition and what they are doing and whom they are focused on. There is no need to 're-invent the wheel' in a mature market. However, by doing this, a bank is only successful in taking away share from competition with better offerings. Sometimes, one can discover flaws in the competitors products and improve on them.
The other approach would be to do a market research to identify possible segments. Market research can be a costly affair and time consuming and, with changing needs of the customer, may also not be the best method. Most of the time, the best method would be to 'hear' the voice of the customers through formal / informal feedback and move accordingly. Most effective organisations extensively use the method of making 'test' offerings and closely analysing the results.
Once the activity of finding customers has progressed, the task of winning the customer is upon us. There are many imperatives for this. I will try to capture them in the form of bullet points below:
1. Solid brand image built through past performance and not merely 'brand ambassadors' or marketing efforts
2. Well designed product meeting customer needs
3. Smooth and speedy processing of transactions
4. Convenience and reach through multiple channels
5. Simple documentation
6. Effective methods of reaching out to target customers
7. Motivated and passionate sales team
Winning customers is not easy especially when there are so many banks offering similar products. More often, the banks with an effective sales team and sales management process wins the battle. More on this in a future blog.
The costs of winning / acquiring customers is usually high. This can best be offset by putting efforts on retaining the customer. Also, when one retains a customer, it provides opportunities to increase income by cross-selling or up-selling more products to the customer. This where the 'keep' part of the title plays a role. Most organisations fail in this crucial area.
In order to retain the customer, banks have to make sure that the customers is delighted with its services. This includes things like speedy processing, transparent dealings, value for money, convenience, complaint redressal and tracking etc. This is also about understanding the need of the customer through regular communication and also about anticipating the customer's changing needs. An effective team with its 'ears to the ground' and focus on customer can make this happen.
There is a need to constantly monitor attrition levels and have triggers based on this. Tracking of customer longevity and share of wallet is also important. Every customer attrition, whether natural or voluntary, whould be treated with concern and attempts must be made to retain the customer. A useful method would be to have an exit interview with attriting customers to understand the causes. A bank which is sincere with the customer and has an empowered front desk stands a better chance of retaining customers than others without these.
Find, Win & Keep Customers is a simple and effective slogan capturing the essence of customer management.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
Monday 19 July 2010
Need for speed
Rupert Murdoch once said "The world is changing very fast. The big will not beat the small anymore. It will be the fast beating the slow."
This just about sums the essence of this blog. What do we mean when we refer to speed? Isn't banking all about taking due care and steady steps? Would not speed give an image to a bank of being reckless? These are the kind of questions skeptics may ask. This blog will attempt to explain and clarify this in detail.
If we look around us we see the world changing at a very fast clip. New technologies, innovations and changes in rules and regulations are making this a very dynamic environment. We also see people becoming more and more demanding. Take for instance travel - most people are very conscious of the value of time and prefer to travel by air as long as the costs are reasonable. No longer are we willing to place an order for some new gadget and wait for it to arrive. Now, we want to only purchase things that are ready "off the shelf".
People want to spend very little time for mundane activities and would rather invest their time in more productive and enjoyable ways. The need for speed in service is becoming very acute. Also, because of the sheer increase in the number of customers, it is necessary to have speed to cater to all customers and improve productivity.
Thankfully, technology has helped to cope with this expectations of customers. Today, we can provide information on the customer account in a matter of seconds - even about transactions done a few years ago. Likewise, using technology we can service most of the customer requirements in very short time frames. The other day I went to my bank to get a demand draft made and was out of the bank with my DD in less than ten minutes!
Speed refers not only to the processing time for customers. It also covers the reaction time of a bank for changes in the environment. Banks who are nimble are able to take advantage of the changes by introducing new products, new processes etc. faster than others. They are thus able to give their customers a better offering in line with the market place changes. Speed also helps the bank to improve productivity, reduce costs and improve profitability.
Getting the "speed mindset" is really a culture issue. It is only when the employees are "clued on" to changes and have the passion to deliver in short time frames that this can be achieved. This mindset has to be reflected in everything that the bank does and should be represented in every employee right from the Managing Director to the last officer. It should be seen in every action of the organisation be it internal facing or external facing. Presence of this mind set should be encouraged and absence should be corrected.
It is true that speed is critical and at the same time, there should be enough checks and balances in the organisation's process to avoid errors. Special care needs to be taken in the areas of customer interface, operations risk and compliance. Even if errors do occur, as they sometimes tend to, the process of spotting it and making corrections should be strong to prevent them from spreading.
Gone are the days when large banks ruled. Today, the successful banks are those who have speed as an asset.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
This just about sums the essence of this blog. What do we mean when we refer to speed? Isn't banking all about taking due care and steady steps? Would not speed give an image to a bank of being reckless? These are the kind of questions skeptics may ask. This blog will attempt to explain and clarify this in detail.
If we look around us we see the world changing at a very fast clip. New technologies, innovations and changes in rules and regulations are making this a very dynamic environment. We also see people becoming more and more demanding. Take for instance travel - most people are very conscious of the value of time and prefer to travel by air as long as the costs are reasonable. No longer are we willing to place an order for some new gadget and wait for it to arrive. Now, we want to only purchase things that are ready "off the shelf".
People want to spend very little time for mundane activities and would rather invest their time in more productive and enjoyable ways. The need for speed in service is becoming very acute. Also, because of the sheer increase in the number of customers, it is necessary to have speed to cater to all customers and improve productivity.
Thankfully, technology has helped to cope with this expectations of customers. Today, we can provide information on the customer account in a matter of seconds - even about transactions done a few years ago. Likewise, using technology we can service most of the customer requirements in very short time frames. The other day I went to my bank to get a demand draft made and was out of the bank with my DD in less than ten minutes!
Speed refers not only to the processing time for customers. It also covers the reaction time of a bank for changes in the environment. Banks who are nimble are able to take advantage of the changes by introducing new products, new processes etc. faster than others. They are thus able to give their customers a better offering in line with the market place changes. Speed also helps the bank to improve productivity, reduce costs and improve profitability.
Getting the "speed mindset" is really a culture issue. It is only when the employees are "clued on" to changes and have the passion to deliver in short time frames that this can be achieved. This mindset has to be reflected in everything that the bank does and should be represented in every employee right from the Managing Director to the last officer. It should be seen in every action of the organisation be it internal facing or external facing. Presence of this mind set should be encouraged and absence should be corrected.
It is true that speed is critical and at the same time, there should be enough checks and balances in the organisation's process to avoid errors. Special care needs to be taken in the areas of customer interface, operations risk and compliance. Even if errors do occur, as they sometimes tend to, the process of spotting it and making corrections should be strong to prevent them from spreading.
Gone are the days when large banks ruled. Today, the successful banks are those who have speed as an asset.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
Sunday 4 July 2010
Relationship management
Establishing and nurturing effective relationships is one of the key to success in any business and retail banking is no exception to this rule. As a banker one has to maintain cordial and strong relationships with a variety of stakeholders of which the customer, the regulator, the market players, the intermediaries etc. are some of the important ones.
It is not enough to have a great product offering or a very competitive price giving good value for money. Many times it is observed that softer elements like trust, and strong relationship do matter when a decision is being taken. Even if (and especially if) the market is saturated with product offerings which are very similar to each other, customers tend to prefer dealing with the known bank due to sheer inertia or comfort factors. Healthy relationship with regulator / media also comes useful to help iron out differences or issues that might crop up due to inefficiencies etc.
What does it take to build a strong relationship with each stakeholder? The bank has to make an exhaustive list of entities / individuals that it considers as important and take stock of where they do stand. This can be done by a simple internal ranking method based on current level of understanding.
A simple four box matrix of High / Low importance in the X axis and a High / Low relation in the Y Axis can be used and each entity can be plotted in this. Those entities which are high in importance but low in relationship need to be worked on a priority basis. One can even draw out a plan of action based on this matrix in terms of a calendar of activities to be performed.
The next step would be to identify people within the bank who are good at communication skills to take up this role of building / nurturing the relationship. Regular meetings followed with a strong communication plan needs to be ensured.
It is also important to have a "Needs Analysis" done for each entity in terms of identifying what is required to build a strong relationship. Any action taken would need to be based on this analysis. For eg. the regulator could be satisfied if there is a satisfaction that compliance is high in the agenda of the organisation and that internal checks and controls are robust. An intermediary could be satisfied if there is transparency and honesty in the dealings coupled with stability and a focus on increasing its profitability.
From time to time a "Reality check" needs to be done on the status of the relationship by doing a survey or using a simple questionnaire to seek feedback from the entity as to what is giving them satisfaction and what is not and what can be done to improve things further. Even a survey of this form with adequate feedback on the follow-up measures taken can give a positive feeling to the entity as to the sincerity of the bank in improving things.
Relationship building skills is not something that can be easily captured or described in a blog. The attempt here is not make an exhaustive list of things that a bank needs to do. Rather this blog would have achieved its purpose if the importance of relationship building is established in the minds of the reader.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
It is not enough to have a great product offering or a very competitive price giving good value for money. Many times it is observed that softer elements like trust, and strong relationship do matter when a decision is being taken. Even if (and especially if) the market is saturated with product offerings which are very similar to each other, customers tend to prefer dealing with the known bank due to sheer inertia or comfort factors. Healthy relationship with regulator / media also comes useful to help iron out differences or issues that might crop up due to inefficiencies etc.
What does it take to build a strong relationship with each stakeholder? The bank has to make an exhaustive list of entities / individuals that it considers as important and take stock of where they do stand. This can be done by a simple internal ranking method based on current level of understanding.
A simple four box matrix of High / Low importance in the X axis and a High / Low relation in the Y Axis can be used and each entity can be plotted in this. Those entities which are high in importance but low in relationship need to be worked on a priority basis. One can even draw out a plan of action based on this matrix in terms of a calendar of activities to be performed.
The next step would be to identify people within the bank who are good at communication skills to take up this role of building / nurturing the relationship. Regular meetings followed with a strong communication plan needs to be ensured.
It is also important to have a "Needs Analysis" done for each entity in terms of identifying what is required to build a strong relationship. Any action taken would need to be based on this analysis. For eg. the regulator could be satisfied if there is a satisfaction that compliance is high in the agenda of the organisation and that internal checks and controls are robust. An intermediary could be satisfied if there is transparency and honesty in the dealings coupled with stability and a focus on increasing its profitability.
From time to time a "Reality check" needs to be done on the status of the relationship by doing a survey or using a simple questionnaire to seek feedback from the entity as to what is giving them satisfaction and what is not and what can be done to improve things further. Even a survey of this form with adequate feedback on the follow-up measures taken can give a positive feeling to the entity as to the sincerity of the bank in improving things.
Relationship building skills is not something that can be easily captured or described in a blog. The attempt here is not make an exhaustive list of things that a bank needs to do. Rather this blog would have achieved its purpose if the importance of relationship building is established in the minds of the reader.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
Thursday 6 May 2010
Technology readiness
As part of an earlier blog entitled "Solid Foundation", we had covered the criticality of technology in any retail banks success. Here we will dwell a little more in detail about the different aspects of technology that needs to be addressed. This is not an in depth paper on technology but is more of a general writeup on the importance, scope and benefits of technology in retail banking.
Retail business is a detail business. The volume of customers and transactions, the complexities of the calculations and the variety of products cannot be managed unless a bank has a solid technology platform having the following aspects:
1. Should preferably be a "tried and tested" software in the retail banking space
2. Should be comprehensive in terms of coverage of products, features, variants etc.
3. Should be flexible to incorporate innovations - one way to do this is to keep everything parametrised and not hard coded.
4. Should transfer data seamlessly without the need for human intervention / duplication of effort across channels, branches etc.
5. Should be secure
6. Should have capability to handle scale up in terms of increase in transactions as well as customers
7. Should be Internet enabled and as far as possible updated on near real time basis
8. Should enable customer to access, transact etc. comfortably while protecting her security.
9. Should be able to offer "one view" of all accounts / relationships of the customer with the bank
10. Should be able to provide all calculations (interest, penalties etc.)transparently to the customer.
11. Should be able to keep audit trails
12. Should have a maker / checker concept
13. Should capture / process everything from "cradle to grave" (from the time of inception till final closure)
14. Should be able to store not just data but also images
The list given above is by no means exhaustive and is only indicative of key capabilities. When it comes to use of IT, one should look at maximising the coverage in order to reap benefits of speed, error free processing etc.
Use of applications like Microsoft office programs (Word, Excel, PowerPoint etc.), although useful, should not be confused with the IT needed. I have seen lots of organisations where they take pride in storing and processing data in rudimentary programs like Excel without realising the risks involved like data security.
It would be useful to restrict the core system to cover only the critical functionalities. For example, one need not have a single system covering all IT needs of a bank. One can break up the systems as follows:
1. Core system to track customer financial transactions for various products (liabilities and assets)
2. Support systems which talk to the core system on a needs basis as follows:
(a) For resolving servicing needs, call center
(b) For managing documentation
(c) For sales process
(d) For underwriting
(e) For analytics
(f) For marketing campaigns, media spends management
(g) For vendor payments
(h) For payroll management
(i) For statement printing, tracking outbound and inbound mails
(j) For collection and repayment management
(k) For accounting and drawing up financial statements
When there is an extensive use of IT in a bank, there is a need to make sure that the personnel is well trained on all aspects of use with special emphasis on safety and security. Taking periodical back ups, having a strong disaster recovery process, having multiple sites with data, strong password processes etc. all need to be built in place. Discipline is to be inculcated as a core value in the handling of data and all processing must be done based on preset procedures / time plans.
Banks should be vigilant and take periodic stock to ensure that non-secure methods are not used to process data. The IT system, its output etc. need to be periodically audited to confirm that quality is not compromised. Review of controls and data security should be done regularly.
When a bank is thus comprehensively ready with technology solutions to meets its data processing needs, customers will experience error free and high quality service. This will result in attracting more customers to the bank as well as help the bank increase the share of wallet of the customer.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
Retail business is a detail business. The volume of customers and transactions, the complexities of the calculations and the variety of products cannot be managed unless a bank has a solid technology platform having the following aspects:
1. Should preferably be a "tried and tested" software in the retail banking space
2. Should be comprehensive in terms of coverage of products, features, variants etc.
3. Should be flexible to incorporate innovations - one way to do this is to keep everything parametrised and not hard coded.
4. Should transfer data seamlessly without the need for human intervention / duplication of effort across channels, branches etc.
5. Should be secure
6. Should have capability to handle scale up in terms of increase in transactions as well as customers
7. Should be Internet enabled and as far as possible updated on near real time basis
8. Should enable customer to access, transact etc. comfortably while protecting her security.
9. Should be able to offer "one view" of all accounts / relationships of the customer with the bank
10. Should be able to provide all calculations (interest, penalties etc.)transparently to the customer.
11. Should be able to keep audit trails
12. Should have a maker / checker concept
13. Should capture / process everything from "cradle to grave" (from the time of inception till final closure)
14. Should be able to store not just data but also images
The list given above is by no means exhaustive and is only indicative of key capabilities. When it comes to use of IT, one should look at maximising the coverage in order to reap benefits of speed, error free processing etc.
Use of applications like Microsoft office programs (Word, Excel, PowerPoint etc.), although useful, should not be confused with the IT needed. I have seen lots of organisations where they take pride in storing and processing data in rudimentary programs like Excel without realising the risks involved like data security.
It would be useful to restrict the core system to cover only the critical functionalities. For example, one need not have a single system covering all IT needs of a bank. One can break up the systems as follows:
1. Core system to track customer financial transactions for various products (liabilities and assets)
2. Support systems which talk to the core system on a needs basis as follows:
(a) For resolving servicing needs, call center
(b) For managing documentation
(c) For sales process
(d) For underwriting
(e) For analytics
(f) For marketing campaigns, media spends management
(g) For vendor payments
(h) For payroll management
(i) For statement printing, tracking outbound and inbound mails
(j) For collection and repayment management
(k) For accounting and drawing up financial statements
When there is an extensive use of IT in a bank, there is a need to make sure that the personnel is well trained on all aspects of use with special emphasis on safety and security. Taking periodical back ups, having a strong disaster recovery process, having multiple sites with data, strong password processes etc. all need to be built in place. Discipline is to be inculcated as a core value in the handling of data and all processing must be done based on preset procedures / time plans.
Banks should be vigilant and take periodic stock to ensure that non-secure methods are not used to process data. The IT system, its output etc. need to be periodically audited to confirm that quality is not compromised. Review of controls and data security should be done regularly.
When a bank is thus comprehensively ready with technology solutions to meets its data processing needs, customers will experience error free and high quality service. This will result in attracting more customers to the bank as well as help the bank increase the share of wallet of the customer.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
Monday 3 May 2010
Service Orientation
Today, one can find banks catering to retail products and businesses virtually everywhere. With so many public sector and private sector banks in business, there is no lack of players. Most of the banks have identical products and even pricing - give or take a few basis points differences. As soon as any bank introduces an innovation in their product, the competitors start introducing similar products or variants.
This leads some to believe that there is virtually nothing to differentiate banks. I had once heard a senior banker comment "Banking has become a commodity business". He felt that price is the only way to compete and grab market share. What he did not state / realise is that customers look for two things - price and value for money.
There is one category of customers who are very price sensitive and will always go for the lowest price. However, most customers also deeply look for quality of service. Over a period of time, if customers realise that they are getting poor quality of service, they will start gravitating towards the bank that offers better value for money and may even be willing to offer a premium pricing for service.
So, what are the things that give value to the customer? I list below a few key service factors - the list is not a comprehensive list as they customer expectations and aspirations keep going up. The key service elements include:
(a) Transparency of dealing
(b) Speed of response
(c) Recognition of customer
(d) Convenience
(e) Courtesy
(f) Integrity & Fair play
(g) Security
(h) Care for customer's interests
(i) Comprehensive coverage of needs
(j) Reliability
(k) Record keeping & documentation
(l) Reasonable cost
Banking in essentially a service business. Banks which are able to offer a wide range of products and at the same time are able to offer high quality of services at reasonable cost are the ones who will attract loyalty and market share.
Customers do not get carried away by advertisements and brand building measures which do not get reflected in the bank's day-to-day behaviour. They also do not get attracted by smart or popular brand ambassadors lavishing praise on the bank. Customers do reflect on their individual experiences and moments of truth and pass it on to others by word of mouth or by sharing it in blogs / Internet sites.
Any investment in understanding customer needs, finding out gaps in the bank's service offering, putting systems / processes / technology in place to address gaps etc. will have huge paybacks in form of customer delight and retention. Banks also need to work towards creating a culture of service within their organisation in order to remain competitive in the long run. Training, rewards and recognition for service orientation, exemplary action against non-conformers etc. are all useful methods to achieve this.
Often, the difference between the leading bank and the others is this service orientation.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
This leads some to believe that there is virtually nothing to differentiate banks. I had once heard a senior banker comment "Banking has become a commodity business". He felt that price is the only way to compete and grab market share. What he did not state / realise is that customers look for two things - price and value for money.
There is one category of customers who are very price sensitive and will always go for the lowest price. However, most customers also deeply look for quality of service. Over a period of time, if customers realise that they are getting poor quality of service, they will start gravitating towards the bank that offers better value for money and may even be willing to offer a premium pricing for service.
So, what are the things that give value to the customer? I list below a few key service factors - the list is not a comprehensive list as they customer expectations and aspirations keep going up. The key service elements include:
(a) Transparency of dealing
(b) Speed of response
(c) Recognition of customer
(d) Convenience
(e) Courtesy
(f) Integrity & Fair play
(g) Security
(h) Care for customer's interests
(i) Comprehensive coverage of needs
(j) Reliability
(k) Record keeping & documentation
(l) Reasonable cost
Banking in essentially a service business. Banks which are able to offer a wide range of products and at the same time are able to offer high quality of services at reasonable cost are the ones who will attract loyalty and market share.
Customers do not get carried away by advertisements and brand building measures which do not get reflected in the bank's day-to-day behaviour. They also do not get attracted by smart or popular brand ambassadors lavishing praise on the bank. Customers do reflect on their individual experiences and moments of truth and pass it on to others by word of mouth or by sharing it in blogs / Internet sites.
Any investment in understanding customer needs, finding out gaps in the bank's service offering, putting systems / processes / technology in place to address gaps etc. will have huge paybacks in form of customer delight and retention. Banks also need to work towards creating a culture of service within their organisation in order to remain competitive in the long run. Training, rewards and recognition for service orientation, exemplary action against non-conformers etc. are all useful methods to achieve this.
Often, the difference between the leading bank and the others is this service orientation.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
Friday 30 April 2010
Profit focus
Profit is critical for long term sustenance of any business. Shareholders / Owners are happy to invest in businesses that produce sustainable profits. While planning for any business this objective must be kept in mind. Often, management gets carried away with other objectives without worrying about profits - for e.g. they focus on brand image, market share, top line growth, book size etc. at the cost of profits.
While drawing up the business plan, a key question to be dealt with is on what is the break even period and when will the business deliver sustainable profits to deliver returns to the shareholders. Everyone understands that a business becomes profitable only after a critical book size is reached. However, one should have clarity on what is the level of operations which is necessary to deliver profits.
This profit focus leads the management to focus on all elements which drive profits which are outlined below:
(a) Volume of business
(b) Pricing
(c) Cost of funds
(d) Fee income opportunities
(e) Sourcing cost
(f) Cost of operations and technology
(g) Manpower costs
(h) Losses on account of defaults, frauds etc.
Each of the above are dynamic and linked to market forces. For instance, pricing has to be competitive and attractive to ensure high volumes and high quality portfolio. Pricing also decides how much penetration of market and therefore can be achieved. When each item listed above is seen individually and collectively, the business can become an efficient player. And at every stage of the business growth these have to be carefully monitored and analysed.
Too often, there is a temptation to drop prices below competition to make our product look attractive. There is also a temptation to pay the distribution channel handsomely to attract volumes. A long term player will not succumb to such temptations. Only short term mindset will encourage compromising on quality standards and building book only based on price advantage.
Productivity is a key measure which can be used to evaluate performance of employees, channel, branches etc. It is a useful tool to compare performance between various units and even across organisations if suitable information is available. This can be used to pay more attention to laggards and to improve their output. I remember an instance when I found one branch consistently under-performing and on visiting that branch to identify problems, I came across many obvious issues. I found the manager in charge was distracted with personal issues. Also, as opportunities for funding new assets were limited in that location, we began funding used assets and also focused on transferring loans from other banks to our bank and thus improved productivity significantly.
It is important also to monitor profitability by branch, by individual product etc. Many times organisations get confused due to a large number of products and branches and are unable to ascertain which ones are contributing to the overall profitability and which ones are a drag. it could also be due to poor systems or methods of allocations / apportioning of revenues. Sometimes, managers with vested interests also mix up costs / revenues deliberately so as to continue doing unprofitable businesses and have large empires.
Quality of portfolio is also a very important aspect which has a direct bearing on profitability. In the quest for building a large book, one should not loose focus on underwriting or credit buying. Profits come only when the customer is repaying regularly. Some organisations play on the borderline cases where the likelihood of defaults is high. The rationale for doing this is to collect higher amounts as penalty and default interest. However, this should be done very selectively and only after being sure that the collections costs are not higher than the incremental income. In any case, one should restrict the portfolio of such sub-prime cases to a manageable percentage of the overall book.
This blog would be incomplete if I do not mention the importance of cost consciousness. Every organisation should be wary of incurring costs. Every cost proposed to be incurred is to be evaluated in terms of benefits it will deliver. A tight process of budgeting should be followed with a close and periodical review of costs. Inter branch / unit comparison of costs should be done. Delegation of authority should clearly identify who is empowered to incur costs and to what extent.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
While drawing up the business plan, a key question to be dealt with is on what is the break even period and when will the business deliver sustainable profits to deliver returns to the shareholders. Everyone understands that a business becomes profitable only after a critical book size is reached. However, one should have clarity on what is the level of operations which is necessary to deliver profits.
This profit focus leads the management to focus on all elements which drive profits which are outlined below:
(a) Volume of business
(b) Pricing
(c) Cost of funds
(d) Fee income opportunities
(e) Sourcing cost
(f) Cost of operations and technology
(g) Manpower costs
(h) Losses on account of defaults, frauds etc.
Each of the above are dynamic and linked to market forces. For instance, pricing has to be competitive and attractive to ensure high volumes and high quality portfolio. Pricing also decides how much penetration of market and therefore can be achieved. When each item listed above is seen individually and collectively, the business can become an efficient player. And at every stage of the business growth these have to be carefully monitored and analysed.
Too often, there is a temptation to drop prices below competition to make our product look attractive. There is also a temptation to pay the distribution channel handsomely to attract volumes. A long term player will not succumb to such temptations. Only short term mindset will encourage compromising on quality standards and building book only based on price advantage.
Productivity is a key measure which can be used to evaluate performance of employees, channel, branches etc. It is a useful tool to compare performance between various units and even across organisations if suitable information is available. This can be used to pay more attention to laggards and to improve their output. I remember an instance when I found one branch consistently under-performing and on visiting that branch to identify problems, I came across many obvious issues. I found the manager in charge was distracted with personal issues. Also, as opportunities for funding new assets were limited in that location, we began funding used assets and also focused on transferring loans from other banks to our bank and thus improved productivity significantly.
It is important also to monitor profitability by branch, by individual product etc. Many times organisations get confused due to a large number of products and branches and are unable to ascertain which ones are contributing to the overall profitability and which ones are a drag. it could also be due to poor systems or methods of allocations / apportioning of revenues. Sometimes, managers with vested interests also mix up costs / revenues deliberately so as to continue doing unprofitable businesses and have large empires.
Quality of portfolio is also a very important aspect which has a direct bearing on profitability. In the quest for building a large book, one should not loose focus on underwriting or credit buying. Profits come only when the customer is repaying regularly. Some organisations play on the borderline cases where the likelihood of defaults is high. The rationale for doing this is to collect higher amounts as penalty and default interest. However, this should be done very selectively and only after being sure that the collections costs are not higher than the incremental income. In any case, one should restrict the portfolio of such sub-prime cases to a manageable percentage of the overall book.
This blog would be incomplete if I do not mention the importance of cost consciousness. Every organisation should be wary of incurring costs. Every cost proposed to be incurred is to be evaluated in terms of benefits it will deliver. A tight process of budgeting should be followed with a close and periodical review of costs. Inter branch / unit comparison of costs should be done. Delegation of authority should clearly identify who is empowered to incur costs and to what extent.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
Thursday 29 April 2010
Solid Foundation
Any organisation to have a lasting impact must be built on a solid foundation and enough attention needs to be paid to get a solid foundation. It is always better to go slow at the foundation laying stage rather than succumb to pressures and try to show numbers. This is very much akin to building a multi storied tower where the initial period seems agonisingly slow. Much time and effort is spent on creating a rock solid foundation. Once this is done well, the rest of the construction is a much easier affair.
When we talk about foundation, we cover a variety of things as outlined below. Each of these will be dealt with in detail in later blogs. The typical areas to be created as part of the foundation include:
(a) An efficient operations platform to deal with recording transactions diligently and servicing customers
(b) A strong technology platform to ensure seamless flow of data with minimum human intervention and with strong checks and balances
(c) A robust credit policy, under-writing and risk management systems
(d) A focused collections and recovery system and process to deal with defaults
(e) A good fraud management process
(f) A good accounting and MIS to be able to ascertain profitability by unit / product
(g) A well thought out marketing and distribution plan
(h) A good organisation structure to ensure effective supervision and coordination between units
(i) Internal audit to ensure approved policies and processes are adhered
(j) Clearly laid out authorisation / delegation policies
It is only when all of these are working smoothly and effectively that one should attempt to scale up the business. Any attempt to do so prematurely with a plan to fix other areas along with growth will lead to huge issues. Each of the above are like the pillars of the business and weakness in any pillar will lead to the structure becoming weak and collapse.
For an organisation to be a long term player, the thoughts must be like that of a marathon runner and not like that of a sprinter. A marathon runner appears to be relatively slow to start with and may seem to be not making much effort. However, for the long run that is before him, it is better to conserve energy and run with a rhythm.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
When we talk about foundation, we cover a variety of things as outlined below. Each of these will be dealt with in detail in later blogs. The typical areas to be created as part of the foundation include:
(a) An efficient operations platform to deal with recording transactions diligently and servicing customers
(b) A strong technology platform to ensure seamless flow of data with minimum human intervention and with strong checks and balances
(c) A robust credit policy, under-writing and risk management systems
(d) A focused collections and recovery system and process to deal with defaults
(e) A good fraud management process
(f) A good accounting and MIS to be able to ascertain profitability by unit / product
(g) A well thought out marketing and distribution plan
(h) A good organisation structure to ensure effective supervision and coordination between units
(i) Internal audit to ensure approved policies and processes are adhered
(j) Clearly laid out authorisation / delegation policies
It is only when all of these are working smoothly and effectively that one should attempt to scale up the business. Any attempt to do so prematurely with a plan to fix other areas along with growth will lead to huge issues. Each of the above are like the pillars of the business and weakness in any pillar will lead to the structure becoming weak and collapse.
For an organisation to be a long term player, the thoughts must be like that of a marathon runner and not like that of a sprinter. A marathon runner appears to be relatively slow to start with and may seem to be not making much effort. However, for the long run that is before him, it is better to conserve energy and run with a rhythm.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
Wednesday 28 April 2010
Recruit right
It is common knowledge that recruiting and retaining the right kind of people is key to any successful business model. Yet, we find that most organisations ignore this cardinal rule in actual practice. Either because of the incompetence of the people responsible for recruitment or due to poor people management practices or other reasons, organisations find themselves short of talent leading to inefficiencies over a period of time.
This blog specifically deals only with the recruitment process and other issues like retention, motivation, talent management etc. will be dealt with in later blogs. Selection processes are to be tuned to attract the right kind of profiles to the organisation. Cultural fit is critical and it is better to spend a little extra time to ensure the right candidate is selected.
Qualification and experience are important but not the only factors. Right attitude is also to be ascertained. I list below some of the key traits to be sought for from each candidate with minor tweaking based on role and level of the position.
(a) Energy and enthusiasm
(b) Positive mindset
(c) Solutions and service focus
(d) Initiative
(e) Communication and articulation skills
(f) Team spirit and networking
(g) Target and result orientation
(h) Ambition combined with maturity
(i) Relationship skills
It is not easy to identify all these traits easily merely on the basis of an interview process. One should therefore make extensive use of psychometric tests, detailed background checks etc. to know more about the candidate. Some people are especially skilled in spotting talent and they should involved in the recruitment process. It is better to take due care and diligence at the initial stage itself so as to avoid problems later.
The right kind of mix and balance is necessary in every organisation. It is not correct to take too many people of a particular type. It takes all kinds of skill sets to lead to efficiency. Too many risk takers or too few are both undesirable. Likewise, too many leaders / thinkers or too few, too many doers or too few etc. are all recipes for disaster. Diversity of people and thought should be encouraged.
It is critical to closely observe the candidate and take frequent feedback from people working around to know how the fitment is working. Within the first few weeks, one can ascertain whether the recruitment was a success or not and take suitable actions.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
This blog specifically deals only with the recruitment process and other issues like retention, motivation, talent management etc. will be dealt with in later blogs. Selection processes are to be tuned to attract the right kind of profiles to the organisation. Cultural fit is critical and it is better to spend a little extra time to ensure the right candidate is selected.
Qualification and experience are important but not the only factors. Right attitude is also to be ascertained. I list below some of the key traits to be sought for from each candidate with minor tweaking based on role and level of the position.
(a) Energy and enthusiasm
(b) Positive mindset
(c) Solutions and service focus
(d) Initiative
(e) Communication and articulation skills
(f) Team spirit and networking
(g) Target and result orientation
(h) Ambition combined with maturity
(i) Relationship skills
It is not easy to identify all these traits easily merely on the basis of an interview process. One should therefore make extensive use of psychometric tests, detailed background checks etc. to know more about the candidate. Some people are especially skilled in spotting talent and they should involved in the recruitment process. It is better to take due care and diligence at the initial stage itself so as to avoid problems later.
The right kind of mix and balance is necessary in every organisation. It is not correct to take too many people of a particular type. It takes all kinds of skill sets to lead to efficiency. Too many risk takers or too few are both undesirable. Likewise, too many leaders / thinkers or too few, too many doers or too few etc. are all recipes for disaster. Diversity of people and thought should be encouraged.
It is critical to closely observe the candidate and take frequent feedback from people working around to know how the fitment is working. Within the first few weeks, one can ascertain whether the recruitment was a success or not and take suitable actions.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
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