Modern CEOs must balance priorities, writes John Brennan.
Samuel Tsien, group CEO of OCBC Bank, has his own term for the type of person needed to run a modern bank. “These days, the individual at the helm is what I would describe as a ‘smart juggler’ – one who is able to balance an increasingly complex, and at times contradictory, set of considerations,” he says.
“Simply delivering good financial performance by achieving operational excellence, growing incremental revenue and managing modest increases in expenses is, of course, still necessary, but it is not sufficient.
“The ‘smart juggler’ has to contend with many different areas over and above these, from meeting the societal expectations of communities to re-shaping organisational culture; and from adhering to the increasing demands of new and existing regulations to ensuring the interests of additional stakeholders, such as communities, netizens and politicians, are respected and managed in a delicate and balanced manner that brings the entire organisation together in a sustainable manner.”
Since OCBC has branches and offices in 18 countries and territories, Tsien is well placed to comment on the international forces complicating the job of the contemporary bank CEO. He believes changes introduced into the banking industry in response to the worldwide credit crunch were given impetus by the Occupy Wall Street movement.
“Indignant at social and economic inequality, and aggrieved by the excesses of the financial industry that led to the global financial crisis of 2008, the public demanded greater scrutiny of banking practices. In order to restore public trust in the industry and pre-empt any possible recurrence, this was a call regulators could not ignore.
“This gave rise to what I would call the ‘New Normal’. In this environment, regulatory requirements have increased dramatically. Banks have been placed under the spotlight with expectations of public accountability starker than ever before. Undoubtedly, these have been the most impactful changes to the banking landscape over the past few years.”
In an age in which digital technology allows information to be made public almost instantly, Tsien sees a greater need for banks to manage reputational risks more diligently. Meanwhile, the requirement for financial institutions to comply with a growing range of regulations increases both costs and the need for suitably skilled specialists.
However, the overarching challenge for today’s banking chiefs, in Tsien’s opinion, is the need to re-evaluate their business models for growth and expansion in the years to come, he says.
He explains that CEOs will need to assess if fundamental changes are needed under the new regulatory realities. “For instance, decisions will have to be made on whether it still makes sense to pursue an expansion strategy that emphasises geographical broadening or a global presence in multiple markets. With global operations in funding, shared investments and hubbing of operations being seriously challenged, regional banking may become a more attractive proposition.
“My view is that with scarce resources, banks will generally have to become more focused on fewer rather than more countries, deepening their presence in countries they have competitive advantages in.”
But alongside all these problems and puzzles, he sees great new opportunities for the industry – among them, the internationalisation of the renminbi. “I see tremendous growth potential for the currency’s use in trade, payments and investments. The growing importance of China on the world stage cannot be overstated and the rise of its currency in tandem will mean opportunities for banks that are well positioned to benefit from this trend.”
While Hong Kong’s established financial industry and close economic ties with China have provided the city with a unique competitive advantage, Tsien warns against complacency. “[Hong Kong’s] role as a financial centre cannot be taken for granted forever. It is already being challenged by other initiatives implemented by the Chinese government, like the Shanghai Free Trade Zone, the opening up of additional RMB clearing centres around the world, and strong competition from other well-established financial centres,” he says.
“As Hong Kong revamps itself to ensure its role as a financial centre remains relevant, CEOs here must understand the latest trends and developments across Asia. They must innovate with products and services to capture these opportunities and develop the right human capital to support the expanded role Hong Kong can play in regional trade, investment and capital flows.