DBS bank appoints Batra as Global Head of Sales

Yogini Joglekar /BS / Mumbai Dec 13, 2012, 15:47 IST

Sanjeev Lall to be designated as Head of IBG and Branches, India

Vivek Batra, presently head of Institutional Banking Group (IBG), India, is appointed as a Global Head of Sales for Transaction Banking.

 He will relocate to Singapore and operate from the headquarters of DBS Group. 

Similarly, Sanjeev Lall, who presently heads the bank branches in India will take on additional responsibilities as Head of Institutional Banking Group (IBG), in the country and will be designated as Head of IBG and Branches, India.

 He will continue to operate from DBS Bank India head office in Mumbai.

These appointments will be effective from January 1, 2013. this way DBS Bank tapped into its internal talent pool, announcing total four appointments in a row toda

GMR, not Wal-Mart, is our real worry

Shoppers entering a Wal-Mart store in Riverside, Illinois. Photo: AFP

Sundeep Khanna: mint :Wed, Dec 12 2012. 01 31 PM IST

Where Indian firms might be getting it wrong is in their estimation of how hard some govts are going after corruption

Instead of getting our collective knickers in a twist over the legality of Wal-Mart’s
lobbying efforts, we might be better off ensuring wannabe Indian multinationals have a clear permissible practices list.

In recent times, in countries as diverse as the Maldives, Bolivia, Bulgaria, Zambia and Zimbabwe, Indian business groups such asGMR, Jindal, Mittal and Essar have run afoul of local politics or rules. As we float our boats, hoping India’s new reputation as a global player pushes us into the big league, the country needs the equivalent of the US Foreign Corrupt Practices Act (FCPA), or even the UK’s Foreign Bribery Act, 2011.

Currently, India just has the inadequate Prevention of Corruption Act, which hasn’t been able to rein in corrupt practices at home, leave alone those in distant lands.

FCPA has two parts. The first prohibits US citizens and US firms, or those listed on a US stock exchange, from making and offering to make payments to foreign government officials to obtain, or retain, business or a business advantage. The second requires that companies maintain accurate books and records. And the onus is on the parent entities; they can be held responsible for the actions of their subsidiaries. Though approved in 1988, FCPA became robust only after the passage of the Sarbanes-Oxley Act.

For India, a country ranked 94 on Transparency International’s global corruption list, it is futile to pretend that its companies will act within the letter and spirit of the law when doing business, particularly in developing countries, which may themselves be dodgy about their business practices (on the same list Bolivia is 105 while Zimbabwe is 163).

Graft and corruption have always been a part of global business. Assuming, therefore, that a kickback is the best way to get a contract isn’t unreasonable. Where Indian companies might be getting it wrong is in their estimation of how hard some governments are going after corruption, propelled in part by a groundswell of global opinion against graft in business.

The full story of GMR’s ouster from the airport project in Maldives isn’t out yet, so we don’t know if any rules were bent when the contract was being awarded. But neutral experts have acknowledged that the original contract was structured too heavily in favour of GMR. That may have been merely a part of business negotiations. But in the absence of a specific law to modulate their behaviour, Indian companies have been left to figure out for themselves the Lakshman rekha.

What hasn’t helped is the government’s own pussyfooting around this issue. India, as a member of the International Monetary Fund, is committed to the revised Madrid Declaration unanimously adopted recently by the lending agency and declaring that “promoting good governance in all its aspects, including efficiency and accountability of public sector, and tackling corruption are essential elements of a framework within which economies can prosper”. But such declarations lack teeth.

The Anti-Bribery Convention of the Organisation for Economic Co-operation and Development, now signed by 38 countries, established legally binding standards to criminalize bribery of foreign officials in international business. India, along with China, hasn’t joined the convention yet. Alvaro Cuervo-Cazurra, Robert Morrison fellow and associate professor of international business and strategy at Northeastern University, in a paper, Who Cares about Corruption?, says that laws against bribery abroad act as a deterrent against engaging in corruption in foreign countries and that investors who have been exposed to bribery at home may not be deterred by corruption abroad, seeking instead countries where corruption is prevalent.

Increasing globalization implies grappling with uncertainty when the internal politics of a country or even regime change reverses or starts dictating business decisions. Even as Indian corporate credibility plummets with the GMR episode in the region, what is clear is that despite the bilateral treaties between government pairs—that today stand at 3,000 or more in the world— interpretation and lack of common standards leave companies to their own devices in manoeuvring in foreign shores. An unambiguous law laying down the rules of behaviour wherever in the world an Indian company operates, will serve as a guiding principle for those that may find it difficult to take a conscience call in the face of a multi-million dollar deal.

Inside India’s best boards

Mint :Mon, Dec 10 2012. 12 04 AM IST
The Aon Hewitt-Mint Best Managed Boards Study identifies organizations that reflect best practices in board governance

Why the best managed boards are really the best

A critical aspect of any study is to identify a set of practices and policies that other organizations can learn from and replicate. The Aon Hewitt-Mint Best Managed Boards Study had the same express objective of identifying the organizations that reflect the best practices in board governance and through it manage sustainable value generating companies. However, as we went through this exercise, we realized the inherent challenges in identifying any real “best practices” that organizations could emulate. It was a gradual discovery (or, may be, the confirmation of a suspicion) that processes and practices have no way of driving good governance and, at best, can be enablers. Good governance naturally lay in the intent of the individuals and organizations. However, we did discover a pattern in the way the best-managed boards approach the whole aspect of governance as opposed to the rest.

Enabling independence

While independence truly lies in the minds of the individuals concerned, the best-managed boards display a focus on ensuring that the constitution and structure of the board as well as the associated process provide a strong framework for ensuring independence. At the very outset, these organizations ensured that the process of selection of independent members to the board was driven by board committees that were constituted primarily of independent directors. The chairman/promoter was consulted, but the decision making was driven largely by this committee. We found our best-managed boards give a lot of importance to the role of a lead independent director. This individual had a clearly defined role of consolidating opinions and reflections of the other independent members of the board and putting forward, at all times, an unbiased point of view to the management/promoter group. These organizations provided their lead independent director with formal opportunities to convene meetings with only the independent members of the board, and also allowed them to interact with the management team directly without the presence of the executive directors. There was also a clearly articulated focus on the rotation of the board members, not only to infuse fresh thinking, but also to consciously uphold the independence of the individuals.

Driving diversity

The best-managed boards seem to actively drive diversity through the nature of skill sets that are represented on the board. Traditionally, a lot of Indian organizations have had three kinds of skill profiles constitute the majority of the independent directors—accounting professionals, lawyers and retired government officials. While there are obvious reasons for why this was so, we found our crop of best-managed boards structure their boards based on the nature of the business and, consequently, the kind of skill sets that the business would derive value from. We found these organizations have at least five different kinds of professional backgrounds represented on the board—and, in most cases, no skill set was found in two individuals. The other aspect about diversity in thinking within the board was driven by these organizations through a defined process for director rotation. Unfortunately, gender diversity still remains an issue across most boards, and not many of our best-managed boards had any gender diversity.

Focusing on minority stakeholders

In the Indian context, where a bulk of the market capitalization is managed by promoter-driven organizations, a structured focus on the minority shareholder perspective becomes an important aspect of ensuring good governance. This is naturally an intangible dimension in the governance structure. However, we found the best-managed boards drive this through a set of very tangible means—while some had a stated policy of evaluating all the decisions from the perspective of the minority shareholders, at its most basic level this was implemented through the nature of templates that the board required the management to provide information/data on for taking decisions.

The active role of these boards in stepping out and talking to the management and the shareholders at formal or informal gatherings was also prominently seen as a way of ensuring stakeholder views were reflected. Most board members in these organizations actively participated in annual general meetings (AGMs). Finally, we found our list of best-managed boards had the lowest average turnaround time for addressing investor complaints and, quite surprisingly, the highest attendance levels across the entire study set in shareholder grievance committee meetings!

Focus on managing risk and sustainability

Risk management was a stated policy across almost all the organizations we studied, but the best-managed boards displayed a few unique characteristics in their approach towards managing risk. Like many others, they had a risk-management committee or had a clearly defined risk-management charter as a part of the audit committee. This committee met at least twice during the course of the year, and the attendance at these meetings was greater than 90% for all members. Finally, there was a clear policy towards evaluating and disclosing related party transactions.

The board members in these organizations were intimately involved in significant strategic decisions and were instrumental in ensuring that sufficient and high quality information was shared with the board by the management team. The board members also actively involved themselves in interacting directly with external advisers, suppliers, etc. to understand the real implications of decisions or events.

In spite of this, most board members we spoke admitted to the fact that it was enormously difficult to actively understand the nature of risk that might be hidden within the businesses and, eventually, the role of the board had to be limited to ensuring that the processes for reporting of data was efficient enough for risks to surface.

Evaluation of board effectiveness

The ability of the board to step back and evaluate its own performance is a critical reflection on the board’s confidence in the value it is providing to the organization. We found most organizations in India did not have a structured process for board performance evaluation and, as a matter of fact in many cases, did not even feel the need for any such performance evaluation.

However, we found most of our best-managed boards took a formal approach towards the evaluation of performance of the board and its members. This evaluation process was driven, in most cases, by external agencies that reported the performance to the chair of the board or to the chairperson of the nominating and governance committee.

We sought two data-based validations of the effectiveness of the boards that were finally adjudged as the best managed—their overall attendance record and their ability to drive performance of the business in the long run. We found the best-managed boards had an average board attendance record of greater than 85% across all board and committee meetings. We also found these organizations seemed to consistently deliver positive shareholder returns over five- and 10-year cycles.

The best-managed boards effectively were the best managed for three simple things—the board members had the capability and the willingness to contribute to the business; the management/promoters respected and were open to feedback from the board and, finally, the processes were laid out to not inhibit the independent members of the board but to actively contribute. While it is difficult for organizations to go about learning about the first two aspects of what makes best-managed boards, we hope that the diligence in the design and implementation of board processes is emulated by a larger section of organizations in India.

Here's a Better Way to Remember Things

H B R  :by H. James Wilson  |   8:00 AM December 11, 2012

A group of Brazilian entrepreneurs who have come north for a week's worth of ideas on growing their ventures, are leaving a class, when one of them breaks from pack toward the coffee maker, where I'm heading too. He works the machine first, reciting something again and again in Portuguese as he watches his cup fill.

"Excuse me?," I say, unsure he's talking to me.

"Sorry, I am repeating what the lecturer said," he explains, "so I remember later."

Remembering new information is an underappreciated skill. The fact that most of us have never evolved our technique beyond the rudimentary and ad hoc approaches we used as middle schoolers suggests this. It is required for any sort of professional growth, since the need to learn is high, and can separate the exceptional performances from the mediocre ones. After all, would you prefer to hire the consultant who presented using cue cards or the one who pitched from memory?

Fortunately for us, insights from cognitive psychology have vastly improved our understanding of how we remember. Many of these are accepted wisdom in the neurological and psychological realms. But it hasn't been easy to transfer that knowledge to actual tools for individuals. Until recently, anyway. Easy-to-use auto-analytic tools that exploit our understanding of memory can now help you treat remembering as the skill it is, and improve it the same way you improve any professional skill, like public speaking. Here's how to get started.

First, focus on the right unit of measure. Yes, your objective is to remember better, but you'll get the best results by focusing on forgetting as your base unit of analysis.

Experimental psychologist Hermann Ebbinghaus's pioneering discovery of the forgetting curve shows that we forget the majority of newly learned information within hours or days, unless we review it again and again. This alone won't be a shock to many of us. But Ebbinghaus demonstrated how systematic forgetting. It occurs exponentially on a predictable curve — researchers call this "exponential decay."

Different things you're trying to remember will have different curves. For instance, that piece of operations data that you remember clearly, since you prepped and presented it to your team, has a flatter downward curve (you'll remember longer) than that the now hazy sales figure a colleague mentioned during the same team meeting. Evenso, each curve is predictable.

Practice remembering at the right time. Think about how you really use your memory for things that matter to you and your career, like in preparing for a speech. Maybe you're a crammer who tries to prime your memory by doing as many dry-runs as possible the night before. Or perhaps you've committed to ploddingly rehearsing your lines each afternoon for a month from 3 pm to 4 pm. Or maybe you're an improviser who finds time here and there, rehearsing what you'll say at random moments between meetings.
The forgetting curve suggests you should follow a very different memorization process than any of these entail. It shows that there's a precise moment that's best for practicing your lines. That moment is just before you are about to forget them.

So sessions aimed at learning new content should happen at "about-to-forget" moments, with spaces between practice sessions increasing as you approach mastery. This learning process is called spaced repetition, and can help us avoid the inefficiencies and risks of ad hoc memorization methods like cramming.

Incorporate auto-analytics tools. OK, so you get the idea that you should try to commit things to memory only when you are just about to forget them. But how do you know when that critical moment is about to happen? How do you know what your forgetting curve looks like?

Almost like your fingerprint, your forgetting curve is very different from anyone else's. But a type of auto-analytics tool called "Spaced Repetition Software" or "SRS" can learn the idiosyncrasies of your memory, and then ping you to practice at the optimal time.

These mobile and desktop tools are like automated flashcards, though you work through your "pile" according to your personal algorithm and the rules of spaced repetition.
They fine-tune your algorithm using a straightforward rating system. Let's say you're a newly appointed manager learning some finance for the first time, and you're trying to improve your recall of many new terms. When the term "Leverage" appears you recall its meaning effortlessly and assign it an A. But when "Arbitrage" appears you assign it a D since you must labor to recall its basic meaning, and even then it remains fuzzy.

The tool continually hones its prompts based on your input. No doubt you'll see "Arbitrage" sooner than "Leverage," as practice sessions for the second concept would be scheduled later and less frequently to maximize efficient memorization.

Map your practice to your priorities. Finally, be very selective when choosing what you want to get better at remembering. In theory, you could work on mastering numerous new domains at once, but experimental research and case studies suggest this isn't practical for full time workers.

Focus instead on a single development opportunity integral to your career. (See the accompany chart for examples of cases where you could use SRS.) Does this opportunity require learning new terms, concepts, or narratives? If yes, then it makes sense to focus on hacking your memory with these computing tools to pursue it.

In short, when you're on a steep learning curve, remember the forgetting curve, and then beat it.

H. JAMES WILSON

H. James Wilson is senior researcher at Babson Executive Education.

 He is co-author ofThe New Entrepreneurial Leader: Developing Leaders Who Shape Social and Economic Opportunity (Berrett-Koehler Publishers, 2011).

Management Tip of the Day,

HBR :DECEMBER 13, 2012 Focus on a Career Direction, Not a Specific Job In an unpredictable world, traditional career planning is a waste of time. It's close to impossible to pinpoint exactly where you'll be in five years and work backwards. Instead, you need to see opportunities as they arise and take smart steps down the right path. Begin with a direction, based on a real desire. While you can't say what exact job you might hold down the line, you can say what matters to you. Is it working in a specific industry? Managing people or not? Having work/life balance? Your answers will point you in a productive direction. Then think about the means you have to move in that direction: What are your talents and skills? Whom do you know? What do you know? With these assets in mind, you can act as opportunities present themselves. Today's Management Tip was adapted from the HBR Guide to Getting the Right Job.

HSBC to pay record $1.9 bn US fine in money laundering case

The settlement, which will be in the form of a deferred-prosecution agreement, is the largest by far that a US or European bank has agreed to amid a crackdown in the United States. Photo: AFP

 carrick mollenkamp :MInt :Tue, Dec 11 2012. 07 41 PM IST

HSBC Holdings Plc has agreed to pay $1.92 billion to settle a multi-year US criminal probe into money-laundering lapses at the British lender, the largest penalty ever paid by a bank.

HSBC admitted to a breakdown of controls and apologised in a statement announcing it had reached a deferred-prosecution agreement with the US department of justice, as was first reported by Reuters last week.

“We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again. The HSBC of today is a fundamentally different organisation from the one that made those mistakes,” said chief executive Stuart Gulliver.

“Over the last two years, under new senior leadership, we have been taking concrete steps to put right what went wrong and to participate actively with government authorities in bringing to light and addressing these matters.”

The bank said it expected to also reach a settlement with British watchdog the Financial Services Authority.

US and European banks have now agreed to settlements with US regulators totalling some $5 billion in recent years on charges they violated US sanctions and failed to police illicit transactions.

No bank or bank executives, however, have been indicted as prosecutors have instead utilized deferred prosecutions.

HSBC said it would pay $1.921 billion, continue to cooperate fully with regulatory and law enforcement authorities and take further action to strengthen its compliance policies and procedures. US prosecutors have agreed to defer or forgo prosecution.

Last month, HSBC told investors it had set aside $1.5 billion to cover fines or penalties stemming from the inquiry and warned costs could be significantly higher.

Analyst Jim Antos of Mizuho Securities said the statement on Tuesday indicates an extra $420 million for the settlement costs, calling it a “trivial” figure in terms of the company’s book value. “But in terms of real cash terms, that’s a huge fine to pay,” said Antos, who rates HSBC a “buy.”

Hong Kong listed shares of HSBC nudged up slightly on Tuesday, adding 25 cents to HK$79.75.

US justice department officials are expected to detail the settlement later Tuesday.

HSBC’s settlement is the latest chapter in an embarrassing period for the bank, the result of a lengthy probe into Europe’s biggest bank by US law enforcement agencies as well as a US senate panel that in July issued a scathing review of HSBC.

Anti-money laundering controls

In its statement, HSBC said it had increased spending on anti-money laundering systems, exited business relationships, and clawed back bonuses for senior executives. It also cited the hiring last January of Stuart Levey, a former top US treasury department official, as chief legal officer.

Under a five-year agreement with the justice department, HSBC agreed to have an independent monitor evaluate its progress in improving its compliance.

HSBC’s settlement comes a day after rival British bank Standard Chartered Plc agreed to a $327 million settlement with US law enforcement agencies for sanctions violations, a pact that follows a $340 million settlement the bank reached with the New York bank regulator in August.

Such settlements have become commonplace. In what had been the largest settlement until this week, ING Bank NV in June agreed to pay $619 million to settle US government allegations it violated sanctions against countries including Cuba and Iran.

Other banks that have reached settlements over sanctions violations are Credit Suisse Group of Switzerland, Lloyds Banking Group and Barclays Plc in Britain and ABN Amro Holding NV, a Dutch bank acquired by Royal Bank of Scotland Group Plc and a bank consortium in 2007. In the United States, J.P. Morgan Chase & Co., Wachovia Corp. and Citigroup Inc. have been cited for anti-money laundering lapses or sanctions violations.

HSBC’s failings date to 2003, when the Federal Reserve Bank of New York and New York state regulators ordered the bank to better monitor suspicious money flows.

In 2010, a consent order from the Comptroller of the Currency (OCC) ordered HSBC to review suspicious transactions moving through the bank. At the time, the OCC called HSBC’s compliance programme “ineffective”.

In 2008, the US Attorney in Wheeling, West Virginia, began investigating HSBC and how a local pain doctor allegedly used the bank to launder Medicare fraud.

Ultimately, that prosecutor’s office came to believe the case was “the tip of the iceberg” in terms of the suspicious transactions conducted through HSBC, according to documents reviewed by Reuters and reported earlier this year. REUTERS

Islamic banks to expand, compete for mainstream clients: study

The total of all commercial banks’ Islamic assets is estimated to reach $1.55 trillion this year and $1.8 trillion in 2013 the report said. Photo: AFP

Bernardo Vizcaino :REUTERS:Mint :Mon, Dec 10 2012. 12 34 PM IST

Islamic banking assets to reach $1.8 tn in 2013; drop in profitability lower than for conventional banks

Manama/Kuala Lumpur: Islamic banks are set to expand as they compete increasingly with conventional lenders in attracting mainstream customers, according to a report by consultancy Ernst & Young released on Monday.

The total of all commercial banks’ Islamic assets is estimated to reach $1.55 trillion this year and $1.8 trillion in 2013, the report said. Gulf-based Islamic banks now have $450 billion in assets, about 30% of the total.

Islamic banks will grow as they focus on customers who expect more than just sharia-compliance in terms of products and service and have traditionally relied on conventional banks.

“Success will be defined in the core markets through the transformation of Islamic banks so they are able to compete with the much bigger, conventional boys for mainstream customers,” Ashar Nazim, Islamic financial services leader at Ernst & Young, said.

Islamic finance follows religious guidelines such as a ban on interest and on pure monetary speculation, with its core markets in the Middle East and Southeast Asia.

The role of pure Islamic banks will also become important by comparison with banks that deliver products just through Islamic windows at their existing branch networks.

“There is no truly fully fledged Islamic bank (that stretches) across international markets or even regional,” Nazim said.

He identified a group of 20 Islamic banks as likely candidates to become significant regional institutions. They now account for 55% of total Islamic banking assets after having grown over the past three years at an average rate of 16.2% a year, Nazim said.

“It is a lopsided industry at this point ... only 13 Islamic banks have $1 billion or more in equity,” Nazim said, adding that the difference between small and large Islamic banks will widen.

Between 100 to 150 new financial institutions could be launched in the next five to seven years to cater to markets that are new to Islamic finance or have low rates of penetration including Egypt, Libya, Indonesia, Pakistan and Bangladesh, he predicted. Ten of the 25 fastest growing emerging markets have large Muslim populations.

Profitability lagging

Even while growing, Islamic banks have experienced a decline in profitability, and their average return on equity lags behind that of conventional banks by 20%, Nazim estimated.

Return on equity for both Islamic and conventional banks has deteriorated since 2008 in the wake of the financial crisis, dropping to 12% in 2011 for Islamic banks, compared with 15% for conventional banks, the report showed.

This 3% gap is much wider than the 1% difference observed in 2008-2010.

The return on assets for Islamic banks dropped to 1.3% in 2011 from 1.7% in 2008, while rising for conventional banks to 1.7% in 2011 from 1.5% in 2008.

Operating expenses are 50% higher for Islamic banks, while their cost of funds still remain more competitive than for conventional banks, the report said.

Some banks have started to focus on improving efficiency and reducing costs, which could boost their profit margins by about 25% within two to three years, Nazim said.

“The severity of this performance challenge has put many Islamic banks in a difficult place. They have taken the decision to transform the way their businesses work,” Nazim said