Author: World Finance

Italian wealth managers respond to new regulations and millennials

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The international wealth management sector is constantly growing and evolving; adapting to the needs of a new generation, and embracing digital technology. Gianpietro Giuffrida from BNP Paribas Wealth Management explains the challenges and the changes that he’s seeing in the wealth management industry today: technological advances, new expectations in customer service from millennials, and price pressures from new regulations like MiFID II.

World Finance: Tell me more about the challenges and the changes that you’re seeing in the wealth management industry today.

Gianpietro Giuffrida: The wealth management industry is currently undergoing its biggest challenges since the financial crisis. Technological development is bringing a great digitalisation and automation to financial services. The new generation called millennials tends to demand a great personalisation in customer services. Technology change is generating demand: simple products through new digital channels.

Unfortunately, loyalty rates are dropping, and wealth managers must overcome this.

World Finance: How can technology be used in the wealth management industry to improve things for customers and the industry itself?

Gianpietro Giuffrida: Customers more and more are looking for totally digitalised solutions. Technology can help a wealth manager to deliver services, and also to adapt to the evolving regulatory climate.

At the same time, the wealth manager should also employ conventional approaches, such as brand cultivation and relationship management, to boost customer trust and to fulfil the growing demand for focuses for service solution.

World Finance: So what is the reality for private banking in Italy today?

Gianpietro Giuffrida: The Italian wealth management market offers a good example for how industry in general is starting to change. The change is driven by rising costs, in part from new regulations like MiFID II.

In Italy, wealth is normally concentrated in the central or northern regions. In terms of financial assets, the total wealth of households with minimum €500,000 amounts to over €1tr.

Another important characteristic of the Italian market is the large number of business owners, who may control the small and medium sized enterprises. Many business owners think that the family office is the best solution to manage their wealth; consequently, Italian banks have to work with these family offices.

World Finance: How is BNP Paribas Wealth Management responding to these changes in Italy? What are you hoping to achieve?

Gianpietro Giuffrida: BNP Paribas hopes to be a leader in transforming the wealth management industry by 2020. This objective will be a change in three main ways. The first, to invest in remote, digital interaction. The second, to improve services to meet the expectations of the younger generation. And last but not least, building innovative support for our customers. For example, Privilege Connect, our private banking, tailor-made service centre, providing 24/7 support.

The customer is in the head of our commitment. We want to be the most popular and recommended bank of Italy.

World Finance: Gianpietro, thank you very much.

Gianpietro Giuffrida: You’re welcome.

Thai Life Insurance embeds ‘loving, caring and sharing’ in viral campaign

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Thai Life Insurance became an internationally recognised brand when its tear-jerking commercials became a viral sensation three years ago. Its marketing strategy – dubbed ‘sadvertising’ – has created some beautiful art, and helped the 75-year-old business grow its assets under management to $9bn. Chai Chaiyawan, President of Thai Life Insurance, explains his vision of the company as a people business, which puts human value first.

World Finance: How are you managing the organisation to succeed, and grow into a leading life insurance company in Thailand?

Chai Chaiyawan: Actually, the key of our business is the people. So, that’s why our vision is: ‘We are in the people business.’

Running the business as a people business, bringing our company to focus on human value more than business value. So as a company, we are a human value -centric company. With that focus on the stakeholders, customers, shareholders, partners, employees, and also the people in society.

As human nature, we cannot live without others. So we are human because we have compassion and love for each other. We have embedded a philosophy of humanism in our core policies, because we believe that if we can build love and compassion in the company, then the staff and the salesforce will take care of the company, and take care of the community.

World Finance: And those concepts of humanism come through in your branding as well; how do you create it?

Chai Chaiyawan: The most valued assets of the company are brand and trust, that we build towards the customer.

So, Thai Life Insurance aims to be the brand that inspires the people in society, through television commercials and by the concept of value of life and value of love.

All our television commercials must be fresh and catchy. With a controversial issue, and a real issue – presented in a memorable, spiritual, emotional marketing format – to let the audience feel gratitude. Which creates the identity of Thai Life Insurance.

World Finance: So where do the ideas come from, and which is your favourite?

Chai Chaiyawan: Actually the ideas come from the words loving, caring, and sharing. When we create the advertisements, we try to point out that life insurance is essential to their life and their love.

Actually, I love all Thai Life Insurance television commercials. But the well-known one is called ‘The Dumb Father.’ That was released in 2011. We tell the viewer that, maybe we never had the best father; but at least we have the father who loves us with all their hearts, and without condition.

World Finance: So what do you hope to achieve for Thai society through Thai Life Insurance?

Chai Chaiyawan: Actually, we aim to be the life inspired brand in Thailand. We want the people in society to realise the importance of life insurance, through the value of love and the value of life.

It comes from the royal remark of our late king, King Rama IX. “The value of life is not wealth or longevity; the precious life is worthiness of our life and others.”

World Finance: And finally, what does the future hold for Thai Life Insurance – and for your customer relationships?

Chai Chaiyawan: The goal of Thai Life Insurance is to be the most trusted brand, that inspires all Thais. This will resolve in Thai Life Insurance growing sustainably, and hope that Thai Life Insurance will go to the stable organisation, run our business based on customer and staff benefit, will give us sustainable growth.

World Finance: Chai, thank you very much.

Chai Chaiyawan: Thank you.

Mashreq Bank: Digitisation mustn’t leave face-to-face customers behind

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Mashreq Bank celebrated its 50th anniversary in 2017. It’s the UAE’s oldest bank, and has been innovating throughout its history, achieving a number of notable firsts in expanding financial services in the country. Head of Retail Banking Subroto Som talks us through those achievements, and Mashreq’s ongoing internal digitisation journey. But, he explains, there are still consumers who want to talk to a branch employee, and they cannot be ignored. Digital-only banks like Mashreq Neo are a choice for consumers – they shouldn’t be the be-all and end-all of financial services. He also discusses the challenges in the UAE’s retail banking industry, with some consolidation in the hyper-competitive market already happening.

World Finance: Mashreq Bank is celebrating its 50th anniversary this year; talk me through some of the key achievements in that history.

Subroto Som: In 1978 we were the first and only bank to have established a presence across all the seven emirates of UAE. Then in 1981 we were the first bank to introduce debit cards and credit cards in the UAE; followed immediately by introducing ATMs in 1983.

Then in more recent times we were the first bank to introduce online banking, followed that up soon thereafter to introduce mobile banking in 2008. The UAE is introducing digital and mobile wallets: we were the first bank to bring the Samsung Wallet in the UAE, and we were in the first batch of banks to launch Apple Pay in the UAE, and we already launched Mashreq’s own proprietary Mashreq Pay wallet, also to help our consumers in the UAE.

Mashreq has always been a bank that has been innovative; it’s in our DNA. And it’s a bank that’s ready for the future. In fact in many ways, it is a bank that’s shaping the future.

World Finance: So does the new digital-only Mashreq Neo point to challenges in the physical retail space?

Subroto Som: The bank has actually increased the number of branches even in the last 12 months: we’ve actually increased by 12 new branches. But I think what happens in a branch has changed significantly.

To give you an example, when you go to a branch and you want to update your personal information, you typically will be asked to fill out a form, sign, the branch will verify your detail, will send to the back office, the changes will be made, and the process could take anywhere from six hours to a couple of days. It’s a very manual process filled with a lot of paper.

The same thing could be done in mobile banking, or in online banking by the consumer, by just inputting it. So we thought about just changing the branch process, that when a customer came to do a similar activity, we could get him to input the details directly onto the system, and get it done instantaneously.

We have been investing in what we call converting the bank digitally inside for quite some time. And that uses the whole process re-engineering, big data analytics, AI and robotics. So that journey has been on for quite some time. So today’s branch is a lot more digital, it has a lot more machines, it has a lot more things that consumers can use directly. And you are not depending to talk to an individual.

But at the same time there are consumers who are very comfortable talking to an individual, talking to a branch employee, and you cannot ignore them.

World Finance: What challenges are you experiencing in the retail banking space in the UAE?

Subroto Som: As you know, UAE is a very competitive market, for the market of its size: we have over 30 retail banks. So the first challenge will be consolidation, and I think some consolidation is happening.

The second is as I mentioned; the credit bureau has come into place for the last couple of years, and that has shown that there are segments and pockets of the economy where there is high leverage, and de-leverage is happening. That has its own stresses and challenges.

Most banks are moving towards digital, and hence the interplay of digital process and banks’ legacy system is a challenge in itself.

And last but not least, we should not underestimate the balance between ease of a transaction and the security and safety of the consumer and the bank. And there’s a constant battle to balance the two.

So we have always been innovating. We spend huge amounts of dollars and dirhams in staying ahead on technology, on finding the right solution and new products. And we’ll continue to do so.

Our key interest is in bringing the best in breed products to the consumer, and looking after consumers’ convenience and safety. We will continue to invest in that.

And it’s a journey. It’s a journey with the consumer. Many of the things that are happening are new; it’s a path that we are confident of, and we have been on this journey for quite some time.

World Finance: Subroto Som, thank you very much.

Subroto Som: Thank you very much.

Mashreq Neo: UAE’s new bank offers fresh experience for digital natives

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Mashreq Neo is the new full-service digital-only bank for customers in the UAE. This newest bank is the child of the UAE’s oldest: Mashreq Bank, which has 50 years of experience providing award-winning financial services in the country. Mashreq’s Head of Retail Banking Subroto Som explains how the new bank was created to cater to the needs and wants of the emerging connected generation: digital natives who want to do everything online, on-the-go, and with as little human interaction as possible. You can also watch the second half of this interview, where he explains that Mashreq Bank is still maintaining and actually expanding its physical branch network; and discusses the challenges for retail banking in the UAE.

World Finance: Mashreq has a long history of innovation; tell me more about this latest offering.

Subroto Som: Mashreq Neo is a retail bank targeted at consumer behaviours and the consumers that we see emerging in the UAE. We call this the connected generation. They are always connected through smartphones; through social media; through their peers, friends, and family. And they get influenced by them.

Mashreq Neo is a retail bank targeted at this connected generation. It offers you the flexibility of multi-currency accounts. It facilitates payments through wallets. It allows you remittances. It allows you to do lending. It also connects you to 30 stock exchanges of the world, to buy and sell stocks. And we will bring new features to the Mashreq Neo customers as we work together.

World Finance: What are the particular needs and wants of this connected generation, and how are you catering specifically to them?

Subroto Som: So let me give you three examples; first in just opening the account. All it takes is four steps and less than five minutes, and the consumer will have an account.

You have to download the Mashreq Neo app. Upload your Emirates ID, input a few details. The bank will send you an OTP to verify that it is you who we are talking to. You’ll choose your password and your username, and you’re done.

The very next day, a bank employee will visit you to verify your documents, take your signature (which is a regulatory requirement) and hand you over the debit card, the credit card, and the chequebook. And that is the account set up.

Second, you don’t need to visit a branch, or talk to anybody, ever again. Mashreq Neo has the capability through your mobile phone or through online banking that you can do all your transactions without visiting a branch ever again.

Third, to give you a sense of the flexibility and the personalisation that you can do. Normally in a credit card you get rewards, either in the form of cashback, miles, or reward points. Mashreq Neo credit card offers you the flexibility to choose any of these three, and at an interval of every quarter you can choose to move from one to the other.

These are three examples of how this connected generation is looking for flexibility, convenience, and things that matter to them in their retail banking.

World Finance: It’s very early days, barely a month at time of recording; how has the reception been?

Subroto Som: We have been very pleased with the response that we have got from the consumer. We had planned for a certain number of accounts to be opened in the first three months, by the end of the year. I’m pleased to say that we will cross that number even before we end the first month. The numbers will be far more than we had anticipated, and we are extremely pleased about it.

But let me also share one other thing. In the first couple of days, when we launched the product, we actually saw a lot of bankers applying for the product. Not only from UAE, also from elsewhere! We were getting worried, is it only for bankers? But soon thereafter we started to get real customers also applying for Mashreq Neo.

World Finance: So what growth do you see in this youth segment?

Subroto Som: I would not call it just a youth segment; one of our oldest customers who still uses mobile banking is as old as 92.

It’s actually aimed at people who are digitally savvy, they are seeking convenience and they are comfortable with the use of the new technology. And we are trying to embed retail banking within their other activities.

So to me, the growth potentials are enormous. Research recently showed that close to 80 percent of consumers in the UAE do do some part of their banking on mobile. We have seen in our customer base that there’s 45-50 percent of customers who do all their banking through mobile or online banking, and do not visit a branch. So I am very hopeful that there is a lot of potential of new customers moving from traditional channels to Mashreq Neo.

Peer-to-peer solar energy trading coming soon to Bangkok from BCPG

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BCPG Public Company started life as the green power business unit of Thailand’s Bangchak Corporation. In September 2016, president Bundit Sapianchai led the company to a successful IPO on the Stock Exchange of Thailand. Today the business has investments in solar, wind and geothermal production, with a goal of operating 1,000 MW of renewable energy by 2020. Bundit Sapianchai explains the company’s current assets for wholesale production – and its strategy to pivot into retail. BCPG is creating a smart green energy community of pro-sumers: households with solar panels, generating and trading their own energy, peer-to-peer.

World Finance: BCPG Public Company started life as the green power business unit of Thailand’s Bangchak Corporation. In September 2016, president Bundit Sapianchai led the company to a successful IPO on the Stock Exchange of Thailand. Today the business has investments in solar, wind and geothermal production, with a goal of operating 1,000 MW of renewable energy by 2020. Bundit Sapianchai joins me now.

Talk me through your current assets.

Bundit Sapianchai: BCPG is running green power plants throughout the region. Actually it’s four countries. In the Thai market we have 200 MW of solar in operation. We have 200 MW partfully owned in Japan. We also have wind energy in the Philippines, and another 180 MW in geothermal in Indonesia.

So what we have now is a mix of technologies. But if you calculate everything in solar equivalent it’s already 1,000 MW. So we’ve achieved our target beforehand.

World Finance: You’ve had a very successful year since you listed; managed to double your market capitalisation. What’s the next stage of growth for BCPG?

Bundit Sapianchai: Our business model is wholesale. We produce green energy, and then we sell to the grid company, the transmission line. But we would like to move from wholesale to retail.

The whole industry is shifting from a conventional way to a smarter way. It’s shifting from centralised to distributed; consume only to pro-sumer, where people can produce and trade their own energy, peer-to-peer.

Meanwhile, our baseload of wholesale still has to be expanded as well. So it’s a mix between wholesale and retail.

World Finance: And to that end you’ve partnered with one of Thailand’s largest real estate developers to create a smart green energy community; tell me more.

Bundit Sapianchai: Our plan is to build our very first peer-to-peer energy trading community. That community, they have housing, they have condominiums, they have a school, they have a hospital, they have a mini-mall. So we will put solar on every roof in the community. And once the system is producing energy, we’ll put our energy trading platform – we call it the internet of energy – where every person can trade their energy directly, without any middle man anymore. Using a blockchain technology.

We started doing the engineering already. The software is in place, it’s ready. The whole system will be up within another four to six months in Bangkok. This will be the first one in Thailand, or even in south-east Asia.

What’s quite exciting about this is, we can show to the country that you have a choice to save on your bill, you have a choice to increase your revenue by selling your surplus energy. It’s a new energy economy, so people like us will have a better energy life.

World Finance: And what other strategies, technologies and countries are you exploring?

Bundit Sapianchai: So, the wholesale business model: we’re looking for M&A opportunities throughout south-east Asia. We’re open for any opportunities.

Retail is all about knowing your customer, so we’ll try to focus in Thailand first. And, who knows? Because the platform is a global solution.

World Finance: And how are you maintaining good corporate governance as you grow?

Bundit Sapianchai: For me, good governance is all about performance and trust. You have to perform well with a good strategy and implementation. You have to make sure that you’re running your business in a good way, in a transparent way. You disclose all the information. So, if you can trust and you perform well, you have good strategy and implementation plan. I think that we are in good shape in managing the company in good governance.

World Finance: Bundit, thank you very much.

Bundit Sapianchai: Thank you.

Egyptian Steel CEO: Investing during tough times is the right thing to do

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Ahmed Abou Hashima is CEO and Chairman of Egyptian Steel, which he co-founded in 2010. By continuing to invest in the business through Egypt’s 2011 revolution, he has grown the company into one of the most important – and sustainable – steel manufacturers in the country. He explains the growth of Egyptian Steel, and the foundation of his new buildings material complex. This video is mostly in Arabic with English subtitles.

World Finance: Talk me through the growth of Egyptian Steel.

Ahmed Abou Hashima: Egyptian Steel was established in 2010, before the revolution. After the revolution everyone expected that we would halt our operations. But I persisted. I had faith in my country, and I believed in what I was doing; and that the right decision is to invest during rough times.

Now we have 4 steel plants, producing 2.3 million tons of steel annually. We chose a prime location for each: Port Said, Al Ain Al Sokhna, Alexandria and Beni Sueif. They’re also equipped with the latest of the latest technologies. I’m proud of what we achieved. We reached this level during a time where no one else was investing. The future is ours, and I never regretted investing during this time.

World Finance: Most recently you’ve been creating a building materials complex, to act as a one-stop shop for the construction industry.

Ahmed Abou Hashima: Yes, now we have Egyptian Cement and Egyptian Building Materials. I want to adopt this new approach to have the industries of all building materials under one roof. The contractor of the construction company can buy everything from us: cement, steel, blocks, lime, gypsum, everything.

I see this as a new model, probably not available elsewhere in the world, where your shareholders have all these industries within the same group. This is a new ideology, and it reduces the risk: if one company makes gains and the other doesn’t, they complete each other.

By the end of 2018, this whole dream will be realised, as the cement factory and the seven factories of the building materials complex will be complete and operational by the end of next year; or by the beginning of 2019 at the latest.

World Finance: And what other expansions or projects are there in the pipeline?

Ahmed Abou Hashima: I am always keeping an eye on new business fields that we can venture into. For example, we are interested in hotels, since in my opinion tourism is the fastest method to regain the strength of our economy, because this is hot money entering directly.

Any other opportunities that arise in Egypt will be of interest to me. I believe in this country and its market, which I invite all investors globally to consider. Egypt has a high demand and potential in so many fields. It can reach a high economic growth rate in a very short time. I invite them to enter this market with no fear.

Egypt promises that the return on their investments will be very high; and I’m saying this out of my first-hand experience in investing in Egypt. I invested during a very rough time, right before the first revolution; then a second revolution happened. Now the atmosphere is much more stable on both the political and economic fronts. I’m not from the government, I’m from the private sector; and I’m telling them to come to Egypt, have no worries: you will make good money with a very decent ROI.

World Finance: Ahmed, thank you very much. Shukran.

Ahmed Abou Hashima: Thank you Paul, thank you.

Bank of the West: Enhancing global solutions with local relationships

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International business brings international complications. That complexity brings uncertainty, disruption, and events we can’t control. Jean-Marc Torre, senior executive vice president and commercial banking group head for Bank of the West, explains how the bank works with customers to ease those complications. Offering a global network through BNP Paribas, Bank of the West also works to develop local relationships – and to this end has established a number of new commercial banking centres in key commercial locations of the US, to offer closer, more customised support to new geographies and industries.

Jean-Marc Torre: Why business is so complicated? I think in the business environment, everyone understands that we live in a complex world where there’s a lot of uncertainty, possible disruption, and events we can’t control.

It has been the case before, but I think it’s never been that much, and with that frequency, as it is today.

We are now in an environment where more things happen that we cannot predict than before. So in the business community, how we can deal with it is by collaborating, discussing, and looking at all the facets of it.

We have to be ready to deal with what we cannot predict, so how to deal with it is to have flexible solutions: being clear on what you want to achieve, but being flexible in how you do it.

World Finance: How are you collaborating with your partners to help them identify opportunities for growth?

Jean-Marc Torre: The business community, working particularly internationally, have developed different models. But one key is to have strategic and trusted partners. Selecting the right ones, and having the right level of dialogue, is I think critical.

When you talk about growth, particularly internationally, one essential aspect to make the difference between global and local is having global solutions but being also able to leverage the local possibility and solutions you have.

One example is cash pooling: people talk about this as a global capability that companies internationally need. You can see cash pooling as a way to centralise treasury. Then you have control globally. But this is not a substitute, to multi-currency liquidity management. This is where you design that you may want to keep dollars in the US, because interest rates are better than in Europe.

Again, you have to go into understanding what you want, and go beyond the solution to achieve your strategy. This is possible only because you have a strategic relationship with a bank that has got not only the capabilities, but also the ability to balance the local and the global.

World Finance: Innovation is also incredibly important; how do you work with clients to help them identify ways to innovate, and gain a competitive advantage?

Jean-Marc Torre: To become a competitive advantage, I think it’s a question of more developing a culture of innovation, rather than finding the innovation that will change the world or your business immediately.

The question is, not to be innovative for the sake of being innovative. I’ll give you the example of real-time payments: it’s a great advance, and who doesn’t want it? But at the same time you need to be thoughtful of, do you need that for everything, and do you have the level of control of the processes that allow you to take the maximum benefit out of it?

It’s a combination of having the products; but you must also have the dialogue, or be open to the discussion, to see what is best for you, and what are the consequences to make best use of them?

World Finance: You’ve established a number of new commercial banking centres to help grow Bank of the West into some new markets; tell me more.

Jean-Marc Torre: We again want to build relationships. So if we develop product capabilities or new geographies, it’s because there’s a need in our customer base, and we see that we can bring new services or new support to help our customers grow. Because this is how we’re successful: only if our customers are.

It’s all about how we can be a global and local effective partner. If I take the example of Cleveland, our latest office, we have important international customers that had a local office there. The company globally had great ideas about how to optimise their treasury and their various products. So the local management of our customer and the local manager of Bank of the West there developed a relationship and understood that there were interesting and local solutions that could improve the structure they had.

And I think this exemplifies how important being nimble, being local, and building relationships at all levels between the bank and international companies makes it work.

World Finance: Jean-Marc, thank you very much.

Jean-Marc Torre: Thank you.

Empresta Capital adopts SPM standards to gauge social investment impact

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Investors in Brazil are looking to alternative investments for decent returns, as the government’s bond rates have dropped from 14.5 percent in 2016 to an expected seven percent by the end of 2017. One of those alternatives is Empresta Capital, which combines social impact with attractive returns. Founder and CEO Ricardo George Assaf explains that after the company carved out its niche – supporting underserved small and micro-entrepreneurs in the condominium sector – it realised that as well as returning good growth, its investments were having a good social impact. But how to measure that impact? Enter the Social Performance Task Force, whose standards Empresta is adopting in 2018.

World Finance: Introduce us to Empresta Capital: what do you do?

Ricardo George Assaf: Empresta Capital is a financial institution, regulated by the central bank, that mainly focuses on small and micro-entrepreneurs all over Brazil.

We’re almost like a private bank, but upside-down: offering highly specialised financial solutions, but to the bottom of the pyramid.

Back in 2004, when we started the business, microfinance wasn’t explored at all in Brazil – despite the size of the market. So that created an interesting opportunity for the sorts of company such as Empresta Capital.

Today we have a portfolio of roughly 12,000 active customers, and more than 70,000 credit operations. And we try to differentiate ourselves with the knowledge that we have in the niches where we operate.

World Finance: What are those niches? Who are the micro-entrepreneurs you’re working with?

Ricardo George Assaf: Empresta Capital focuses on one niche, which is condominiums. Because we noticed there were a lot of small and micro-entrepreneurs that were servicing those condominiums; so we decided to finance those kinds of projects.

To give you an example, we have companies that install alternative sources of energy in buildings, such as solar energy, or even wind energy in certain areas of Brazil.

We also do have not only the small companies, but also individuals that are not formalised, but have some sort of entrepreneurship within those condominiums, either in sustainability projects, or create a high impact on the community that they work.

World Finance: Now there is a misconception that social investments necessarily have a lower return than more traditional ones; how are you working to dispel this myth?

Ricardo George Assaf: You’re absolutely right. When you talk about social impact or sustainability, the first thing that would come to an investor’s mind would be an NGO, or donations. And the other way around is also true; when you talk about high impact investments, concepts such as social impact do not come.

We didn’t realise, to be honest that we were doing a lot of social impact investments, and also financing a lot of sustainable projects. So to answer your question, I think the first thing was to realise we were doing that; and the second was, how to actually show the investors, measure that?

World Finance: So answer that question for me; how do you show that to investors? How do you measure the social impact you have?

Ricardo George Assaf: We spoke to other microfinance institutions; developed microfinance institutions. And we came across a very interesting project called Social Performance Task Force. It’s actually an international organisation that sets standards on how to measure, and how to show social impact.

This is quite recent; we’re implementing it 2018 in Empresta Capital. And that goes from the customer level up until the board level. And it helps you balance the financial return that you have with the social impact you’re causing, or the sustainability you’ve been financing.

World Finance: What opportunities exist for Empresta on the horizon?

Ricardo George Assaf: We’re looking at two main areas. The first one being technology; a lot has been said about fintech, new technologies, new business models coming along with technology; but we believe the real value won’t come from the technology stand-alone, but by mixing those propositions or business models into a new customer value proposition.

So for instance, we’ve been investing in a self-service app, but we’re linking to a big data analysis solution. So mixing different kinds of business model into one customer value proposition.

The second area is services. There’s a lot of opportunity for us to cross-sell different kinds of services to our customer base, which is needy of financial, specified financial solutions. So for instance, micro-insurance, assistances; services that are quite cheap, with a high perceived value for the customer base that we have. That’s what we’re looking at right now as well.

World Finance: Ricardo, thank you very much.

Ricardo George Assaf: Thank you.

Crédito Real’s acquisitions strategy brings stability and higher yields

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Crédito Real has 25 years of experience providing credit facilities in Mexico. The business focuses on clients who are underserved by the traditional banking sector; a potential base of more than 50 million people. Over the last few years the business has grown this base with some key acquisitions, including Instacredit in Costa Rica, and Don Carro in the US. Deputy CEO and CFO Carlos Ochoa explains the strategic benefits of these latest acquisitions, and their performance so far. He also touches on the company’s risk management and corporate governance credentials, and points towards more inorganic growth in the future.

World Finance: Carlos, thanks for coming in; talk me through these acquisitions, first Instacredit. What made it an attractive asset, and how has it performed so far?

Carlos Ochoa: Instacredit is based on Costa Rica, and it has operations in Nicaragua and Panama as well. It was attractive because these three countries are very stable economies, especially at the time when, in Mexico, things didn’t look so certain, you know, given all the political changes, both in Mexico or in the US.

So, by having Instacredit we were able to grow 30 percent in a year. That was a key element. And also we gained access to these stable markets, with stable currencies; and more importantly with high yield financial products.

So in a time in which Mexico, the interest rates were hiking; adding this particular product to our mix provided us some comfort.

World Finance: And Don Carro in the US; what’s the strategic benefit there?

Carlos Ochoa: Well, Don Carro provides credit facilities for the acquisition of cars to the hispanic community.

Our core business relies on finding those segments of the population underserved traditionally by the banks. Don Carro is a good example of that, and was our entry point to one of the largest markets in the world.

There are about 54-55 million hispanic people living in the US. They could make seven, eight times more what they make in their native countries. So that’s the potential that we see in the US.

World Finance: But with the recent anti-immigration sentiment in the US, it must expose you to a certain political risk.

Carlos Ochoa: Yes… I mean, we see that potential risk, but the market would still be enormous. I mean, even if a lot of people get deported, you would still have many millions to serve.

World Finance: Other risks you’re exposed to include currency fluctuations and the risk of increasing interest rates; how are you controlling and mitigating these?

Carlos Ochoa: Well, we have no forex risk; most of the debt that we have issued on the international markets is hedged into dollars, or into the local currencies that we work in. On the other hand, what we did in order to cope with interest rates hike exposure which we lived in Mexico, especially in the last couple of years, is we’ve been increasing the fixed part of our debt to over half of it.

World Finance: The Mexican Stock Exchange has rewarded your strong corporate governance; what measures have you taken to achieve this?

Carlos Ochoa: The most important element is transparency. We have an active board with a very active executive committee, and they are committed to transparency with all their stakeholders. And we have a very active IR team – I mean, we attend conferences all over the world, and that’s the way we communicate with them.

World Finance: And what does the future hold for Crédito Real? Are you targeting new markets?

Carlos Ochoa: There are a couple of large opportunities; and the US is going to be an important driver of growth in the years to come.

But also, if you see Mexico as an emerging market, as an emerging country, it is one of the most under-penetrated, financially. So the growth opportunities are also there.

World Finance: Carlos, thank you very much.

Carlos Ochoa: Thank you.

Robert Wessman: A leader must be able to act when most others don’t

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Previously we heard from Robert Wessman – founder, chairman and CEO of generic pharmaceuticals company Alvogen – about the pressures in his industry, and the origins of the business on a restaurant napkin. Now we hear his vision of leadership, which in many ways has its origins in the same place: with the financial markets in ruins, and nothing but a napkin in his hand. He also talks about how he finds good people – and keeps them motivated.

Robert Wessman: A leader must be able to act and do, when most others don’t. And a leader has to also be persistent.

In the early days, I didn’t have any money, I didn’t have anything else, other than a piece of napkin. You have nothing! Empty pockets. You have a handful of colleagues, you have some thoughts, you have the financial markets collapsed. Then you have to believe. And you have to continue and not give up; even though we have a lot of hiccups and headwinds.

I think those two elements are very critical, but of course there are many elements in a good leader.

I motivate people, mainly by being motivated myself. So if I wake up grumpy and I’m not motivated, I’m not going to motivate anything! I’m staying positive. And when we, kind of, hit the end of the tunnel and we didn’t see the light, I was the one to go on the floor, talk to the team, and help to find and create the solutions.

I’m not sure leadership can be in a big scale taught. You can, you know, have tools to help you, and improve. Some people are funny, and it’s not only because they have the DNA saying, you are funny. They are brought up in a certain environment, they go to school which impacts them, they have friends which impact them. They end up being funny people!

And I can learn a few jokes, but I would never be a stand-up comedian. But, it’s the same with leadership.

It’s not what you learn in school, in university, or MBA. It basically starts the day you were born. Your upbringing, your friends, which kind of personality you are yourself. People are at the end of the day, when they start learning about leadership, already they are leaders or not. But they can unfold their leadership by going to school.

World Finance: How do you find great people?

First of all, to find great people, you have to know what you’re looking for. And I look for two things. First of all experience, and reputation in the industry.

The second, and even more important, is the personality. Is the person ambitious? Is the person positive? Is the person able to work within a group? I’m looking for people who are pro-active and find solutions.

Our environment is positive. It’s a hard-working environment; we create our culture within the company from day one. We decided which kind of culture we wanted in the company.

We earn our respect by being respectful; and many, many companies don’t get that, or understand that. And I think that is part of the motivation we bring in people; the fire we manage to bring into everyone’s belly.

That is good leaders do, and that is what I believe in.

Thanks for watching. Click through for our other videos with Robert Wessman, where he talks about the pressures in the generic pharmaceuticals market today, and Alvogen’s origins on a restaurant napkin. And please subscribe for even more international business insights from worldfinance.com

‘I took my napkin, and off we went’: Robert Wessman’s billion dollar vision

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In June 2009, Robert Wessman – former CEO of multi-billion dollar pharmaceuticals business Actavis – met with investors in a New York restaurant to discuss his vision for a new pharma business model: Alvogen. He explains how he grabbed a napkin to sketch out his ideas – a napkin he still has to this day, and brings out every couple of years. This year the company has surpassed the $1bn sales target he set himself eight years ago. Watch our other interviews with the Alvogen chairman and CEO, where he discusses his vision of leadership, and the pressures in the generic pharmaceuticals market today.

World Finance: In June 2009, Robert Wessman – former CEO of multi-billion dollar pharmaceuticals business Actavis – met with investors in a New York restaurant to discuss his vision for a new pharma business model: Alvogen. And by discuss, I mean: draw on a napkin.

So basically I grabbed this napkin – and I’m quite fond of this napkin. So you cannot borrow it, by the way.

So just reading from the napkin, my vision was, I wanted to create a leading company in the world. So, no lack of ambition there! I wanted to see a company with over a billion dollar sales, here. And we will exceed that this year.

I wanted to go into emerging markets – meaning central and eastern Europe, Asia-Pacific. And I wanted to also include the US, being the biggest market in the world.

I wanted to make sure that we could produce our products. So, wanted to have a CMO, our own facility. Which we did, in the US. I wanted to open a CRO, so we could do our own clinical trials. I wanted to then open up my own biosimilars, which we did four years back with Alvotech. And I wanted to cover not only prescription drugs, but also OTC.

I wanted to hire the best in class people to join us. I wanted to build the best portfolio, knowing that the industry would consolidate. So we would have a product which our customers want.

I wanted to make sure that we would build up the best quality systems. And we wanted to build up the best service. So Alvogen today operates over 99 percent service level on a global scale. Which I think don’t think any other generic company is doing.

So I took my nice napkin, and off we went. I signed up with a US company, I bought a half developed portfolio: 21 products, which I wanted to use as a base for my new venture. A year later, those products were advanced in the development, and I didn’t have any production side.

So I went to a meeting in upstate New York with a company called Norwich. And met with the owners of Norwich: they had manufacturing plants only. I came with 21 products I needed someone to produce. And I explained my napkin.

So, they were inspired. They thought it would be a good idea to combine products and plant. And a few months later we had a contract where we combined forces.

So from that day we started a journey to build up our portfolio, to build up our research and development, our business development. We expanded into 35 countries in only 24 months. And we basically took this small company with $37m revenues, loss making; into what is now Alvogen. A global business with over a billion dollar sales.

So since then, this has been our strategic roadmap. I’m always a little bit proud when I take a look at my napkin, which I only do every second year. So, I kind of preserve it well, and make sure that nobody uses it by mistake.

World Finance: Quite a story; thank you very much.

Robert Wessman: Thanks.

Thanks for watching. Click through to our other videos with Robert Wessman, where he talks about his vision of leadership, and the pressures in the generic pharmaceuticals market today. And please subscribe for even more international business insights from worldfinance.com

Alvogen founder: Generic drug price wars will drive consolidation

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Generic pharmaceuticals has become big business in recent years, as the drug industry has ricocheted down a series of patent cliffs over the last decade. You’d think it would be triples all round for investors; but in the US, publicly listed generics companies have actually seen their market capitalisation drop 57 percent since January 2016. Robert Wessman, founder of Alvogen, explains that customer consolidation and over-leveraging to acquire assets has changed the industry permanently. Watch our other interviews with the Alvogen chairman and CEO, where he discusses the company’s origins on a restaurant napkin, and his vision of leadership.

Robert Wessman: There are two main reasons: one being consolidation of customers in the US, and the second being the massive acquisition spree the industry went into the last couple of years.

The US market is half of all global sales. What we have seen in the last couple of years is the wholesalers teaming up with retailers. So today, we have three groups controlling 90 percent of the entire market. The purchasing power of those three groups is two times the purchasing power of the entire European Union. So for us as a generics company, we are among 100 companies fighting for shelf space with those three big groups. And that has led to intense price wars in the last 18 months.

The main issue when it comes to acquisitions: our industry is cyclical, it was at its peak in 2015. Many of those companies, to maintain growth, had to enter into acquisitions to buy growth. And those companies were willing to over pay just to secure the assets and continue to grow. Most of those acquisitions were funded by debt; then, when we saw the pricing start to erode, those companies became over-leveraged, which impacted for sure the market cap of those companies.

Those changes have changed the industry permanently. My prediction is there will be a massive consolidation in the industry, because we cannot have 100 generic companies serving three customers. So I think we will see many companies merging, we will see many companies fighting off their debt by selling off assets. Most likely we will see 10-15 companies emerge out of that.

So, I think we will have a very exciting time, an interesting time, in the coming 24-36 months in the industry.

In my opinion, companies that have access to cash today are in a much better position. And also companies which did put an effort and investment into research and development in the past, into novel and difficult-to-make products, will be able to fuel their growth going forward.

At the same time, companies that have invested into bio-similars – because the industry will be at a crossroads only five years from now, when biotech products will become the bigger portion of the global market.

Alvogen is well-positioned today. We have been spending about $60-70m on our research and development for the last five years, every year. We have a very strong portfolio to continue to grow the business.

At the same time, we went out. We raised funds before we saw the crash coming, now. So the company has over $600m sitting on the balance sheet, waiting to take advantage of assets that come for sale, and hopefully will be at much more reasonable prices than we’ve seen in the past.

BBH: Manage risk to match your needs, not to avoid price volatility

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Equity markets are hitting all-time highs, while the volatility index is at an all-time low. Although this sounds like positive news, for Scott Clemons from Brown Brothers Harriman, now is exactly the time that you should be assessing your investment risk. He explains why BBH rejects the institutional definition of risk, the private bank’s approach to portfolio selection, and why low volatility is making his active value approach harder.

World Finance: Scott, why should investors be remaining alert to their risk?

Scott Clemons: Well investors should always be alert! But particularly now, because we know, as is the case in life, so is the case in investment markets: it’s precisely when you think that nothing can go wrong, that mother nature or mister market pulls the rug out from under you.

World Finance: Volatility isn’t actually the definition of risk that you’re particularly interested in.

Scott Clemons: It is the institutional definition of risk, but it happens to be one with which we don’t agree. Because the definition of price volatility is simply not one that most private clients embrace.

Risk for an individual investor, or risk for a family investor, is simply that the assets they have don’t support the spending needs that they have, both now and into the future. It’s an exercise in balance, not necessarily an exercise in avoiding price volatility.

World Finance: And when you’re putting a portfolio together, you’re actually more interested in what the client needs than in chasing an index.

Scott Clemons: That’s right; it’s an exercise ultimately in balance sheet management. Individuals and families, like companies, have assets and liabilities. The difference is, for individuals, those liabilities may be more subjective. It may be the desire to retire in a certain place at a certain age, to be philanthropic, to leave money for future generations; whatever it may be. But then the exercise of asset allocation, investing, is simply a reflection of the liability allocation: what you need your assets to do in terms of supporting those liabilities, both now and into the future.

World Finance: Now any individual security that you choose is going to have a fundamental value, and it’s also going to have a current price. Talk me through how you assess those two things.

Scott Clemons: So first of all, they’re two very different things. Price is a wonderful notion: it has transparency, it has availability, you and I would agree on the price of any security on any given day of the week. That’s a beautiful thing. The downside is that price has volatility.

Value is the reverse of all of those things. You and I might not agree on the value of the security; it’s not readily accessible. But it has more durability.

So our approach at Brown Brothers Harriman is simply to identify the value of a security in any asset class, and exploit the volatility of the price to buy the asset at a discount to its intrinsic value.

World Finance: Low volatility in the market at the moment actually means there’s not many opportunities, then.

Scott Clemons: It’s become a lot more difficult. We haven’t had a five percent correction in US equity markets since June 2016, with the surprise Brexit vote. And even that wasn’t that big of a setback. That’s the fourth longest stretch on record without a five percent correction in the market. So yes: it makes an active value approach a little bit more difficult, which in turn makes the risk approach all the more important.

World Finance: So with current market sentiment, what should investors be doing?

Scott Clemons: Investors should first of all be making sure that the asset allocation they have reflects the liability allocation they have – step one. Step two, they should not be lowering their investment standards in pursuit of return without attention to risk. One of my favourite definitions of risk is simply that many, many more things can happen than will happen; and just because risky things haven’t happened in the past 18 months since that last correction, doesn’t mean the market’s not a risky place.

World Finance: Scott, thank you very much.

Scott Clemons: Thank you, Paul.

Bank of Cyprus not afraid to forgo profits in financial crime clean-up

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In the first half of our interview with Marios Skandalis, he described Bank of Cyprus’ four year journey from a public bail-in requiring depositors to take a 50 percent haircut, to repaying its emergency liquidity assistance and listing on the London Stock Exchange. One of the key aspects of its compliance transformation along the way was aggressively tackling money laundering – in this second video he explains why the bank isn’t afraid to be open about the efforts it’s gone to, in order to meet stringent ethical standards. And he explains the compliance challenges his team is facing as the bank becomes a fully digitised financial institution.

World Finance: I’m with Marios Skandalis, Bank of Cyprus’ compliance director, and we’re discussing the bank’s compliance transformation since 2013. One of the key aspects of this was stepping up to aggressively tackle money laundering; tell me more.

Marios Skandalis: Yes indeed; our bank has aggressively engaged in a clean-up campaign under the most stringent ethical rules. During the past three years our bank has terminated 30 percent of its international clientele, more than 5,000 accounts were shut down, corresponding to more than €10m of annual net profitability.

We have also terminated 80 percent of our relationships with our professional intermediaries, from 1,600 we’re only left with 300 such relationships at the moment.

Although a hard path to follow, and harsh measures to apply, our bank has won Best Corporate Governance institution by World Finance for two consecutive years. Our bank has also won the 2016 award by Transparency International for adopting the best anti-corruption and transparency measures. It has also won the award of Bank of the Year for 2017 by Corporate Insider. And our bank is today the only financial institution in Cyprus that for two consecutive years were members of the Business Integrity Forum of Transparency International.

World Finance: It seems quite rare for a bank to be so honest and transparent about the efforts that it’s taking to tackle financial crime?

Marios Skandalis: This exactly, Paul. We’re not ashamed and we’re not afraid to say that we’ve shut down relationships. We’re not afraid to tell our investors that we’ve foregone tens of millions of profitability. Because we consider this foregone profitability to be an investment for the future: higher returns, and more robust returns.

World Finance: And what does the future hold for Bank of Cyprus?

Marios Skandalis: Our prime objective is our commitment to this new culture, to this new path that we’ve successfully applied over the last four years. But at the same time we would like to offer more to our customers, to our most important external stakeholders, by improving and enhancing our services to them.

Our bank has recently collaborated with IBM in a multi-million euro project, leading to a full digitisation of our bank over the next five years. This enhancement of our customer service and product excellence sets our bank as the undisputed leader in the south-eastern European region.

With this digitisation process, basically we’re trying not only to apply completely paperless relationships with our customers, but offer the ease to our customers to perform their banking affairs, either from their home or their mobile device or by visiting the branch, in the most appropriate way to them.

At the moment there are no other institutions that have taken such an aggressive strategic decision to fully digitise their operations. But we consider that unless institutions take this step forward, there is no future for those institutions in the short to medium-term.

World Finance: What does this kind of process present in terms of challenges for your compliance function?

Marios Skandalis: The challenges are quite high, because fully digitising a financial institution obviously creates new means of doing business and opening new gateways for customers to engage with our institution.

Therefore what we need to be is to be vigilant, to participate, review every possible new gateway that we open to our customers and new policies and services that we are offering to them; and make sure that the principles of compliance apply there as well.

Compliance is not a business-preventing mechanism to an institution. On the contrary, it is a business facilitator, to ensure our stakeholders receive a robust return and they don’t just receive any return which will take them into very risky paths of losing everything at the end of the day.

World Finance: Marios, thank you very much!

Marios Skandalis: Thank you too.

How Bank of Cyprus came back from its bail-in to listing in London

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In January 2017, Bank of Cyprus Holdings was listed on the London Stock Exchange. It’s the latest milestone on its path back to strength, since the Cypriot financial crisis and a €10bn bailout in 2013. In those four years the bank has made stunning progress in restructuring its risk, improving capital adequacy, and establishing high corporate governance standards. Compliance director Marios Skandalis explains that journey, and how the bank’s compliance and corporate governance standards have kept the bank on track. Watch the second half of our interview with Marios, where he discusses the bank’s aggressive and transparent clean-up campaign to tackle financial crime, and Bank of Cyprus’ digital future.

World Finance: What was Bank of Cyprus’ position in 2013, and how far have you come?

Marios Skandalis: Well, following the events of 2013, when the economy went through a bailout with the Troika, the banking sector had to go through a major remediation. Bank of Cyprus had its depositors receiving a more than 50 percent haircut of their deposits. Bank of Cyprus also absorbed all assets and liabilities of the second-largest bank shutting down, including €11.4bn of emergency liquidity assistance. So you can understand it was a chaotic situation.

However, in 2014 we had a successful capital injection from private investors of €1bn. That same year we had a successful comprehensive assessment by the European Central Bank. But it was 2017 that has been the hallmark of this rebirth and remediation of Bank of Cyprus.

In February we had been successfully admitted to the London Stock Exchange, and a successful issuance of €250m tier two capital notes.

World Finance: How significant has your compliance function been in keeping the bank on a positive course?

Marios Skandalis: The compliance function was the function that has undergone the most heavy and major remediation in the bank. Given the direction by the board of directors that rather than just adhere to the regulatory framework in place in Cyprus, but applying, adopting, and adapting to best international practices and procedures; that meant simply for us a complete cultural transformation of our function.

In doing so, we took a holistic view, and we applied six strategic pillars in fully remediating the function: being reviewing the overall restructuring and organisational structure of the compliance function, enhancing our monitoring activities, enhancing our assurance activities, enhancing the awareness and training competency of the staff, and establishing new transparent channels of communication with our regulators and competent authorities.

World Finance: Tell me more about the corporate governance standards that the bank has embraced.

Marios Skandalis: Corporate governance is a core aspect of the new compliance function of the bank. Our listing to the London Stock Exchange is one example of that. Our bank today is the only institution in Cyprus that is concurrently governed by two codes: the Cyprus Stock Exchange code, and the UK code.

We operate the corporate governance function through our corporate governance group policy, our group diversity policy, our group nominations policy, and our group fitness and probity policy.

Our board undergoes an annual internal review of its composition and functioning, and also a triennial assessment by an external consultant.

This blend of procedures that we have applied – and of course, having the London Stock Exchange and the Cyprus Stock Exchange monitoring our corporate governance function – sets our bank as a benchmark among the best well-governed institutions in Europe.

World Finance: Being listed on the London Stock Exchange does give you a greater international profile; what are you hoping to achieve with this?

Marios Skandalis: Being listed and traded on one of the most mature and reputable stock exchanges in Europe not only enhances the liquidity of the trading of the shares, but at the same time it ensures that the fundamentals of our organisation reflects on the price of our shares.

It gives us the credibility towards our internal and primarily external stakeholders, like our investors primarily, and our customers.