Author: World Finance

Banco Popular: Catalysing social and economic progress in the Dominican Republic

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Fifty-five years ago, Banco Popular was established in the Dominican Republic with the mission to democratise banking services. Today, improving financial inclusion in the country means embracing mobile and digital, and putting the bank in the palm of people’s hands. Arturo Grullón Finet, Executive Vice President of Personal Businesses and Branches, discusses how important digital transformation is to reaching the DR’s unbanked, as well as the bank’s broader mission to improving life in the country in a sustainable way.

Watch our other new video with Banco Popular Dominicano, in which Arturo introduces the first Banco Popular Digital Centre.

Arturo Grullón Finet: As one of the largest banks in the country, and the leader of digital transformation, we believe that mobile and digital are the game changer when it comes to financial inclusion.

Imagine: in the Dominican Republic, out of every 100 people, 85-90 people have mobile phones. This means that a strong mobile platform puts the bank in the palm of their hands.

This is the way to increase banking penetration, definitely. And it is the way to give credit access to more Dominicans than ever before.

We are a company based on strong moral values and strong corporate governance. Our mission has been for the last 55 years to be a catalyst for social and economic progress in the Dominican Republic. How do we put our mission into action? I could mention to you several programmes. One that is very close to my heart is Impulsa Popular, which is a training platform and financial products for small businesses.

We foster an entrepreneurial culture among our young customers, in order to develop nationwide: successful, innovative, sustainable businesses, that create jobs and boost domestic development.

We’ve been expanding the scope of our financial training programme: Finances with a Purpose – with which we have been able to reach 60,000 people, providing basic personal financial education and tools.

In addition, we are aware of the high vulnerability of the Dominican Republic to the effects of climate change. This fact has made the bank develop different initiatives with the aim of mitigating and reducing our carbon footprint. One important example is that we as a company maintain the leadership as the largest generator of solar energy in the whole Dominican Republic. Today we have more than 11,000 solar panels installed throughout the country in our branches.

For 55 years we have been the leader in promoting financial inclusion for all Dominicans. We have worked to create opportunities that make peoples’ aspirations become a reality on a sustainable environment.

We look to the future with optimism, because we are convinced that together we can build a better society, with innovation and entrepreneurial ideas.

We serve small businesses, export businesses, the hotel industry, and young entrepreneurs with the same passion. And we plan on doing so for the next 55 years.

Latin America must diversify beyond commodities to expand regional trade

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Bladex, the foreign trade bank of Latin America, has been working to support and promote Latin American trade since the political and economic troubles of the 1970s and 80s. As Bladex celebrates its 40th anniversary, CEO N Gabriel Tolchinsky explores the economies of Brazil, Mexico and Argentina, and discusses the prospects for trade growth in the region. In the first half of this interview N Gabriel Tolchinsky talks about the bank’s origins and the role it will play helping Latin America overcome its current challenges.

N Gabriel Tolchinsky: When we look at Latin America and the opportunities in the region, we first need to focus on the top three economies.

Brazil, after a very significant recession in 2015 and 2016, had very little growth in 2017 and 2018, because of the political uncertainty. With the election behind us, and a bit more of a pro-market approach out of this government, we think Brazil could actually be poised for growth.

And interestingly, we don’t think we are dealing with a banking sector able to deal with an increase in credit demand if we start seeing genuine economic growth out of the country. We’re expecting around a 2.5 percent growth for 2018; if that were to be the case, Bladex expects to do some very good business there.

Mexico is going through a period of uncertainty, because the new administration needs to prove that it’s not going to deviate from what the world has believed to be established policy over the last 20 years.

Two specific things we were going to be following: the project to build an airport outside of Mexico City, and the continuation of the energy reforms. So far, the airport construction was essentially stopped, and the energy reforms – what we’re hearing out of the country has not been encouraging. For the time being, we’re not curtailing our exposure. But we’re going to be monitoring that very closely.

Argentina has gone through a significant crisis of confidence in 2018, that the country is trying to deal with, with the establishment of an IMF programme and a more austere policy with respect to expenditures and the curtailment of fiscal deficits on a go-forward basis. The problem with that is that a diminished expectation for economic growth in the country will result in some political uncertainty.

That said, there are some good opportunities in the Argentine private sector, because companies have been able to deal with macro uncertainties for quite a while, and they are prepared to endure such volatility. As such, we believe that there is some business to be done there as well.

From a trade perspective, Latin America continues to be very much a commodities story. Under a more stable commodity price environment, trade in Latin America could grow about six percent per annum, which is below what it used to be during the commodity price bubble, but still very respectable to provide for a basis of overall solid economic growth.

It’s really up to the individual countries in the region to be able to take advantage of that, and be able to do the type of long-term investments it needs, in order to diversify its economies beyond commodities – and have more of an industrial and knowledge base, so it can provide value to the world economy.

Bladex celebrates 40 years of supporting Latin American trade

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Bladex, the foreign trade bank of Latin America, has been working to support and promote Latin American trade since the political and economic troubles of the 1970s and 80s. As Bladex celebrates its 40th anniversary, CEO N Gabriel Tolchinsky discusses the bank’s origins, the challenges Latin America faces today, and the role Bladex has to play in helping overcome those challenges. In the second half of this interview N Gabriel Tolchinsky explores the economies of Brazil, Mexico and Argentina, and the prospects for trade growth in the region.

N Gabriel Tolchinsky: Over the last 40 years, Bladex’s mission has been remarkably consistent. One: the strengthening of Latin America’s capacity to be engaged in foreign trade through the financing of specific trade transactions; and two: aid and promote Latin American integration so that Latin America could be eventually a source of value-added product to the world’s economy.

The 1970s and 1980s were a time of significant political upheaval, economic upheaval. And in that context, it was very important to create a bank with regional footprint that is able to lend to the local banks so that they in turn can lend to corporates that are engaged in foreign trade; and also be directly involved in the financing of trade transactions.

Latin America faces quite a few challenges – particularly as they relate to trade. We’re seeing winds of change coming out of Washington; a little bit of unhappiness with the established world economic order. About 50 percent of the trade that Latin America does with the rest of the world is with North America: the US and Canada.

So, Latin America needs to diversify its trade channels. Relationships already started with China, Europe – those trade channels are growing and will continue to grow. But it’s also important to develop the capacity for Latin American to trade with itself.

Right now, trade among Latin nations represents about 16 percent of the overall trade that Latin America does. We expect that to grow to around 23 percent, but we need it to be more than just trading in commodities, and start providing value-added from one country to the next.

Today’s economy is very much a function of not only what we can tap out of the ground, but also what we can get out of an educated workforce that can add value in terms of technology, in terms of manufactured industrial capacity. And the challenge for the next 40 years is for Latin America to be able to tap not just natural resources, but human resources as well.

We believe that Bladex has a role to play in terms of being able to provide the right financing when trade takes place from one Latin American country to the next. Why? Because we know Latin American credit risk. Bladex, being in Panama, has a very strong presence in Central America. We know the countries, this is our back yard, and are able to endure the cycles of each one of these countries.

Bladex has the experience and know-how in lending to Latin America across border, because we’ve been doing business in the region for the last 40 years.

When a Peruvian company sells, for example, to a Brazilian company, and gives them 90 day terms for payment: we know the credit of the Peruvian company, we know the credit of the Brazilian company, and are able to be the most efficient financial intermediary. And in such a manner, be able to assist in the development of regional trade growth.

Creating a bright line between strategy design and strategy delivery

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The people that are responsible for developing a strategy aren’t typically the people who make it reality. There’s a disconnect between the executives who dream up the future of their organisation and the project managers who have to make that dream come true. Recognising this, the Project Management Institute is leading Brightline: a coalition that creates resources to help executives bridge the gap between strategy design and delivery. Cindy W Anderson from PMI explains Brightline’s vision and work.

The next video in this series is about how digital transformation is disrupting project management, or you can watch the full Project Management Institute playlist.

Cindy W Anderson: Project management is sometimes considered an ‘accidental profession’ – people fall into it when they realise that they have a knack for getting things done.

We sometimes talk about project managers as the people who make dreams come true. They turn ideas into reality. And that’s not really very easy. So, consider some of the research that we’ve done in the past, which finds that every 20 seconds, $1m globally is wasted due to poor project performance. Which means that every day it’s $5bn, and every year it’s $2trn of economic value that’s wasted because projects aren’t being completed successfully.

The people that are responsible for developing a strategy, developing that set of initiatives that are going to transform an organisation. They’re strategy people that sit around tables and come up with these great ideas and these beautiful strategies: they typically aren’t responsible for the delivering on those strategies. And that’s why we find that only one in 10 organisations is able to complete all of their strategic initiatives successfully.

The line right now between strategy design and strategy delivery is blurry. And we want to make it a bright line. And that’s why we developed the Brightline Initiative.

The Brightline Initiative is really targeted towards senior executives, typically in the strategy space.

We think the more that those executives understand that they’re accountable to deliver what they’ve promised; to actually have the capability in the organisation to make those dreams come true: we think that waste is going to go down dramatically.

So, we believe that once executives know they’re accountable, that that’s the first step. Right now that gap between strategy design and delivery is more like a chasm.

They think it’s going to happen by magic somehow. People have developed strategies over time, and over time they just don’t get delivered successfully. So we’re trying to raise awareness first of all. Making sure that these executives – especially the chief strategy officers – understand that they do have accountability. Even if they’re not the people who deliver it, they still need to know that their organisation has the capability to deliver. And they have to make that connection. Develop that bright line between strategy design and delivery.

And at that point, the project management function – and it’s called many things in different organisations, but it’s all the people who turn ideas into reality, it’s all the people who are developing the products and delivering the value that customers want – but at that point, that function can take over, and they actually deliver the strategy, and the connection is really that bright line between strategy design and strategy delivery.

Leveraging the full value delivery landscape with PMI

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We don’t do projects just because we want to get a project done: we do projects because we expect they will deliver value to customers or stakeholders. That’s why the Project Management Institute talks about the practices and techniques of project management as the value delivery landscape. Cindy W Anderson from PMI, Suneet Prakash from Aditya Birla Management Corporation, and Peter Moutsatsos from Telstra discuss the value delivery landscape and how project management professionals can keep up to date as new and innovative approaches are added to it.

The next video in this series is about creating a bright line between strategy design and strategy delivery, or you can watch the full Project Management Institute playlist.

Cindy W Anderson: An organisation really needs the capability to deliver value. The capability to deliver projects and programmes that lead to value and competitive advantage.

At PMI we call that the value delivery landscape. And we call it the value delivery landscape because we don’t do projects because we want to get a project done; we do projects because we know it’s going to deliver value to our customers or to our stakeholders.

Projects require all sorts of different methods and approaches. And the value delivery landscape encompasses all of those practices from very traditional to cutting edge and innovative approaches to project management – and including what might be next, that we haven’t even discovered yet.

Suneet Prakash: We started with the very basic, fundamental processes of project management. And then we also have agile, we have predictive, we have iterative, we have waterfall. We also use – depending upon the type of the project – sometimes it could be a hybrid. That means in a phase of a project we would use the waterfall technique, in another phase of the project we would use agile technique, or the fundamental technique. So it depends really upon the project requirement.

Peter Moutsatsos: If we go back in the past and look at how, say, software development projects were executed 20 years ago, waterfall was largely the only choice. And project managers used waterfall methods to create all types of software projects.

If we now flash forward 20 years, there’s still software projects, but we’re seeing different types of software projects. We’re seeing social media, we’re seeing mobile apps. Those things can be better served by agile methodology, or perhaps even a hybrid approach. Because the stakeholder mix has changed, the complexity mix has changed, the business drivers are different. So adopting just the waterfall method may not get the best outcome.

Cindy W Anderson: When organisations have a lot of agility and flexibility in the way that they go about executing their strategies, they’re much more successful.

The business really needs to have a capability within its project management operating function that allows it to be able to staff across this value delivery landscape.

One of the ways that organisations can be sure that their project managers have the skills that they need not only for today but also in the future is making sure that they have a continuous development cycle.

Our main certification is called the PMP – the Project Management Professional certification – and it requires 60 hours of continuing education training every three years. To make sure that project managers keep up with the emerging skillsets that they’ll need to help their organisations deliver value in the future.

Suneet Prakash: I got my PMP certification in the year 2007. And I like this system of PMP renewal, because you are automatically forced to replenish your project management knowledge if you really want to retain your credential.

So it’s a very focused approach which helps you to learn new techniques and use them in your projects. And that’s how you keep learning, and that’s how you talk the same language.

Project Management Institute: How to get the best out of executive sponsors

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Executive sponsors connect project managers and project teams to the rest of an organisation: they clear roadblocks, advocate for resources, and make higher-level decisions when they need to be made. But they’re also extremely busy, and need their organisation to support them in this role. Cindy W Anderson from PMI and Peter Moutsatsos from Telstra discuss the ways that executive sponsors help projects, and how organisations can help executive sponsors.

The next video in this series is about leveraging the full value delivery landscape, or you can watch the full Project Management Institute playlist.

Cindy W Anderson: Executive sponsors are important to a project or a programme because they connect the project and the project team to the rest of the organisation kind of laterally, and they also connect it upward into the executive suite.

Peter Moutsatsos: Our business has known the importance of sponsorship for quite some time. And so we do our very best to engage with our sponsors, to make sure they understand that they are a part of the project, and that they sign up and advocate the whole way through the project’s life.

Cindy W Anderson: Executive sponsors clear roadblocks. Executive sponsors are those who make decisions when there’s a decision to be made. They advocate for the resources – both human resources and budget – when projects need additional funding, or there’s competition for project work.

And without that, projects can get lost. They can get stopped or stalled. And I think that’s probably why an executive sponsor is so important. It’s that connection to the rest of the organisation.

Peter Moutsatsos: Project sponsors must understand that they are on the hook for delivery. Because they are the project. They are the ones who signed up to an idea, they secured company capital, they secured a project team and key resources to go and get this product or service built.

When the delivery phase is over and the project is in the market, they are the ones who are accountable to the leadership team for the benefits that are coming in the door – or not coming in the door – as a result of the project.

Cindy W Anderson: I think there are three things that an organisation can do to get the best use out of an executive sponsor. One of those is creating a culture where executive sponsors are really seen as a critical project resource.

If an organisation has a culture where it supports an executive sponsor, and gives that person the capability and freedom to actually sponsor in a meaningful way, then I think they can be very successful.

Peter Moutsatsos: The way we do that is explain to them the importance of being a sponsor. We induct them into the role. We train them. We put together roundtables, and get them to collaborate and share stories about the challenges they’re experiencing in being a sponsor.

Cindy W Anderson: The second thing I would say is that organisations that are most successful with executive sponsors really focus on the most important skills. Influencing. Being able to understand the organisation, and having the organisational savvy in order to influence across and up in an organisation.

Peter Moutsatsos: A good sponsor knows how to engage with the project, they understand that they are the advocate of the project, they have vested interests in the outcome.

Cindy W Anderson: And then the third thing I would say is that organisations that are most successful provide training for executive sponsors, the same way that they would provide training for anybody who’s moving into another role or another skillset within the organisation.

All of the presentations that we do, and the material that we provide to organisations, to help build that capability within their own organisation is all based on our research. And that helps the project managers, and the PMO directors, and the team that’s delivering the value within an organisation, be advocates for that capability within the organisation.

‘Laser-focused on outcome’: The changing role of the project manager

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Projects today can last for multiple years, involving thousands of people across multiple continents, with business priorities changing regularly. That puts enormous pressure on project leaders to adapt themselves, their teams, and their technologies. Murat Bicak from PMI and Peter Moutstatsos from Telstra discuss the skills that project managers need to develop today to become the project leaders of tomorrow.

The next video in this series is about getting the best out of executive sponsors, or you can watch the full Project Management Institute playlist.

Murat Bicak: Projects became increasingly complex over time. If you look at a project today you may have thousands of people working together; collaborating on digital platforms, in multiple countries across the globe.

But some of these projects last for four, five years. And businesses change, requirements change over that period of time. Technology changes over that period of time.

So for a project leader to become successful, they must be laser-focused on the outcome, laser-focused on the customer needs, and constantly asking whether or not there are changes that they need to make to the team, to the capabilities underneath that team, to the technology that they might be using.

Which requires a very different type of person. A very strategic leader, if you will, who is able to think critically, negotiate, influence the organisation and leadership. And those are some of the changes that are already happening, at the project world.

Peter Moutsatsos: Over the last 10 years, we’ve noticed that project managers have become more professional. They’ve become an integral part of the organisational resource mix. And what we’re seeing is a recognition that project managers need skills that are going to serve them in the digital economy.

The future project manager has to be far more interpersonal. They’ve got to be far more connected emotionally with stakeholders, and have that emotional intelligence to understand what’s needed, to be a more effective leader. And also to be more servant in nature, in terms of their leadership style. So, to lead from behind.

Murat Bicak: The new skills that project leadership and project managers need to acquire is a tremendous understanding of customers. So, design thinking for example is going to be a critical enabler for getting to the question: why?

Every project delivers against a customer need. And with technology advances, the customers are much closer to projects and project leadership and project management and the team. So, putting the customer need up front is going to be the number one change for every type of project.

Number two, there will be a tremendous amount of iteration, prototyping, learning and testing, and failing! Risk taking. Which is also different from what many people are used to. Which requires a different type of leadership, a different type of skillset, which requires empowerment, different culture, and a way of working.

The line between strategy and delivery is blurring, and our project management professionals are going to find themselves at the forefront of delivering every strategic initiative for their organisations.

The world of work is changing, and so is PMI. In 2019 we’re going to be celebrating our 50th anniversary. And with the transformation programme that we have started, we’re making transformation part of our DNA. So over the next 50 years you’re going to see a very proactive PMI, continuing to deliver value to our stakeholders and customers.

How digital transformation is disrupting project management and leaders

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Every sector is touched by digital transformation – and more and more project managers will be required to manage the rapid changes it’s causing. But it’s also changing the project management profession itself – so professionals and the Project Management Institute are having to adapt. Murat Bicak from PMI, Peter Moutsatsos from Telstra, and Suneet Prakash from Aditya Birla Management Corporation discuss the impact of digital transformation on project management, the role of the project manager, and the Project Management Institute itself.

The next video in this series is about the changing role of the project manager, or you can watch the full Project Management Institute playlist.

Murat Bicak: Every sector is touched by digital transformations. What makes digital transformations very different from previous transformative efforts is – first of all – the amount of change and the pace of change that is going on right now. Secondly, it’s the competitive environment that’s changed, because organisations need to worry about not only competition coming from their own industries, but competition coming from adjacencies, software sectors. And lastly, the amount of change that organisations go through as it relates to how talent, as well as leadership needs to react, is also a big driver of what makes digital transformations quite different.

Peter Moutsatsos: Digital transformation is changing our business in that it is – we are staring into legacy platforms and legacy products and systems that must be disrupted. And what we’re discovering is that in order to reinvent ourselves, we must disrupt ourselves or be disrupted.

And if we don’t, some young, fresh-faced, well-funded startup will come and take our marketshare and our customers away from us.

Murat Bicak: If you think about the amount of change that needs to happen because of digital transformations, all of that change is going to be delivered through a project or a set of projects, programmes, portfolios. So the opportunity for project management is tremendous, because the world is becoming projectised. There will be more and more projects, more and more change, and the project management profession is going to change with it.

Suneet Prakash: As technology’s coming, and as things are changing, a lot of traditional responsibilities of the project manager can actually now be taken over by technology. Things like scheduling and planning, and things which can be done by software or technology. And he or she can actually spend more time thinking how to get the business alignment of the project. Which is very important.

Today, projects are talked about as strategy: delivery of strategy. That’s the real project manager’s role. And technology will help project managers to align the business part of the project with the delivery.

Murat Bicak: Digital transformations are going to change the role of the project manager – and project management – in big ways.

They’re going to be strategic leaders of their organisations. They’re going to be using different ways and methodologies: so they will be agnostic how actually projects should be delivered, because they’re going to be focused on delivering the outcomes that their organisations are trying to achieve in the marketplace.

At PMI we are also going through a digital transformation, and we consider this a great opportunity for us to continue supporting project management professionals in a different way. We’re building the professional association of the future, by putting our customers in the middle, and really understanding the challenges and issues, and the skills that they need, to continue their careers in the organisations that they work at. And we will continue supporting them on a lifelong career journey.

Yılmaz Yıldız: Turkey’s troubles are ‘just a blip on the long-term chart’

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Emerging markets are being impacted negatively because of a major paradigm shift in the global economy, says Yılmaz Yıldız, CEO of Zurich Turkey. The huge liquidity post-financial crisis has dried up, and escalating commodity prices are putting pressure on emerging markets. Turkey has been impacted by this paradigm shift – along with some political issues – and dropped in global growth rankings. But, says Yılmaz: its strengths remain. In the first half of this interview Yılmaz discussed in more detail the currency crisis that Turkey is experiencing, and its impact on Turkey’s insurance sector.

World Finance: Setting aside Turkey’s currency crisis, what more general trends are affecting emerging economies today?

Yılmaz Yıldız: The global economy is going through a major paradigm shift, and emerging markets are impacted negatively because of that.

If you remember in 2008-9, after the crisis, the Fed and the ECB pumped incredible liquidity into the financial markets. The Fed’s balance sheet increased from $900bn to $4.5trn from 2007-17. The ECB from €2trn to €4trn. So there was this huge liquidity in the financial markets, and the emerging markets – which need foreign investment – benefitted substantially.

But now there’s this paradigm shift.

Liquidity is being taken back. A strong dollar, high US interest rates, uncertainties, and the commodity and oil prices going up: creates an unfavourable context for the emerging markets. And all the emerging markets are being impacted negatively, one way or another. But they’re not all the same. Especially the ones with high current account deficits, high growth rates, and high indebtedness, are impacted much more negatively than the ones with lower current account deficits and stronger debt dynamics.

And this will continue for a while, I think. Paradigm shifts take a while for everybody to get used to. Let’s say: not easy times ahead.

World Finance: And how is Turkey positioned within the emerging markets? What are your strengths and weaknesses?

Yılmaz Yıldız: Yes, Turkey has been impacted negatively.

If you look at 2017, Turkey was one of the fastest growing economies after China: 7.4 percent growth. That growth was good on its own, but created huge current account deficits. And with that current account deficit, one: the paradigm shift happened, the dollar began to appreciate, and some political problems; the currency has been hit really hard.

But we should not miss the strengths of the Turkish economy.

What made Turkey a very attractive emerging market – most of those are still in place. Huge market of 80 million people? It’s still there. Location? It is still there. A young, well-educated population, positive demographics? It is still there.

If you look at the debt dynamics: debt to GDP is less than 30 percent. Budget deficit is less than two percent. So the indebtedness is probably one of the best in the emerging markets.

And on the other side, Turkey has a very diversified industrial base. So the economy does not depend on any single industry or commodity or market. That good diversification will serve well going forward.

And, with that in mind, and us being in Turkey as Zurich Insurance Group for the long term: there may be ups and downs, but as long as these positive demographics and economic measures are in place, this is just a blip on the long-term chart. And we will continue to be profitable, we will continue to be successful. So: we’re very confident about the future, and in the short-term; yes, sometimes different things happen – not only in Turkey, around the world. We take measures; we move on.

How Turkey’s currency crisis could make Zurich Turkey more profitable

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Turkey, once the darling of emerging market investors, is going through some difficult times due to its ongoing currency and debt crisis. Yılmaz Yıldız from Zurich Turkey explains how Turkey’s insurance sector has been affected, how Zurich Turkey has been meeting or exceeding its targets in spite of the crisis, and what the future holds for Turkey. In the second half of this interview Yılmaz discusses the general trends in emerging markets, and how Turkey is positioned within them.

World Finance: What’s been the impact of the crisis on Turkey’s insurance sector?

Yılmaz Yıldız: Since the currency crisis has not morphed into a financial, economy-wide crisis; as of now we see impact, but not as much as what we’ve seen in the currency markets.

However, a stagflation scenario is a high probability. And the non-life insurance sector will be impacted by that. So, what we expect to see is a slowdown in premium growth rates across all lines of business. But more importantly, the currency crisis, one thing that’s happening is: inflation has increased substantially. The figures as of yesterday is the annual rate is around 25 percent. And claim costs are increasing substantially.

On the other side, due to inflation, and due to the increase of interest rates by the central bank, we will also see an increase on the investment income.

What that all leads to is less income from insurance operations, and more income from financial transactions and investment income. So overall the profitability may not suffer – or may even improve due to financial income – but the core insurance business will inevitably suffer, because of higher costs of claims.

World Finance: And for Zurich Turkey specifically? How has 2018 been, and what’s your projection for 2019?

Yılmaz Yıldız: 2018 has been very good so far – even despite the volatility in the last two quarters, we will meet or exceed our targets. Because Turkey and Turkey’s insurance market is still very attractive, and if you have the right strategy, the right team, and a good execution track record, there’s no reason why you shouldn’t be making your targets or exceeding your targets going forward.

To that end, we have launched new innovative products, especially on the cyber and on the health side, and on the SME side. So those new products will generate revenues for us. Secondly, we’re in the process of having some new partnerships in place, and also with our existing partnerships we are doing more with less.

Secondly, to contain the claim inflation and to remedy the rather negative movement of expenses, we are really focusing on underwriting discipline and claims management. So that’ll continue.

So, overall on the financial side, we expect that our profitability will not suffer. Our growth rate will slow down. But overall we’re doing well in 2018, and we’re confident that we’ll do well in 2019 as well.

World Finance: So what does the future hold? What’s the timeline for Turkey getting back on its previous trajectory?

Yılmaz Yıldız: I think one thing that is really important to realise is, Turkey is going through a currency crisis. It is not a financial crisis, and it is not an economy-wide crisis. It is only a currency crisis. And with the right measures to contain this currency crisis, it will not be too difficult for Turkey to get back to its growth trajectory very soon.

And the government has announced the midterm plan, in which I think most of the right measures have been taken. And as long as these are done, it will be contained as a currency crisis, and it will not morph into a financial or economy-wide crisis.

World Finance: Yılmaz Yıldız, thank you very much.

Yılmaz Yıldız: Thank you.

Ho Chi Minh Stock Exchange on track to emerging market status by 2020-22

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It’s been quite a year on the Ho Chi Minh stock exchange. The first three months of 2018 saw double-digit growth, taking the exchange to record highs. But by July valuations had crashed back to 2017 levels; at the time this video was filmed, the market still hasn’t re-made any of January’s gains. Đỗ Huy Hoài is CEO of BIDV Securities Company; he discusses the prospect of the stock market being upgraded from frontier to emerging market status, the impact this would have on foreign capital inflows to Vietnam, and what makes the country an attractive investment destination. This video is mostly in Vietnamese with English subtitles.

World Finance: It’s been quite a year on the Ho Chi Ming stock exchange. The first three months of 2018 saw double-digit growth, taking the exchange to record highs. But by July valuations had crashed back to 2017 levels; at time of recording the market still hasn’t re-made any of those January gains. Đỗ Huy Hoài is CEO of BIDV Securities Company; he joins me to discuss the future of the exchange.

There is speculation that the exchange could be upgraded to emerging market status in the next few years – what needs to be done to achieve this?

Đỗ Huy Hoài: I believe that the Vietnamese government has to accomplish two fundamental missions. The first is to maintain its macroeconomic stability, and the second is to upgrade its market infrastructure.

With regard to the issue of macroeconomic stability, to date the GDP growth rate has met the National Assembly requirements, inflation remains under control, the exchange rate and interest rates are relatively stable over time, and the purchase index has increased by approximately four percent.

The second mission is to reinforce and upgrade Vietnam’s market infrastructure. The State Securities Commission is currently making amendments to the Securities Law to suit the development of the market.

In addition, the authorities in Vietnam are prepared to revise the financial reporting system of Vietnamese enterprises in accordance with international practices.

Derivative markets are already in operation. Despite being the very first move, this shows great potential and promises new products, such as warrants, a governmental ‘born future’, and the coming corporate bond market.

I believe that Vietnam will be able to meet the eligibility criteria for upgrading its stock market from a frontier market to an emerging market, following its proposed agenda from 2020 to 2022.

World Finance: If the market is upgraded, what would be the impact on the sizeable foreign capital inflows to the country?

Đỗ Huy Hoài: The proportion of Vietnam’s securities in the MSCI Frontier 100 Index is 17 percent. If its market status is upgraded from a frontier market to an emerging market, this proportion will be much greater.

It is estimated that if the index increases by one percent, approximately $3bn will be poured into the market.

The free movement of domestic capital and foreign capital will be more transparent and easier, which will make foreign investors feel secure, thus a large amount of public funds will be invested in Vietnam’s stock market in a direct manner or via M&A.

World Finance: Vietnam received record-breaking foreign direct investment in 2017 while still a frontier market. What makes the country such an attractive destination?

Đỗ Huy Hoài: There are several reasons for this. Firstly, investors have noted Vietnam’s potential and capacity to be upgraded from a frontier to an emerging market, and have thus taken a step forward.

Secondly, it cannot be denied that Vietnam’s economy is stabilising. Vietnamese enterprises have grown up, and stock quality has improved.

And as mentioned, the large-scale, long-term stability of Vietnam’s market, economy, and stock market, has been a key highlight, attracting attention from foreign investors – notably investors from Thailand and South Korea. With the advantage of being neighbouring countries, they have been able to make bold investments in Vietnam via M&A.

World Finance: How does BIDV Securities assist foreign investors in the Vietnamese market?

Đỗ Huy Hoài: To date, we have built relationships with professional investors in the US, Europe, and Asia. We have the advantage of a team of qualified staff, a strong IT infrastructure, and great insight into the Vietnamese stock market. As a result, our customers are putting their trust into BSC.

We are one of the first stock companies to participate in the derivatives market, and one of the first companies to enter the warranted market.

We are also preparing for participation in the ‘born future’ market of government bonds, and for the establishment of a corporate bond market in Vietnam.

With such preparations, we believe that the investors operating via BSC can fully be assured that their benefits are guaranteed.

World Finance: Đỗ Huy Hoà, thank you very much.

Đỗ Huy Hoài: Thank you.

Activobank offers simple, transparent, honest banking to Portugal

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Activobank has been at the technological forefront of Portugal’s banking industry since its origins in 1994 as a 24/7 phone banking service. Today it is one of the most important players in online banking in Portugal. CEO Dulce Mota discusses the bank’s constant pursuit of technological innovation, including its latest mobile app feature: ActivoPay. She also explains what’s drawing people to ActivoBank’s brand of convenient mobile banking, and why offering the fastest account opening process in Portugal is so important to the bank’s growth.

World Finance: Activobank has been at the technological forefront of Portugal’s banking industry since its origins in 1994 as a 24/7 phone banking service. Today it is one of the most important players in online banking in Portugal. CEO Dulce Mota joins me to discuss the bank’s constant pursuit of technological innovation, and its latest mobile app feature: ActivoPay.

Let’s start with ActivoPay; what is this new feature?

Dulce Mota: We are very proud about this new feature! With ActivoPay you can withdraw or send money just with your smartphone. So you don’t need a card, you don’t need any special technology. Just with your smartphone you can withdraw or send money.

We released it last October – it was a success, we were the first bank in Portugal to introduce this kind of feature. Our customers reacted very well – we already have about 10 percent of our customer base already using this service. We think that we’ll get another figure above that, so, our objective is to attain 30 percent of our customer base using this service. And maybe in the next months we will attain it.

Because the service is very interesting, very simple, very easy. And it’s like the value proposition of ActivoBank.

World Finance: What’s drawing people to your brand of convenient mobile banking?

Dulce Mota: It’s our value proposition, you know: we are a simple bank, with a few products. Our concept of doing banking is taking transparency and honesty to our customers.

For example, we don’t have 10 cards: we have one card. If you want to buy a house, we don’t show you 15 solutions: we show you one solution. For us it’s the best, and for you it’s also the best.

So people appreciate this kind of approach. Being simple, being honest, being transparent. And without commissions. Most of our services we don’t cover anything from our customers.

So, I think we are in the right way of the bank of the future.

World Finance: How do you listen to your customers to identify the digital solutions that they need?

Dulce Mota: Nowadays it’s quite different, how we can see what our customers are seeing and looking at. So, we use a lot of social media; especially Youtube, Instagram, and Facebook, where we have thousands of customers looking at us, where we are always introducing news or facts or something that we want to share with them.

We also contact directly our customers when they have their birthday, when they have a son, when we think they need a mortgage. So we have different types of contacts, depending on the lifecycle and the way the people want us to interact with them.

So, we are not a common bank about normal publicity. We are a different bank, because we try to be with our customers where they are.

World Finance: You have the fastest account opening in Portugal; why is this so important?

Dulce Mota: Because as we are a digital bank, and we want to be present in all the country, and we just have about 15 branches – that are not normal branches! We call them Active Points.

We introduced this year this digital onboarding. Everyone can open an account in ActivoBank just sitting at home, or at a café, or in the car. Nowadays we can open an account in six minutes – that’s our best performance. It’s very easy, and in the next moment you already have your account number, you can do the first transfer to the account, you can use the account from this moment. So it’s very easy and simple.

We increased about 70 percent our customer base this year – it is a huge objective, and we are very proud of that. And next year we hope that it also will increase.

World Finance: What’s next, then?

Dulce Mota: We always think about that, because we are not satisfied with the present! We are thinking about improving our services in the browser. Maybe we will also have some news for the next months. And especially in personal loans and mortgages.

We are also looking at different processes and different experiences for our customers. So maybe next year I can tell you some news about this next future.

World Finance: Dulce, thank you very much.

Dulce Mota: Thank you Paul, it was a pleasure.

Thai Life Insurance pursues digital mindset to transform its culture

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Chai Chaiyawan, President of Thai Life Insurance, has embedded humanism at the core of Thai Life’s brand values. With this belief set comes a focus on building customer trust, and sustainable growth. And that means meeting new customer expectations and challenges head on. Customers have less patience today, he says, and demand better products and services. He explains how Thai Life is transforming its culture to meet these demands, and how the company’s CSR activities are helping it contribute to the UN’s sustainable development goals.

World Finance: Why is sustainability so important for Thai Life?

Chai Chaiyawan: Well, in Thailand at the moment, there’s a business environment change. Customers now have less patience, and also they demand better products and services.

Apart from that, there’s a demographic change; Thailand now is a rich, ageing society.

Also, multi-channel distribution disrupts the business. Technology changes the behaviour of the customer. Now the customer can learn everything by themselves through the internet, make any decisions through the internet; also even pay their premium through the internet.

So the company has to transform the competitive competency; that means we need to transform our people’s attitudes, because now they have to understand about digital technologies. So we have to transform them, to have a digital mindset.

World Finance: How have you embedded sustainability in your long term strategy?

Chai Chaiyawan: First of all we have to run the business, secondly we have to transform the business, and third we have to build the business.

Run the business – this means that the business must be lean, and then optimise profit and optimise sales volume. And the business must have the financial staying power and sustainability.

Transform – this means that we have to transform our corporate culture, to make our people have a new attitude and new mindset. Make them result-oriented, and understand about agility.

On building the business – we have to build business innovation. Be customer-centric. And understand customer insights. We have to create dynamic pricing products, that if the policy holder has good health, then we reduce their premium.

World Finance: You also see your customer relationships and responsibilities as a key part of your sustainability?

Chai Chaiyawan: Mmhmm. We offer products that improve quality of life for our customers, such as dynamic pricing products that I just mentioned, and also offer products that make people live longer, healthier, and better lives.

Also we invented policies for the military, and then invented policies for disabled persons.

World Finance: And how are you expanding your CSR activities?

Chai Chaiyawan: We have a masterplan, and this has three strategies: giving strategy, caring strategy, and fulfilling strategy.

On the giving strategy, we do things such as blood and stem cell donation, occupational training for disabled persons, for single mums, for underprivileged women in rural areas.

On the caring strategy, we do environmental conservation such as the mangrove forest conservation.

And then on the fulfilling strategy, we improve and enhance quality of life of ageing persons and underprivileged people in the rural area.

World Finance: Now overall you hope that your work will contribute to the UN’s sustainable development goals?

Chai Chaiyawan: So we set up a new masterplan on the SDG. First is a promise strategy, secondly is protect, and the third one is a prosperous strategy.

The promise strategy concerns human capital development, workforce wellbeing, and also anti-corruption. And also corporate governance.

On the protect strategy, we have a policy that incentivises responsible behaviour. For example a product for wellness persons or impaired persons. And then also we invent digital technology for the policyholder to give a better product and better services.

On the prosperous strategy, we manage the financial risks, insurance risks, technology risks – to prevent any risks that will happen to the business. And apart from that we also do the corporate citizenship and philanthropy, and accessibility and insurance education.

World Finance: Chai Chaiyawan, thank you very much.

Chai Chaiyawan: Thank you very much.

MB Securities: Vietnamese M&A boom will grow to $50bn in 2020

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In early April 2018, the VNIndex hit a new record of 1,200 points – surpassing its previous peak in 2007. By June 2018, the market capitalisation of equity and debt markets reached $160bn, equivalent to the nominal GDP of Vietnam. There’s been notable foreign investment in the Vietnamese stock market – and MSCI predicts that it could be upgraded from a frontier market to an emerging market by 2020. MB Securities’ Tran Hai Ha and Le Quoc Minh discuss the prospect of an upgrade, Vietnam’s M&A boom, and MB Securities’ investment banking and advisory services in the country. This video is mostly in Vietnamese with English subtitles.

World Finance: My guests are Tran Hai Ha and Le Quoc Minh of MB Securities: a leading brokerage house in Vietnam. They join me to discuss the trends in the country’s $183bn stock market, and what’s driving the new wave of Vietnamese M&A activity.

How has the Vietnamese stock market been performing? What trends are you seeing?

Tran Hai Ha: In early April 2018, the VNIndex hit a new record of 1,200 points – surpassing its peak in 2007. By June 2018, the market capitalisation of equity and debt markets reached $160bn, equivalent to the nominal GDP of Vietnam.

In the stock market, about two million accounts have been opened so far – of which 30,000 accounts are held by foreign investors.

On 10 August 2017, the government introduced the derivatives products on the stock market, marking a new milestone in the development of the market to reach international standards.

Currently, the P/E ratio of the market stands at approximately 17 times, indicating a short-term expected growth of around 25-30 percent.

In addition, MSCI predicts that the Vietnam stock market could be promoted from a frontier market to an emerging market by 2020; making the Vietnam stock market more attractive to investors – especially foreign investors.

We believe that the Vietnam stock market has a huge potential to grow in the near future.

World Finance: How has MB Securities maintained your top five positions on the Hanoi and Ho Chi Minh stock exchanges?

Le Quoc Minh: Over 18 years in operation, we are always consistent with our goal of delivering the best securities services, and we follow this vision in every step we make. That’s the first.

Second, we possess one of the strongest research teams on the market, including industry specialists and experts.

Finally, being aware of the importance of online trading platforms, we have invested strongly in our in-house information technology over the last three years. As a result, we have launched highly qualified online trading services – including derivatives – on mobile and computers.

World Finance: Vietnam is seeing a resurgence in M&A activity; what’s driving this?

Tran Hai Ha: With a total population of 100 million, and a strong connection with about 600 million people in the ASEAN region, M&A activity has been dynamic across sectors – particularly in the retail sector, including consumer finance and fast moving consumer goods – with increasingly sizeable deals; which in turn attracts more international investors from Japan, Korea, the ASEAN region, and the EU.

In my opinion, Vietnam will continue to witness a boom in M&A activity in the long term, given the government’s commitment to restructure, an increasing improvement of the market economy and more open government policies.

Especially, under the state-owned enterprise restructuring plan, the government’s divestment of big state-owned enterprises such as Vietnam National Tobacco Corporation, Vinaconex, and Tien Phong Plastic, would bring about tremendous investment opportunities for foreign investors.

For the above reasons, it is predicted that M&A activity will explode in deal values and volumes across sectors, with total estimated value of $50bn in 2020.

World Finance: And how has MB Securities been improving your investment banking services?

Le Quoc Minh: Over the last three years, MBS has been among the top five local investment banking services. By the end of 2018, we aim to get into the top three. To achieve that target, we create a compatible blend of talent advisors and analysts, a strong network of clients, and an extensive brokerage team.

Over the last 18 years, we have built up strong relationships with large corporations and financial institutions domestically. Besides which, our team carries out independent assessments of every transaction thoroughly, which allows us to propose suitable deal structures to ensure mutual benefits between investors and clients.

A strong brokerage team also helps us to bring investment banking products to as many clients as possible.

Tran Hai Ha: Finally, MBS is actively involved in investment banking services, with financial and M&A advisory services available to clients. Operating as a proactive local securities firm in market, we fully understand corporate culture as well as legal systems.

I strongly believe that as a local securities firm, MBS has a strong competitive advantage in M&A advisory services in Vietnam, including cross-border deals.

World Finance: And what’s your strategy for the next five years?

Tran Hai Ha: We continue to focus on our two core businesses, being brokerage and investment banking services. In the meantime, we will keep improving our services – especially information technology – and expanding our client network locally and internationally.

In the next five years, we aim to become one of the three largest securities firms in Vietnam.

Kamakura’s Troubled Company Index shows trends in e-commerce, Brexit

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The Kamakura Troubled Company Index started in 1990. It looks at the 38,000 companies in Kamakura’s coverage universe, and returns those businesses that are most likely to default in the next month. Kamakura President and COO Martin Zorn explains how the index demonstrates the stresses in the US retail sector caused by the risk of e-commerce, and how it shows the UK performing worse than any other EU country today. In the other half of this interview Martin discusses Kamakura Risk Information Services, and how it helps risk managers run financial simulations when there’s no historical precedent.

Martin Zorn: The Kamakura Troubled Company Index started in 1990, and what it measures is the percentage of companies in our coverage universe – which is 38,000 companies – that have a one month default probability that’s in excess of one percent.

So, in doing that, what it measures is the one percent of the total coverage of companies that at any point in time are the riskiest in our universe.

The use of it is really multifaceted. The simplest use is basically showing the state of the economy in the short-run, relative to default probability. So, default probabilities rise and fall with business conditions. Looking at the one month default probability shows the shortest measure of potential financial distress within the economy.

So you could look at it on a global basis, if you look at all 38,000 companies, because that’s incorporating data from 68 countries. It also allows you to focus in on specific countries, and it also allows you to look at certain sectors. So you could basically see which sectors have higher risk than others on a relative basis.

Over the last six months in the US, what you basically find is a couple of key trends. Most industries are doing very well, from a standpoint there is a very low probability of default. But having said that, there are clearly certain industries that have been under stress.

Probably the most obvious one is the retail sector. And it is not what you would necessarily, typically think the results would be. There are a number of the traditional, brick and mortar, retailers – like Home Depot, and Lowe’s, and Coles, that have very low default probabilities, which indicate that they are doing just fine, even in the world of e-commerce.

But then you also see a number of more traditional brick and mortar, retailers – stores like Seers, JC Penny – that definitely have felt the effect of Amazon, and have a very high default probability. Those firms that have not adjusted their strategies, to basically be relevant in an environment where people can order anything they want online.

The UK is actually quite fascinating. I had not really started noticing this until several months ago, where I attended a conference in Amsterdam. And there was a presentation made on how the various EU countries were performing. And economically, Great Britain was performing worse than any other EU country – including the usual suspects, like Greece or Italy!

And as a result of that I started looking more closely at our Troubled Company Index on the EU countries. And what I did find a disproportionate number of the high risk businesses within the EU tended to be UK firms. And in fact in the last two months, when we take a look at actual defaults, almost 80 percent of the global defaults have been from UK companies.

So, one of the things that the Troubled Company Index on a sector basis will do, is provide you with very good information on where various sectors are. So if we look at it today, what we find is that retail and telecommunications on a global basis are both in a downturn. We see that the energy and natural resource sectors are in a recovery position, where capital markets are lending money to them again, and we see certain sectors such as healthcare, utilities, and green energy very much in an expansionary mode, where there is lots and lots of capital available.

So then, longer-term expected cumulative default measure provides very good insight into not only what the short and medium term future is by sector, but also where the potential risks are, and where the potential spreads could be.