Banks Are Locally Strong, Globally Behind
By Kim Jae-kyoung
Staff Reporter
Korean banks are locally very strong and have great potential to become global players but there is much room for improvement, according to a global banking expert.
He said that Korean banks' attempts to go abroad based on their strong local base is a step in the right direction to becoming successful internationally.
In an interview with The Korea Times, ahead of the annual conference of Korea Chief Financial Officers (KCFO) held yesterday, Abhay Chauhan, senior vice president of HSBC Korea, said that Korean banks should understand global standards to become a true global player. HSBC is the sponsor of the conference.
``Korea is one of the top-tier countries in terms of IT infrastructure. Technology is a critical factor in the banking sector and local Korean banks are ahead in this field compared to their counterparts in other countries,'' he said.
``While local banks tend to be very competitive locally, if they want to become serious global players, one of the areas which they need to work upon is understanding industry standards and markets in other countries and accepting the global standards used by the financial industry worldwide,'' he said.
Chauhan exemplified HSBC to explain what steps Korean banks should take to go global successfully.
``HSBC has successfully established a global network largely through acquiring local banks. From the Middle East to Latin America, we bought many local banks,'' he said.
``HSBC's success factors are localization characterized by its slogan `the world's local bank', as well as human capital and diversity,'' he added. ``We have a culture that respects people with different ideas and cultures, which is critical for going global.''
He pointed out that by going global, Korean banks could get a lot of benefits.
``Korean banks can reduce risk by diversifying their asset portfolio, securing new growth engines by capitalizing on opportunities provided from a wide network, and boost competitiveness through enhanced portfolio and brand value,'' he said.
Globalization Redefines CFO Roles
Chauhan, who heads the global payment and cash management division of HSBC Korea, said that globalization and rapid technological advancements are two key trends dominating the corporate world, and these trends have redefined the role of the CFO.
``Many firms that were once domestic or regional are now global or looking to be global. But opening new subsidiaries in unfamiliar territory inevitably carries risks,'' he said.
``As a result, the treasurer needs to have a far broader range of knowledge regarding overseas financial status and banking business,'' he added.
He stressed that CFOs of Korean firms should perform beyond their traditional role as an accountant to cope with globalization, stressing that they should become a multi-tasking player.
``Korean CFOs still consider that funding from financial institutions and maintaining operating capitals are their key priority roles as a treasurer,'' Chauhan said.
``As Korean companies grow larger and become more competitive, it will be essential for Korean CFOs to start playing a variety of roles,'' he added.
He cited six additional roles modern CFOs should take to play a leading role in organizations.
He emphasized that beyond the role of an accountant Korean CFOs should be strategists, innovators, lobbyists, educators, financial engineers and technology experts.
``Treasury is no longer an ivory tower but a multi-faceted and proactive source of financial expertise,'' he said. ``The cutting edge treasurer is essentially a polymath.''
He explained that of late, there are many CFOs being appointed to CEOs of large corporations around the world and such elevation to the head of a company illustrates the multi-faceted roles handled by CFOs.
He cited Indira Nooyi, CEO of PepsiCo, as a typical example illustrating new CFO's roles. She joined PepsiCo in 1994 and became CFO in 2001. In 2006, she was named CEO, becoming the fifth in the company's 42-year history.
``One common theme running across all such cases is the ability of a CFO to evolve from being a functional head to a leader in the organization, by changing the scope of treasury from being a cost centric department to a value added function,'' Chauhan said.
The veteran banking expert stressed that with operations in 84 countries and territories, HSBC can be a valuable partner in providing advice and consulting to help Korean firms in managing their global and regional business.