Runner-up Prize Building international financial superstar
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By Steven Shideler
The development seen by Korea since the end of the Korean War in 1950-53 has been often repeated as the miracle on the Han River.
While the Korean economy has developed and pushed forward, multi-national juggernauts like Hyundai and Samsung have arisen as some of the top companies in their respective industries.
Korea is well represented internationally in areas such as automobiles, shipbuilding, construction and technology. However, Korea has yet to produce a global player on the world’s financial stage.
In order to produce a global player Korean financial institutions need to do several key things, move away from reliance on loans/mortgages for profits, make strategic acquisitions and develop talent on the global stage.
In comparison to global enterprises, Korean financial institutions rely too much on their loans and mortgages for income.
They need to increase their revenue and profits by increasing value-added services. These include trading of securities, consulting companies and clients about new equity financing, as well as commissions on securities and wealth management.
Diversifying their revenue streams to more value-added services will increase margins and also reduce Korean banks exposure to mounting household debt, a ticking time bomb waiting to explode.
After increasing margins and reducing exposure to lending, Korean financial institutions should also make massive changes in their use of human resources.
Korean banks are known for bloated payrolls and hefty compensation to their employees. While there are unions and employment regulations that must be considered, Korean financial institutions should aim to trim payroll in non-essential areas through early retirement and also the reassigning of staff to more profitable ventures.
With reduced costs and higher margins, Korean Institutions would be in a sounder financial position to begin looking overseas for some key strategic acquisitions in major financial markets.
Since the financial crisis in 2008, there has been considerable opportunity on the global stage to make key inroads into foreign capital markets.
Institutions in the United States as well as Europe are vulnerable to well capitalized buyers.
Though granted due diligence should be strictly followed, Korean institutions should seize this opportunity to make some key acquisitions in these major capital markets. This will provide not only access to these markets, but also access to a global pool of talent.
Korean institutions would be able to shift talent around. It would be tactically important to bring experienced financial players to Korea, as well as send their staff overseas to gain valuable training and experience not available on the domestic financial stage.
Some mid-west financial institutions have done well doing something of this sort.
The global financial crisis of 2008 left many highly capable financial players looking for work. Institutions in mid-America jumped at the chance to recruit these employees who would never have considered leaving places like Wall Street. Now their talents are being utilized to increase the prowess and capabilities of these once smaller and inexperienced institutions.
By making some key acquisitions overseas, Korean financial institutions would be able to benefit from such an exchange of expertise and experience.
One should never forget the axiom that “when banks are profitable, they are stable. When banks succeed, the economy and communities prosper.”
Buy increasing margins and profitability through value-added services, streamlining human resources and making strategic acquisitions in foreign markets, Korean financial institutions will surely become more profitable, more stable and will most certainly benefit the communities and economy of Korea.