A crisis is any high-consequence event that has the potential to threaten an organisations existence, writes Amry JunaideenFrom an accident that disrupts your supply chain to a firestorm in social media, companies manage minor crises all the time. It's part of doing business. But dealing with a major crisis is a different matter. The focus is on a major event, or series of escalating events, that threaten an organisation's strategic objectives, reputation, or viability. It is the nature of crises to bring with them chaotic and uncertain environments, where impacts are difficult to assess and even more difficult to manage.One such recent example is the packets of Nestle's Maggi 2-Minute Noodles that triggered India's worst food scare in a decade almost got lost in the post. Returned months later to the north Indian food inspector who first sent the samples - after a detour via Shimla in the Himalayas - the consignment eventually reached a laboratory in Kolkata, where tests found seven times the legal levels of lead. From there, what began as a minor labelling dispute that according to a local magistrate could have been settled with a $400 fine, spiraled into Nestlé's worst public relations crisis to date in India.By definition, crises have far-reaching implications. Whether because of purposeful acts, simple mismanagement, or something else, crises often begin small but often escalate into full-blown events.No one knows when a crisis will demand the best your organisation can deliver. These kind of crisis lay bare the readiness and responsiveness of an organization. They test a company's values, leadership and character at a time when there is no room for error. In today's world, technology and social media have dramatically increased the visibility of crisis, which can lead to greater reputation risk. Among S&P 500 companies, reputation accounts for close to 26 per cent of market capitalisation.Crises are often multi-dimensional and are growing in intensity and frequency. A series of escalating events or triggers-or even a combination of issues and events-could collectively result in systemic weaknesses that undermine trust and reputation. The table below lists, what we believe, are some key triggers and threats leading to a crisis. Addressing these kinds of threats requires organizations to step forward with decisive leadership and actions that are wholly consistent with their core values and character.What Companies Need To Be Mindful Of?It's natural to think of crisis in spectacular terms - physical catastrophe, international conflict or sudden financial failure. But in practice, a crisis is any high-consequence event that has the potential to threaten an organisations existence.An organisation need a range of capabilities to manage Crisis effectively, including clear command structure, common situational awareness and transparent communications. Crisis Simulation is a demonstrated technique for developing and testing these capabilities using life lie scenarios models.When crises are managed well, stakeholder value can actually increase. And, of course, the opposite is also true. There is no sure way to destroy value than in falling to manage a major crisis effectively.Based on our experience there are essentially, five lessons, about crisis management that C-Suite executives need to bear in mind1. Don't wait until a crisis hits to get ready. Monitoring, preparation, and rehearsal are the most effective ways to get ready for a crisis event. Organizations that can plan and rehearse potential crisis scenarios should be better positioned to respond effectively when a crisis actually hits.2. Every decision during a major crisis can affect stakeholder value. Reputational risks destroy value more quickly than operational risks.3. Response times should be in minutes, not hours or days. Teams on the ground need to take control, lead with flexibility, make decisions with less-than-perfect information, communicate well internally and externally, and inspire confidence. This often requires outside-the-box thinking and innovation.4. You can emerge stronger. Almost every crisis creates opportunities for companies to rebound. Those opportunities will surface only if you're looking for them.5. When a crisis seems like it's over, it's not. The work goes on long after you breathe a sigh of relief. The way you capture and manage data, log decisions, manage finances, handle insurance claims, and meet legal requirements on the road back to normal can determine how strong you recover.Five key areas which represent key opportunities for improvement in the Crisis Management Approaches seen today are clearly in the areas ofa) 24/7 monitoring capability, which is necessary to track all the relevant sources of data for potential business disruptions,b) Crisis Simulations where events or relevant crisis can be simulated for effectiveness, readiness and robustness of once modelc) Real time response, which considers an organizations ability to respond with the necessary expertised) Crisis communication which delivers business insights and financial acumen to protect shareholder values.e) Fluid enterprise architecture that gives an organization the ability to respond to a crisis situation quickly but also enables it to address the crisis with the best tools in its arsenal - across all 3 facets of its architecture - people, processes and technology.The author is senior director, enterprise risk services at Deloitte in India
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The United States Department of Justice is investigating trades worth billions of dollars that Germany's Deutsche Bank AG made on behalf of its Russian clients, Bloomberg reported, citing people familiar with the matter. The probe investigates so-called mirror trades, where the bank's Russian clients bought stocks in rubles, and through simultaneous transactions in London, bought the same stocks in U.S. dollars, thereby moving funds out of Russia without informing authorities, Bloomberg reported. Last month, The New York State Department of Financial Services (DFS) sought detailed information from Deutsche Bank on possible money-laundering transactions by some of its clients in Russia that could exceed $6 billion in total, a source familiar with the matter told Reuters. Deutsche Bank declined to comment on this development and referred to its earlier statement published on the issue along with its annual report on July 30.
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Banco Bradesco SA agreed to buy HSBC Holdings Plc's Brazilian unit for a surprisingly high 17.6 billion reais ($5.2 billion), narrowing the gap with larger rivals while boosting its base of affluent customers in Latin America's largest economy. The deal between Bradesco and Europe's largest bank includes the latter's Brazilian retail banking and insurance units. The agreement, which still requires regulatory approval and was sealed on July 31, could close by June. The all-cash acquisition will allow Bradesco to close the asset gap with larger rivals Itaú Unibanco Holding SA and state-controlled banks Banco do Brasil SA and Caixa Econômica Federal. HSBC Brasil's focus on high-income customers fits well into Bradesco's plan to ramp up sales of specialised financial services for the wealthy and larger corporations. The purchase price, which could change to reflect the net asset value of both businesses, is equivalent to 1.8 times book value, far above what analysts expected and above Bradesco's own valuation. Reuters reported on July 20 that Bradesco had entered exclusive talks with HSBC after offering to pay about 12 billion reais, or 1.2 times book value. Shares of Bradesco posted their steepest drop since July 23, shedding as much as 4.4 percent in São Paulo on Monday. The bank's American depositary receipt lost 3.5 percent in New York. "Too expensive," said Frederico Mesnik, a partner with Humaita Investimentos in São Paulo. "They bought the bank in order to keep the competition from taking it and they are paying a high price for it." The takeover, Bradesco's first since the 2009 purchase of Banco Ibi SA, will increase its assets by 16 percent, number of branches by 18 percent and staff by 23 percent. Bradesco expects the purchase to contribute to earnings starting in 2017. "The transaction makes strategic and financial sense for Bradesco and represents an opportunity to deploy more effectively the excess capital it was prone to accumulate in light of Brazil's poor credit growth outlook in the years to come," said Marcelo Telles, an analyst with Credit Suisse Securities. Strategy MisstepsBradesco paid 10.4 billion reais for HSBC Bank Brasil, 4.7 billion reais for the HSBC Serviços insurance unit and 2.5 billion reais for a measure of future additional revenues or scale gains, it said in a presentation. Following the acquisition, Bradesco's capital regulatory ratio, a measure of solvency strength, will decline to 9.9 percent from 12.8 percent currently. Chief Executive Officer Luiz Carlos Trabuco, speaking on a conference call, promised to integrate HSBC Brasil fully into Bradesco's retail banking insurance platform within the next three to four years. Analysts, who estimated that Bradesco could deduct as much as 6.5 billion reais in goodwill from the HSBC acquisition, were sceptical of the goal. Francisco Kops, an analyst with J Safra Corretora, said it will take at least five years for HSBC assets to be fully integrated into Bradesco. On the other hand, HSBC's sale of its Brazilian business represents a retreat from the second-largest emerging market economy after years of disappointing performance. HSBC, which arrived in Brazil late in the 1990s, never gained enough size to pose a real threat to Itaú, Bradesco or Banco do Brasil, the nation's top lender by assets. HSBC Brasil has 854 branches and 21,000 employees. Its assets of about 170 billion reais represent about 2.3 percent of the total for Brazil's banking system. HSBC, Europe's largest bank by market value, was advised on the deal by its own investment banking unit and Goldman Sachs Group Inc. Bradesco was advised by its Bradesco BBI investment banking unit, as well as JPMorgan Chase & Co and NM Rothschild & Sons Ltd. (Reuters)
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Facing a probe by Indian authorities into accounts held by Indians in Switzerland, global banking giant HSBC today said it is cooperating with the authorities. The bank also disclosed a number of other investigations in various countries for "alleged tax evasion, money laundering and unlawful cross-border banking solicitation" and said it is cooperating with the relevant authorities in each of the ongoing matters. "In February 2015, a public prosecutor in Switzerland commenced an investigation of HSBC Swiss Private Bank, and the Indian tax authority issued a summons and request for information to an HSBC company in India," the bank said in its interim report 2015. The public prosecutor's investigation in Switzerland was closed in June 2015, the bank said, while adding that "with respect to each of these ongoing matters, HSBC is cooperating with the relevant authorities". It said, "There are many factors that may affect the range of outcomes, and the resulting financial impact, of these investigations and reviews, which could be significant." A leaked list of over one lakh account holders in HSBC's Swiss banking unit, including 1,195 Indians, became public early this year, prompting authorities in India and many other countries to launch their investigations to ascertain whether these accounts had illicit money stashed abroad. Separately, the UK-based bank said it has also received "subpoenas and requests for information" from the US and other authorities including with respect to US-based clients of an HSBC company in India. This case relates to some NRIs facing investigation in the US for alleged violation of the American tax laws. On Swiss unit-related tax matters, HSBC said, "Various tax administration, regulatory and law enforcement authorities around the world, including in Belgium, France, Argentina and India, are conducting investigations and reviews of HSBC Swiss Private Bank in connection with allegations of tax evasion or tax fraud, money laundering and unlawful cross-border banking solicitation." It further said that "in light of the recent media attention regarding these matters, it is possible that other tax administration, regulatory or law enforcement authorities will also initiate or enlarge similar investigations or regulatory proceedings. (PTI)
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IDBI Bank has launched its first self service Mini Branch Kiosk at its Cuffe Parade, Mumbai Branch.Kiosk will address the customer’s request of personalised cheque leaves dispensation and issue of Demand Draft & Pay Order on 24X7 basis. These Kiosks will also have the functionalities of ATM.IDBI Bank would be the first bank in the country to make available these services on 24X7 basis.B.K. Batra, DMD, indicated that the bank will install more such 24x7 banking facilities so that its customer can do banking at their own convenience and time.(BW Online Bureau)
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For those who are not maintaining a healthy lifestyle, it’s still not too late to get insured. Sunil Dhawan explains how The lifestyle and working conditions are taking a toll on the health of most of us. It is becoming common for most people to complain about health conditions once one crosses the age of 40. To make matter worse, there are many who not only are overweight but also smoke and drink besides working in a high-stress job and keeping irregular hours. What’s more, they do not have any life and health protection for their family members. This makes them fall in the high risk category when it comes to insurance coverage. However, nothing keeps them away from being insured. Being overweight or a chain-smoker and a heavy drinker certainly puts them in a high-risk category as far as life insurance is concerned. But, that does not mean that they cannot get a life or a health cover. Medical underwriting: In addition to the financial underwriting that every insurer does to decide how much of life cover can be given to an individual, they also have in place the medical underwriting guidelines that help them to decide on the health profile of the individual. Some of the factors considered for placing a life on high or low risk health profile are height, weight, state of health, history of disease, amount of cover and the occupation. The insurer also carries out a series of medical tests to determine the health risks. Pay extra ‘loading’: The high-risk people brings adverse risk into the pool and therefore the persons with good health stands at a disadvantage. Those who are not in the right state of health i.e. not within the insurer’s norms with regard to medical conditions are made to pay up extra. For all lives falling under the normal health category, the insurers cover the risk and the life protection is provided to the individual. However, the moment the risk appears to be high as per the insurer's standards, the insurer resorts to asking higher premium from the individuals. This is called the 'loading', 'rating' or 'extra-premium', which the individual has to pay over and above the premium, which is paid by healthy-class of individuals. In certain cases, the life protection is totally declined to the individual and the entire premium, is paid back to the individual. This is because, according to the defined benchmarks, the life of the individual is considered too risky and the insurer is reluctant to offer any level of protection to the individual. However, that might not be the case always. Perceived medical factors like being overweight should not be the reason for one to stay away from applying for life cover. Even a normal looking and healthy individual may be declined a protection if negative factors surface after the medical tests. What to do in case of ‘loading’: Having asked to pay up the “loading’ should not deter someone not to go ahead. Remember, insurers isn’t denying but asking for extra to cover the additional risk based on health conditions. In case, the 'loading' is too high, then one might be reluctant to go ahead and buy. One may in that case either lower the amount of life cover or lower the term of the plan. Health cover: In case of health insurance, the insurer might as well ask you to undergo medical tests and submit reports. Also, the pre-existing diseases are never covered for the initial 2-4 years. Hence, company’s risk is reduced to that extent. It is certainly not too late for cutting down on weight and stop the use of tobacco for a better health, for you and your family. End note: When the sum assured is high, it calls for tests. The process involve setting up doctor’s appointment and then waiting for reports to be analyzed. To cut the process short, it is a common practice by many insurance agents to avoid the medical tests route. They may ask you to keep a low sum assured so that tests can be avoided. Essentially, one is compromising on the protection in doing so. Get a need analysis done and arrive at the right amount of coverage you need for the sake of your family members. Go for the tests and then based on the ‘loading’ if any decide to stick or modify the life coverage a bit. Bring a change in your lifestyle activities, go for well-ness programmes and come back in shape. Ask for increasing the coverage amount thereafter. Many insurance plans allows increase in coverage on policy anniversary or at important milestones such as birth of child. Remember, the golden rule remains the same -buying insurance when one is in the best of heath is the right approach.
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HSBC Holdings said its first-half profit climbed a better than expected 10 percent, driven by a strong performance in Hong Kong that comes as the bank considers moving its headquarters to the Asian financial hub. HSBC also announced on Monday the sale of its Brazil unit to Banco Bradesco SA, the country's second-biggest private-sector bank, for a higher than expected 17.6 billion reais ($5.2 billion), as HSBC seeks to cut underperforming businesses. Europe's biggest bank reported that pretax profits in the six months to the end of June were $13.6 billion, up from $12.3 billion a year earlier and well above analysts' average forecast of $12.5 billion according to a poll conducted by the bank. HSBC has become increasingly reliant on its former headquarters of Hong Kong for profits as its businesses in Europe, the United States and other emerging markets slow. The bank's improved profits were driven by an investing frenzy in Hong Kong among individual customers amid China's soaring markets earlier in the year, the bank said. "HSBC's wealth management revenues in Hong Kong from equities, mutual funds and asset management increased significantly," Chairman Douglas Flint said in the earnings statement. China's stock markets have been a boon for the lender, driving profits for the bank's broking business in Hong Kong via the Stock Connect trading link with Shanghai as mainland shares soared prior to their June crash. The market turmoil in recent weeks could mean a gloomier outlook for the second half for the bank, however, if investors' souring on Chinese stocks curbs their buying of shares and related investment products. "The bank's profits benefited from the boost from Stock Connect before the market turned, so I wouldn't extrapolate the same level of performance into the third quarter and beyond," said Ian Gordon, analyst at Investec Securities in London. Asia now accounts for two-thirds of HSBC's profits, and Chief Executive Stuart Gulliver has pinned the lender's fortunes on a 'pivot' to the region and its fast-growing economies. The bank is speeding up a cull of unprofitable units and countries by cutting almost 50,000 jobs - half of them from selling businesses in Brazil and Turkey. HSBC also said it had increased to $1.3 billion from $550 million the sum set aside to cover costs from various regulatory probes into banks' rigging of foreign exchange markets worldwide. The lender's shares were unchanged in Hong Kong on Monday early afternoon, against a 1 percent drop in the city's benchmark Hang Seng index. (Reuters)
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Will Reserve Bank of India (RBI) governor Raghuram Rajan spring a surprise by cutting the repo rate 25 basis points in its monetary policy review on Tuesday (04 August)? The last rate cut was announced on 02 June after two back-to-back inter-meeting rate cuts in January and March.A large section of economists maintain that the central bank may leave the repo rate unchanged at 7.25 per cent. However, a few expect a surprise from Rajan in the form of a 25-basis-point cut in the policy rate.A lower repo rate will bring down banks’ borrowing costs, which in turn, may prompt them to slash their “base rates”, the floor interest rate on which lending rates for final home, auto and corporate borrowers are fixed. It can lead to lower floating home loan rates, which move in tandem with base rates, and bring cheer to consumers, who have been paying large chunks of their income as EMIs towards repaying housing loans.Here are top seven reasons on why it's time for another rate cut 1) Consumer price inflation (CPI) accelerated to an eight-month high of 5.4 per cent in June. But going ahead, the base effects will come in play, and at least till August, retail inflation will remain low, below 5%, creating space for RBI to cut its policy rate. Incidentally, wholesale price inflation (WPI) has been in negative territory for seven months in a row. In June, it was at minus 2.4 per cent.Chief economic adviser Arvind Subramanian has said focusing on retail inflation may not be the right thing to do at a time price indicators are pointing in different directions.2) The corporate sector asserts that tepid industrial production numbers and the continuous fall in wholesale prices merit a repo rate cut. The WPI is in the negative territory for seven months. Many believe that this shows the loss of pricing power in the manufacturing sector and the central bank should not only focus on the CPI. A lower rate will help prop up growth in Asia’s third largest economy—at least, that’s the popular belief.3) Poor demand also took a toll on corporate profits in the second quarter. So, circumstantially speaking, there is a case for a rate cut. Corporate profits are hurting. An analysis of 70 companies with a market capitalisation of at least $100 million showed net income fell by 5 percent in April-June, the second consecutive quarterly decline, according to Thomson Reuters data.4) So far, the monsoon rainfall in the country has turned out to be better than the forecast made by the India Meteorological Department (IMD) in early June. The monsoon’s revival from mid-July has boosted rice and soybean crops, curbing food price gains and easing concerns of shortages.Good rainfall this year is key to boosting a rural economy hit by delayed and lower rains last year, as well as keeping a lid on food inflation and giving India's central bank more scope to cut lending rates.5) Another area where the RBI governor can take comfort is a decline in global crude oil prices. Currently, the Brent crude oil prices are trading $54 per barrel compared to $65 a barrel in early June. This will ease pressure on inflation as well.6) In the current economic scenario, a repo rate (the rate at which banks borrow from the RBI) cut and government spending are likely to revive corporate investments in the infrastructure space and is likely to trigger credit pick-up. It is further expected to come as a booster for capital-intensive sectors that have been deferring investments due to high costs and low capacity utilisation.7) Finally, the uncertainties surrounding the timing of the proposed rate hike by the US Federal Reserve (Fed) still loom large and, hence, RBI should pare its policy rate now as the Indian central bank may find it difficult to do so when the Fed bites the bullet. Many believe this could happen as early as September, writes Tamal Bandyopadhyay in the Mint.
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