“limited words, unlimited thoughts”

Banks have been, in recent times, under the hammer of regulatory bodies for a lot of reasons. Be it non conformity of transactions, fraudulent practices, insecure online banking, credit card scams and more importantly improper knowledge of customer profiles and risk management (both internal and external) Since banks manage something which is so sensitive and integral to humans i.e. money it becomes utmost essential for them to have systems in place that is capable of protecting the interest of shareholders and lenders, both in known and unknown circumstances. With the growing pressure from shareholders and the nature of competitive markets many financial institutions have gone and shopped for risky assets in order to deliver above average returns. Banks are also one of the worst hit sectors in times of economic downturns, since they have a direct impact on monetary flows and are the first to hit in case of defaults. Thus, this puts a whole new perspective for the modern day banker.  The case for social responsibility – with billions of dollars of money floating around the financial system, exchanging hands, it is difficult to recognize the good money from the bad money. What we mean by bad money is what is generated out of illegal activities such as drug trafficking, illegal arms deals, smuggling, acts of terrorism etc. Any society or organization or body wanting to undertake and benefit from these activities would ideally require movement of capital from one place to another. Capital again can be in both, in cash(or its convertible equivalent) and electronic form. Now institutions or individuals who promote these activities are likely to remain discreet at the same time have enough indulgence that they would be able to facilitate and finance the above mentioned. Thus, the most common way of how these people operate is through a series of bank accounts spread over geographies with different banks under dubious or fake names opened with forged documents with simultaneous transfer of funds happening in lower denominations that will not be able to catch the attention and eye of the regulator. Thus for every bomb blast that you hear about, or act of terrorism that you see or any criminal activity, there would be some or more banks in either Bermuda, Cayman Islands or any place as a matter of fact that would have received an incoming SWIFT of wire transfer. Thus to control these acts is to restrict the financing and movement of capital associated with it. Compliance is the modern day norm and so are the practices associated with it such as Know Your Customer (KYC) and Anti Money Laundering (AML). The reason why these have grown in importance is because officials have realized how easy it is to convert bad money into good money by flushing it in the financial system. Banks are being used as washing machines and are therefore indirectly financing these activities. Therefore it becomes the apex obligation of every bank to have policies and practices in place that would be capable of detecting at an early stage and give a warning bell to the regulator The case for corporate governance – banks are in to business of borrowing and lending. It looks very lucrative in times of economic prosperity since banks borrow at cheaper rates and lend at higher. But what happens when the rate of defaults starts to escalate. And also what happens when banks are sitting with a portfolio of collateralized assets which are worth lemons in the market. What happens to the lenders? We have seen many instances in the past where banks have gone bust and defaulted on payments, an example would be few of the central and nationalized banks which defaulted on bonds and deposits during the Asian and Argentinean crises. Thus to protect the interest of lenders and depositors banks have to maintain a minimum capital as expressed in percentage terms for every dollar borrowed.  Thus we can say that, for a given portion of risky assets which the bank owns it would have to maintain a minimum amount of capital or in other words for a given amount of capital it can only own the prescribed quantity of risky assets. This expressed in percentage terms is the Capital Adequacy Ratio (CAR). CAR is the sum total of Tier I and Tier II capital divided by the Risk Weighted Assets. The constituents of Tier I and Tier II capital are the core equity of the bank, disclosed and undisclosed reserves, subordinated debt and more. This is where the role of the bank manager comes into play. Efficient risk management systems and credit policies can help a bank mitigate the risk of a possible default or bankruptcy. Basel II accord which is a set of international banking regulations and also an extension of Basel I which was first issued in 1988, is aiming to bring practices in place which will provide greater stability in the financial system. Thus governance of internal policies and applications and appropriate risk management measures would aid banks and financial institutions to strengthen the pillars of the financial system, control the systemic risk, promote sound regulatory and compliant practices, support the resilience of the financial infrastructure which is quintessential for the broader health of the economy.  Modern day society deserves a safer environment to bank in. They also want the assurance that in the whirlpool of money flying in all directions the wrong sources are not being funded. This places the modern day banker in a whole new paradigm. His role far above than just being a money manager.

What would be the ideal response if you would sit for a lecture given by a PhD in Economics from the Harvard Business School. Wouldn’t it be mesmerizing? Yes!!! Indeed it was.  Dr. Yousef started off by posing a question. That is Dubai into a Boom phase? Inferences were drawn upon to 70’s where the Middle East underwent a transition phase when the oil prices rose to sky high limits. It was dollars pouring in by the seconds which the rise of the black gold and the oil producing nations in return started various benefit programmes for their citizens. Just like anything in this world which is subject to a cycle so are economies and industries. The mid eighties saw the oil price falling and the serious loss of revenues to the Middle East. Suddenly the benefit programmes which earlier used to be like a walk in the park were now more difficult to sustain. Coupled with the Asian crises which also had an impact, left the region with almost negligible growth.  Back again now, with history repeating itself and the oil prices again gaining momentum the big question now is what happens next. Is Dubai still susceptible to the movements in oil prices or are there other means that will ensure that the impact is felt lesser. Although one can say that the Middle East has diversified its revenue streams, with strong emphasis on hospitality, tourism, financials, real estate and other services and manufacturing sectors energy still in a big way impacts the nation’s balance sheet.  Dr. Yousef also drew upon the shifts in economic thinking right from the neo classical era to Keynesian economics when he recited the famous quote of Keynes “In the long run we are all dead.” From where we have come right from the State Controlled era where even the prices of bread that we bought was determined by the state, to the free market economy where the forces of invisible hands interact to form a price-demand-supply mechanism.  Finally Dr. Yousef mentioned that the way for the future would be Knowledge Economies. Knowledge driven societies would emerge as the new parlance and would lead the crowd further into the era of globalization. The move in that direction can be witnessed with Dubai placing a strong emphasis on education, a result of which is the Knowledge Village and the Academic City. Thus we ended with the opening question that was posted to us “Dubai, from boom to bust and back?” still unanswered. Thus it was an interesting session for us as it made us  which posed a lot of questions, the answer to which will only be known to us in the long run.

‘Strategic Marketing’ is essential for pushing sales of products or services or for even developing new markets. There is a need to have a bird’s eye view of the numerous elements that may seem to creep out of oblivion in order to get the right perspective of the market in its myriad colours. Any strategy remains incomplete without the use of right communication at the right time, through the right media. ’Timing’ is also another important factor. For any communication, one action follows the other & if there is no synergy in terms of timing, it will create more confusion rather than making things simple. Having been in the field of advertising, I would like to share one of the most recent & known example of ‘Strategic Marketing Communications’ of Mutual PR agency for one of their clients, Star Cruises that is set as a benchmark for all advertising firms. The agency’s expertise was in handling the marketing communications for IT & Telecommunications companies. They entered into an entirely new domain by signing up with Star Cruises. They had to drift from IT & Telecommunications to lifestyle & entertainment. They took it up as a challenge of establishing cruising as a holidaying concept & thereby creating a market for itself in the country. The client’s brief was clear as to establishing itself in the market with low cost options. Therefore, as the advertising spends was initially very low, PR was the only low cost option to support the market build up in India.  The agency’s strategic planning exercise started with research & identification of the target audience followed by identification of their taste, preference, lifestyle, reading habits, listening habits, TV viewing habits. The service after all was ‘Cruising’ which was synonymous to holidaying in a lavish & luxurious style. People generally recall cruising as an expensive proposition. The strategy was to break into the mindset of the target audience and position cruising as a relevant, exciting & affordable holiday option. Integrating various forms of communications, an aggressive marketing communications plan was devised in consonance with the marketing strategies of Star Cruises. This involved communicating to the various parties who come in the immediate environment of Star Cruises through various types of communication tools. It included media related activities, trade body relations as well as corporate to corporate PR. Media activities were drawn phase wise depending upon the messages based on different activities that were carried out.  Integrating the various media elements & binding them together with the messages targeted at the audience was the key to success. The messages were either bundled together or were disseminated individually depending upon the strength and relevance of the media chosen. One might think as to why a news story appeared in one of the leading financial dailies, which speaks about the idea of cruising. Yes it was the publication’s travel supplement. This was just an example about using media as a vehicle of communication to reach the corporate segment as it was one of the key audiences. The agency through its Planning department compiled a database of the top 50 corporates offering incentives to employees, dealers and keen on holding their board meetings & business meetings in holiday destinations. The agency prepared corporate presentations & initiated talks with the corporates. Follow up stories appeared in the media endorsed by top business tycoons creating more opportunities for corporates to follow. A freelance TV crew was also sent on board Star Cruises, which in turn provided software content to the various TV channels along with regional language channels. Innovative schemes like targeting the ‘honeymooners’ during the marriage season by offering discounts, introducing quiz contest for school children during summer & winter vacation & giving free cruise offer to the winners were carried out. In-film advertising is also fast picking up in India & there was no stone unturned to tap this idea as well. It was implemented through the film ‘Humraaz’ wherein the film was extensively shot on board one of Star Cruises liners.  The basic idea of sharing this example of Star Cruises is to explain the basic tenets of strategic marketing communications as a part of the media activity for any client. However strong the marketing strategy is, it cannot be successful unless it is communicated rightly at the right time through the right media. A thorough understanding as to how the media functions and what type of content goes on to the respective media are necessary for every Advertising & PR professional in today’s world where the audience concerned have less time for leisure & are stressed too.
- Bhavna Agarwal