Meeting of Minds - MCB

MEETINGOF MINDS

In October 2019, over 35 bank CEOs and senior leaders, mainly from African countries, convened in Mauriti us for the annual Africa Forward Together (AFT) conference, a three-day networking, sharing and business event hosted by MCB Group, East Africa’s largest bank-ing group1. Over a series of fast-paced workshops, panels and collaborati ve discussions, the parti cipants discussed and agreed on a list of the main challenges faced by various African insti tuti ons.

This report is a resti tuti on of the fi ndings derived from one parti cular workshop held during the AFT confer-ence, themed ‘Meeti ng of Minds’ - that leveraged the insight of C-suite and senior banking delegates to identi fy the biggest challenges they are currently facing in their respecti ve insti tuti ons. Five specifi c themes were emphasised, all tackling areas that go beyond tradi-ti onal fi nancial metrics: Experti se, People,

1 The Banker 2019, in terms of Tier 1 capital

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Y Operati onal Effi ciency, Risk and Corpo-rate Sustainability. The subsequent prioriti sati on and discussion of these chal-lenges were characterised by a wide degree of consensus amongst delegates, and helped provide a clearer bearing of areas where African banking is facing diffi culty.

The insights from this survey should comfort individual insti tuti ons about the common nature of key challenges facing the region’s players, with the fi ndings informing the prioriti zati on of enabling strategies for the future, and promoti ng awareness that some avenues of collaborati on and partnership could help solve some of these challenges. Whilst the insights may also resonate with other players beyond Africa, the coherent trend of steady progress across the conti nent provides an opportunity for the region’s banks and fi nancial services stakeholders to engage in harmonised and collaborati ve development.

Partnership and collaborati on - the key to MCB Group’s appreciable regional impact in a relati vely short ti me

Established in 1838, MCB’s expan-sion outside of Mauriti us is a relati vely recent development, starti ng in 1991 to reach 11 markets in which it is present as at 2019. Today, the Group is a well-established regional player in fi nancial services and has positi oned itself as a strong contender in key segments.

A key success factor for the organisa-ti on’s strong growth and expansion, alongside its solid credenti als1 and con-ti nuous eff orts in innovati on2, has been a strategic focus on partnering and collab-orati ng with other fi nancial insti tuti ons in the region and beyond. In additi on to a well-developed network of some 1,150 correspondent banks worldwide3, including around 200 in Africa, MCB has acti vely pursued its “Bank of Banks” strategy.

1As at November 2019, MCB Ltd’s deposit rati ng was Baa2 by Moody’s Investors Service (“Moody’s”); the Bank has the best long-term deposit rati ng amongst commercial banks rated by the above agency in Africa2MCB invests heavily in technology and innovati on to make our soluti ons simpler, faster and more convenient, making the Group an att racti ve partner and soluti ons provider3As at June 2019

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Pierre Guy NOELChief Executi veMCB Group

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ALA “Bank of Banks” with the aim of driving Africa Forward Together

This component of the Group’s interna-ti onal expansion strategy has worked towards establishing MCB as a region-al hub in handling trade fi nance, pay-ments and cards operati ons outsourcing services, alongside off ering business soluti ons to fi nancial service providers in Africa, Asia and the Middle East. Of note, the Group partnered with and assisted some 91 fi nancial insti tuti ons worldwide, including over 60 in Africa and spanning 24 countries in its last fi nancial year. We enabled clients to gain access to state-of-the-art services off ered by various MCB Group enti ti es, thus helping them to un-derpin capacity building and business growth initi ati ves, while accessing indus-try best practi ces.

The Africa Forward Together (AFT) con-ference is an extension of this strategy, being an annual event off ering the region’s banking leaders a privileged platf orm to network with industry leaders as well as share experiences and views on trends and business developments shaping the fi nancial services sector on the conti -nent. This year marked the 10th editi on of AFT, having cumulated over the years the parti cipati on of over 360 delegates from 115+ fi nancial insti tuti ons across more than 30 countries.

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ALLeveraging a ‘Meeti ng of Minds’ to confi rm and calibrate where future strategies and prioriti es should lie

During the 10th editi on of AFT, delegates took part in a workshop aiming to lever-age this unique Meeti ng of Minds, a gath-ering of over 1000 years of cumulati ve experience in fi nancial services across the region, to identi fy and discuss the big-gest challenges facing African banks and those of other countries. The discussion revolved around fi ve specifi c themes, all tackling areas beyond core fi nancial metrics:

• Experti se - Technical know-how in the context of increasingly specialised disciplines (e.g. IFRS9);

• People - Talent acquisiti on and devel-opment, planning for skill transiti ons, interplay with technology;

• Operati onal Effi ciency - Leveraging digitalisati on or process opti misati on eff orts with a view to positi vely impact on cost, ti me and customer-centricity;

• Risk - Focus on operati onal and regulatory risk; and

• Corporate Sustainability - Obstacles to the inclusion of wider stakeholders, and challenges in aligning strategy, risk management, and culture.

What insights emerged?

Considering the relati ve heterogeneity of African markets in terms of disti nct char-acteristi cs and level of maturity in con-sumer behaviour, there was a remarkable alignment on the challenges facing the region’s fi nancial insti tuti ons. Thirty-nine

challenges across the fi ve themes were identi fi ed, a shortlist of which was rated, ranked and discussed. Fellow parti cipants therefore gained a collegial insight on the main challenges regional fi nancial insti tu-ti ons are currently struggling with, and the acti onable prioriti es for AFT’s community.

The top fi ve challenges are highlight-ed below, with the full list provided subsequently in this document:1. Lack of technical experti se amidst the

increased cybersecurity risk;2. KYC issues hampering fi nancial inclusion;3. Talent management, retenti on and

development;4. Gaps in customer relati onship

management; and5. IT, Digitalisati on and Transformati on

Programme Experti se.

Looking at the results of the survey, the parti cipati ng insti tuti ons indicat-ed a strong awareness of technological innovati ons impacti ng the banking and fi nancial sector, with most having embarked on digitalisati on initi ati ves of varying degrees, oriented around the need to streamline processes and enhance customer-centricity. Several insti tuti ons acknowledged signifi cant investments in technology, but reported some diffi culty in clearly translati ng these eff orts into transformati ve results, in additi on to establishing and measuring a positi ve impact on their bott om line. Additi onally, there is a lack of appropri-ate risk assessment and framework that caters for the exigencies arising from the

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Pierre Guy NOELChief Executi veMCB Group

use and adopti on of new digital soluti ons. The rise of cybersecurity att acks and other cyber frauds were therefore high-lighted as the most signifi cant challenge, compounded by the lack of technical ex-perti se and familiarity at senior levels in these fi elds.

In parallel, across the rest of most insti tuti ons, is the signifi cant shortage of technical experti se and know-how in IT, Digitalisati on and related transforma-ti on programmes, covering skills required for positi ons such as Data Scienti sts and enabling organisati onal structures for transformati onal project and change management. Parti cipants also shared the low level of familiarity of senior management with fast-evolving and emerging technological trends.

Whilst the burden of regulati on from cen-tral banks and authoriti es were not spe-cifi cally targeted as a major challenge, the lack of adapted Know-Your-Customer (KYC) and other compliance frameworks to facilitate the on-boarding of unbanked segments remain a key obstacle for regional banks in furthering fi nancial inclusion. This challenge emerged in many discussions.

On another note, the heterogeneity arising both from within the region’s mar-ket and across the wider conti nent presents the challenge of developing soluti ons for customer segments that are disti nct and someti mes unrelat-ed, e.g. urban customer segments with

high digital literacy vs rural unbanked segments requiring traditi onal support and channels.

Elsewhere, embedding principles of sustainability into corporate DNA was also highlighted as a challenge. The alignment of long-term value to stakeholders with corporate sustainability requires a considerable strategic push, a deep adjustment of corporate cul-ture and a more measured risk manage-ment mindset. This adjustment will have to take place sooner rather than later, because being a trusted bank with a wider positi ve impact is increasingly upheld as the minimum standard vis-a-vis stakeholders ranging from our own cus-tomers and central banks, to providers of lines of credit.

I hope that the insights from this report will help inform fi nancial insti tuti ons’ prioriti zati on of enabling strategies for the future, and promote awareness that collaborati on and partnership within the region has the potenti al to address many of the common challenges facing African banking and fi nancial services today.

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5.7

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Expertise

Technology as a business enabler

IT, digitalisation and transformation programme expertise

Project management expertise

Key challenges keeping African banking leaders up at night

6.27.1

6.2

Risk

Cost of regulatory compliance

Reputational risk, notably arising from social media

Cybersecurity risk and lack of related expertise

5.8

5.96.6

Operational efficiency

Gaps in customer relationship management

System and processes to support operational efficiency

Regulation slowing down operational efficiency

6.1

76.4

People

Integrity (ethics)

Change management

Talent management

CorporateSustainability

66.3

7.1Inadequate institutional frameworks are hampering progress on sustainability

Insufficient support to drive corporate sustainability

Aligning strategy, risk management and culture to principles of corporate sustainability

Shortlisted and rated from 1 to 9, with 9 being the most important challenge

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Cybersecurity risk and lack of related experti se

• Sub-opti mal controls amidst increasing adopti on of new channels and customer interfaces

• Increasing recourse to soluti on providers for new technological set-ups, i.e. cloud

• Experti se in managing cybersecurity diffi cult to fi nd

RISK

7.1

7.1

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6.3

6.2

6.2

OPERATIONAL EFFICIENCY

EXPERTISE

PEOPLE

RISK

CORPORATESUSTAINABILITY

Inadequate institutional frameworks are hampering progress on sustainability


Aligning strategy, risk management and culture to principles of Corporate Sustainability




6.3Integrity (Ethics)

6.1Change management

Talent management

6.1Technology as a business enabler(leadership)

6.5IT, Digitalisation and Transformation Programme Expertise

5.7Project management expertise

6.6Gaps in customer relationship management

5.8System and processes to support Operational Efficiency

5.9Regulations slowing down operational efficiency

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While new technologies are progressively disrupti ng traditi onal business models and opening up new opportuniti es, such developments also come with att endant risks, parti cularly when making allowance for the rising prominence of new channels and media used to conduct business. Moreover, risk in its various forms remain the defi ning challenge to banks and fi nancial insti tuti ons, with an especially potent weight for the African region. The experience of recent and general derisking from global players has led to a parti cu-larly cauti ous approach to the risk assessment of the African region and highlighted the importance of domesti c market knowledge and insight.

MAIN CHALLENGES IDENTIFIED AND DISCUSSED

1 being rated least important9 being rated most important

Reputati onal risk, notably arising from social media• Diffi culty in quanti fying impact


• Both local and internati onal standards increasingly expensive to abide by

• The emergence of new standards that are highly complex, i.e. IFRS9

OTHER CHALLENGES

Adequate governance mechanisms are an important considerati on proving challeng-ing to implement

Changing market dynamics make it diffi cult to keep up with the development of new products within shortening ti me-to-market exigencies, whilst ensuring a proper risk framework


Gaps in customer relati onship man-agement

• Customer awareness/educati on, and adopti on of new effi cient channels and off erings

• Diffi culty in implementi ng end-to-end pro-cesses between the customers and the Bank

Regulati ons slowing down operati on-al effi ciency• Internati onal Operati ons (USD – FATCA)• Restricti ons on monetary policies

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EXPERTISE

PEOPLE

RISK










Talent management







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System and processes to support Operati onal Effi ciency• Connecti vity is a challenge• Issues with mapping in the system (high

rework rates and change requests, etc…)• Challenge to secure strategic and

resource bandwidth to embark on large-scale projects (Run the bank vs. Change the bank)

With the emergence of new competi ti ve pressures arising from new players such as Fintechs and Telcos, fi nancial insti tuti ons fi nd themselves compelled to achieve signifi cant improvements in operati onal effi ciency, be it in terms of ti me, cost or simplicity of process. These new business imperati ves are occurring against a backdrop of unrelenti ng regulatory rigour and increasing stringency in compliance and risk frameworks.

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CYOTHER CHALLENGES

Threat from Telecommunicati on compa-nies who are moving into the disintermedi-ated space, notably payments

Client onboarding remains a pain point, due to cumbersome and rigid Compliance and KYC frameworks

Multi ple and redundant clearance pro-tocols are hindering the adopti on of Straight-through-processing and effi cient processes

Governance frameworks and buy-in from senior management are a challenge for transformati ve or disrupti ve operati onal effi ciency initi ati ves

Piecemeal digitalisati on eff orts and a non-holisti c approach are hindering the progress, with frequent limitati ons crop-ping up

?Our survey fi nds that nearly 25% of our respondents assigned the maximum score when rati ng the importance of “Regulati on slowing down operati onal effi ciency” as a challenge.

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As today’s economies become ever more knowledge-based, technology-driven and glo-balised, there is a growing recogniti on that companies have to prepare the next generati on with future-ready skills and the capacity for conti nued lifelong learning, while, at the same ti me, up-skilling and re-skilling the current workforce. Despite imminent disrupti on to human resource management arising from new phenomena such as automati on and Arti fi cial Intelligence, people remain at the core of banking and fi nancial services, which rely on intrinsically human values such as trust and integrity.

Talent Management

• Highly competi ti ve market and frequent poaching

• Increasing staff turnover rate• Increasing expectati ons for more con-

sidered career development paths and frameworks

Change Management• Workforce planning in anti cipati on to

the changing nature of jobs

OTHER CHALLENGESLeadership skills are being tested, with leaders called upon to remain informed and educated on new trends in technology or workplace practi ces being brought about by shift ing generati onal behaviour from both customers and employees.

7.1

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6.2

6.2


EXPERTISE

PEOPLE

RISK










Talent management







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• Shortage of skills in IT and Digitalisati on• Increasing pace of development in tech-

nology a challenge in terms of people

Integrity(Ethics)• Increasing scope for internal fraud,

enabled by technology, require a bolstered training and inducti on programme

• Monitoring frameworks need to be strengthened

There is now an accepted understanding that governments are no longer the only respon-sible agent in building sustainable societi es. Banks and fi nancial insti tuti ons hold a unique vantage point on the economies in which they operate, and are positi oned to contrib-ute acti vely to a new paradigm that aims to embed long-term value for all stakeholders. Additi onally, consumers now increasingly vote with their wallets on areas such as social and environmental issues. Going forward, companies will have to work towards embedding sustainability principles as a key value driver in the way they do business and this will require a multi -level shift .

Aligning strategy, risk management and culture to principles of corporate sustainability• Traditi onal and unilateral focus on

fi nancial metrics challenging to widen• Diffi culty in securing buy-in from relevant

stakeholders

Insuffi cient support to drive corpo-rate sustainability• Structure and staffi ng eff orts tend to be

underesti mated

7.1

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6.2

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EXPERTISE

PEOPLE

RISK










Talent management







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Inadequate insti tuti onal frameworks are hampering progress on sustain-ability• E.g. Ill-adapted KYC frameworks for the

region’s characteristi cs are proving to be an obstacle to fi nancial inclusion

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OTHER CHALLENGES

Slow pace of regulatory reform, and lack of dialogue

Immature market for Green fi nancing, with products and services not adapted yet

Our survey fi nds that nearly 25% of our respondents assigned the max-imum score when rati ng the im-portance of “KYC issues hampering fi nancial inclusion” as a challenge.

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Amidst an increasingly demanding operati ng and regulatory environment, fi -nancial insti tuti ons are requiring more technical experti se, specialised know-how and high-specifi cati on infrastructure in order to carry out their day-to-day acti viti es. These are both expensive and relati vely more diffi cult to access, considering the African context. Financial insti tuti ons therefore face signifi cant challeng-es in accessing these important enablers, and are adopti ng a variety of possible solu-ti ons, ranging from outsourcing (for example to consulti ng fi rms or through partnerships) to developing in-house and customised set-ups.

Project Management Experti se• Lack of structure within organisati ons to

coordinate projects• Absence of Project Management Offi ce• Diffi culty in securing buy-in & change

management challenges• Costi ng and overruns with regards to

budget and ti meframes

IT, Digitalisati on and Transformati on Programme Experti se• Diffi culty in adequately assessing IT re-

quirements• IT seems to be driving decision-making

7.1

7.1

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6.3

6.2

6.2


EXPERTISE

PEOPLE

RISK










Talent management







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and strategy, instead of being the other way round

• Management someti mes held hostage through lack of experti se

• Diffi culty in reviewing proposals and auditi ng selecti on

Technology as a business enabler and in leadership• Leadership skills in technology are a

challenge• Awareness level of management• Knowledge handling• Decision-taking and challenging proposals

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OTHER CHALLENGES

Due Diligence capabiliti es for the region remain a challenge

Compliance and regulatory experti se, in terms of skills, are diffi cult to source and develop

Process experti se, i.e. the establishment of adequate processes and linkages are a key challenge, oft en when integrati ng state-of-the-art soft ware or infrastructure

Microfi nance experti se

Automati on and arti culati ng a coherent workforce planning to anti cipate future disrupti ons

The implementati on and executi on of strategy, amidst increasing transformati on initi ati ves, is proving increasing challenging

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MCB Group is an integrated fi nancial services provider off ering customised products and services to a wide range of clients through its local and foreign sub-sidiaries and associates. Headquartered in Mauriti us and listed on the Stock Exchange of Mauriti us, the Group has cemented its positi on as the leading banking sector play-er locally, through its main banking enti ty, MCB Ltd. Furthermore, the Group is rec-ognised as a prominent fi nancial services player in the region. It capitalises on its for-eign banking subsidiaries in Madagascar, Seychelles and Maldives to positi on itself

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UP as a strong contender in retail and corpo-

rate banking in these markets. It leverages a network of Representati ve Offi ces located in Johannesburg, Nairobi, Paris and Dubai to further its well-established positi on as a regional player in key segments such as Energy and Commoditi es fi nancing and internati onal structured fi nance, and is in-creasingly established in capital markets. A cornerstone of the Group’s regional expan-sion is its acti ve positi oning as a regional hub for meeti ng the outsourcing needs of fi nancial service providers, especially those in Africa, via a ‘Bank of Banks’ strategy.

For any query about this report:

Jean-Michel FélixChief Executi ve Offi cerMCB Consulti ng Services Ltdjeanmichel.felix@mcbconsulti ng.mu

Dominique AliphonSenior Relati onship ManagerFinancial Insti tuti ons [email protected]

Meeting of Minds - MCB

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