Relationship Managers (RMs) in banks must be a frustrated lot these days.
Financial Sector Spotlight With Omen Muza
In order to appreciate the enormity of the wreckage of relationships that were once superintended by RMs, one only needs to look at the auction notices in newspapers for the forced sale of movable and immovable property belonging to defaulters.
The evidence of failed lender-borrower relationships abounds, condemning the role of RMs to that of chasing for repayments instead of developing new profitable relationships.
The causes of these failures vary from one banker-customer relationship to the next, but the common ones include high interest rates, low business volumes, mismanagement/misallocation of borrowed funds and faulty models from the transition from the Zimbabwean dollar (ZWD) era to the dollarized environment.
However, the failure to develop and actively manage relationships is also one of the contributory factors and its impact must not be underestimated.
Instead of a symbiotic relationship in which the customer and relationship manager co-operate for the greatest good, relations have largely degenerated to a cat-and-mouse game in which customers try to outsmart their banks by disclosing as little material information for as long as possible.
It’s not unheard of for a relationship manager to learn about his/her customer being put under judicial management or liquidation through the media before they hear it from the horse’s mouth.
Under circumstances where customers are multi-banked and multi-borrowed – as is the case in Zimbabwe — it’s clear that only those bankers that develop close relationships with their clients stand to get the most out of even failing relationships.
And in this liquidity-constrained environment, it’s probably the relationship manager with the best relationship with the customer who gets the lion’s share of any funds allocated to debt servicing.
It is against this background that the ongoing efforts of Development Bank of Singapore (DBS)to transform its relationship managers’ capabilities caught my attention. The chief architect of the program is Tom McCabe, previously global head of transaction banking and now chief country officer for DBS’s United States operations.
DBS Bank is one of the largest banks in South east Asia, with more than $330 billion in assets. Headquartered in Singapore, it oversees operations in 17 markets, serving more than 4,6 million customers, including 190 000 corporate and small-and-midsize business clients.
Admittedly, in Asia the main driver for the transformation of the role of the relationship manager is rising customer expectations, but they don’t have to deal with debilitating liquidity issues like we do here.
However, I still feel that what DBS is doing can be selectively adapted and applied to our market in an effort to improve customer relationship management (CRM).
Building Advisory Skills
Building the advisory skills of relationship managers enables them to provide deeper supply–chain insights, helping clients to increase their free cash flow and enhance innovation.
Creating Awareness of Three Critical Questions
Regardless of industry, location or company, most Chief Finance Officers (CFOs) ask the same three questions:
1) Do we have the right capital structure?
2) Are we taking on the appropriate amount of risk?
3) Could we be generating more free cash flow from our operations?
These are questions for which every relationship manager should have ready answers for each of their clients, something which no doubt calls for in-depth understanding of the customer’s business and attendant value chains.
Adopting a New Product Delivery Model
Under the traditional delivery model, RMs begin by calling on their customers and listening for opportunities that match with the bank’s existing products.
RMs then spend time with the product development teams tweaking existing products in order to prepare suitable solutions.
However according to DBS, the new frontier is in helping clients unlock the value that is in their organizations already but for the RMs to assume that role effectively, they need more than a product focus.
They need to become the client’s trusted advisor by providing insights and ideas that are tailored to that client’s needs.
Much work is therefore centered on helping the RMs put themselves in the CFOs shoes – understanding the day-to-day challenges and recognising potential risks.
Providing Infrastructural Support
The RMs need supporting infrastructure as well, so they could develop and deliver their analyses quickly.
According to DBS Bank, the idea is for RMs to uncover “trapped cash” in supply chains (thereby freeing up cash flow), and inefficiencies in the company’s operating model and processes, which are a crucial form of operational risk.
This calls for investment in the development of data sources and analytical tools in order to meet the RMs’ need for client-specific insights. DBS Bank for instance built a 65 000-strong database which is continually updated.
The bank has also invested in teams that mine, manage and analyse this data. Admittedly, Zimbabwean banks would be hard-pressed to make these sorts of investments under current circumstances but there are always some things that don’t require money and can be done using existing human resources in order to get the ball rolling. One must start somewhere.
By implementing these — amongst other — interventions, DBS Bank says it has seen not just better credit decisions but also stronger commercial skills across the 0rganisation.
On the other hand, clients who embrace the bank’s new approach are now able to mitigate operational-risk issues while uncovering opportunities for increased productivity.
lFeedback: email@example.com. Omen N Muza writes in his personal capacity. You can view his LinkedIn profile at zw.linkedin.com/pub/omen-n-muza/30/641/3b8