HR Governance a necessity in light of the

Changing Banking Landscape…

Re-Defining HR

From Rigid Organization

Decem

ber 16

th&

17th

of 2016

Beiru

t -Leb

an

on

The A

nn

ua

l HR

Forum

To Agile & Fluid Organization

By Mohammad Fheili – mifheili@gmail.com

Mohammad Fheili “Over 30 years of Experience in Banking. fheilim@jtbbank.com (961) 3 337175

Risk & Capacity Building Specialist. Trainer in Risk & Compliance University Lecturer: Economics, Risk, and Banking Operations Currently serves in the capacity of an Executive (AGM) at JTB Bank in

Lebanon. Served as:

• Economist at ABL,• Senior Manager at BankMed• Senior Manager & Chief Risk Officer at Group Fransabank

Mohammad is a Graduate of Louisiana State University (LSU), and hasbeen teaching Economics and Finance for over 25 continuous years atreputable universities in the USA (LSU) and Lebanon (LAU).

Finally, Mohammad published over 25 articles, of those many are inrefereed Journals (e.g., Journal of Money Laundering & Control; Journalof Operational Risk; Journal of Law & Economics; etc.) and IndustryBulletins.”

Risk & Capacity Building Specialist. Trainer in Risk & Compliance University Lecturer: Economics, Risk, and Banking Operations Currently serves in the capacity of an Executive (AGM) at JTB Bank in

Lebanon. Served as:

• Economist at ABL,• Senior Manager at BankMed• Senior Manager & Chief Risk Officer at Group Fransabank

Mohammad is a Graduate of Louisiana State University (LSU), and hasbeen teaching Economics and Finance for over 25 continuous years atreputable universities in the USA (LSU) and Lebanon (LAU).

Finally, Mohammad published over 25 articles, of those many are inrefereed Journals (e.g., Journal of Money Laundering & Control; Journalof Operational Risk; Journal of Law & Economics; etc.) and IndustryBulletins.”

“Human Resources are likeNatural Resources; They’re often buried deep. You have to go looking for

them. They’re not just lying

around on the surface. You have to create the

circumstances where theyshow themselves.”

Sir Ken Robinson

… is about … Having the Right People,With the Right Abilities (Knowledge, Skills & Attitude), In the Right Place, At the Right Time.

Deciding what to do is ASIMPORTANT AS deciding whatnot to do.

Sir Steve Jobs

A Student asks his teacher:

Would you punish me forsomething I didn’t do?The teacher swiftly replied:

Of course Not!The Student happily said:

Well I did not do myhomework!

HR Management is A By-Product of the Business it Operates inThere is NO ONE-SIZE HR Management that Fits AllNot a

Job!

HR Service Delivery Strategy Continuum

Human Capital

UnderstandThe Business

The Multi-Facet Complexity of Today’sBanking Environment. Are Banks Equipped To Cope . . . ! Is Your HR Ready . . . !

1st

Com

plex

ities

1. Banking Model 2. Reporting3. Regulations4. Compliance 5. Technology

1997.lb

The Start Of The End Of Banking As We Know It

Many Banks are HERE: Buried Deep in

Complexity

In Lebanon & The Region, we are still HERE

1. Banking Model-Induced ComplexityMAXIMIZE PROFIT subject to:

RISK , REGULATORY, Compliance, Reporting, Etc. Constraints

RISK .  . .  Default Liquidity Maturity Others . . . REGULATORY . . . 

Basel I, Basel II, Basel III

Basel IV (In the making)

Total Loss Absorbing Capacity (TLAC) Requirements 

IFRS9 Requirements 

Sanctions Rules

USA_FATCA Requirements

OECD_CRS Requirements 

AML, CIP, KYC, DD, EDD, RBC, Etc. . . .

Uses of Funds Sources of Funds

Reserves Loans Securities Other 

Investments .  .  . 

All Types of Deposits

Borrowings Other 

Sources Equity .  .  . 

Off-Balance Sheet

Legal Issues .  . . 

Creative Thinking:Who can best help the Bank recoversome of the cost of Compliance?Yes, YOU: Change the ‘Rules ofEngagement’: You can Increase Traffic:

• More Clients• More Transactions which can be

achieved Through cross‐selling Follow up Diligently on the

settlements of Loans (and ‘BienTrouvé’, Updated Financials, SiteVisits, etc….)

Reduce Loss‐Events. Promote the Bank through your

Social Networks.

Where do we go to secure that the Financial Institution is equipped to cope with this Complexity?

How Actively Involved is HR in Budget?

2. Reporting-Induced Complexity

Where do we go to secure that the Financial Institution is equipped to cope with this Complexity?

CRS

IFR

S 9

Pillar 1: Minimum Capital Adequacy Ratios

Calculation Of Exposure

Calculation of PD/LGD

Calculationof RWA

Adjustments forCollateral Valuation

Adjustments forCredit Mitigants

Netting Balance Sheet Items

CalculationsOf Risk WeightsBased on PD/LGD

Supervisory RiskWeights and LGD

Standardized Approach IRB (Foundation) IRB (Advance)

Value at RiskStandardizedMeasurementMethods

Interest Rate Risk

Equity Position Risk

Forex Risk

Commodities Risk

Treatment of Options

Support for allThree Approaches

Basic Indicator Approach:Capital is calculated as apercentage of Gross IncomeStandardized Approach:line of Business BasedExposure IndicatorsAdvanced MeasurementApproach: CapitalComputations as per LDA

Credit Risk Traded Market Risk Operational Risk

External/InternalRating

Systems

Pillar 2: Supervisory OversightPillar 3: Market Discipline

Usage of Metadata whichEnables transparency

Capital for other Risks (Concentration, etc..)

Rules-Based Engines Risk Assessment Reports (ICAAP, CRSA,…)

Capital Adequacy Reporting

Flexible Reporting

Quantitative Reporting-IFRS 7

Qualitative Reporting-IFRS 9

3. Regulations-Induced Complexity: The Basel Accord

Where do we go to secure that the Financial Institution is equipped to cope with this Complexity?

Level Of Maturity in AML Compliance

Nature & Extent o

f Efforts Dep

loyed

DD

EDD

RBA

Due Diligence

Enhanced Due Diligence

Risk‐Based Approach to AML Compliance 

Enhancing Compliance Capabilities … AM

L Cost

Skills Needs

Know‐How

AML Analytics

Enhanced AML Compliance Steps require theUse of Technology. Increase reliance on Technology; Increase the need for a certain set of

technical skills; Necessitate the need to re‐design existing

processes; Increase exposure to Technology Failures

(i,.e., Risk).

4. AML Compliance-Induced Complexity

Where do we go to secure that the Financial Institution is equipped to cope with this Complexity?

Client is Engaged

Compliance Cycle

Service Cycle

st1Client Interface

Interface

End

CIP, KYC

AML Compliance (Regulator Decides)Client Engagement is Constrained by: The Bank isDeemed AML‐Compliance Responsible &Accountable

Customer Satisfaction (Customer Decides)Client Engagement is Driven by: The Potential forRevenue: Interest Income, Commissions & Charges;and a Word‐of‐Mouth Free Marketing

Both Cycles Are Ongoing Processes; None is a Destination 

by itself

The Most Critical CustomerInterface; Manage With Care:You Either Collect all theneeded information (CIP &KYC), or you have planted theseeds of Troubles to Come . . .

Branch

Where do we go to secure that the Financial Institution is equipped to cope with this Complexity?

4. AML Compliance-Induced Complexity

• Increased Usage of ImpersonalElectronic Services

• Low Cost Electronic Services;

• Widespread and DiffusedCustomer Base.

This, in turn led to:Lower Customer Intimacy.Reduced Switching CostsBetween Different Banks

Increased Chances ofFraud

Increased the Demand forTransparency

• Less Time to Know andInfluence Customers.

Where do we go to secure that the Financial Institution is equipped to cope with this Complexity?

5. Technology-Induced Complexity

5. Technology-Induced Vulnerability: Cyber Attacks

In 2015, 38% moresecurity incidents weredetected than in 2014.

Theft of “hard”intellectual propertyincreased 56% in 2015.

Staff remain the mostcited source ofcompromise (Risks).

Risk Events attributedto business partnersclimbed 22%.Source: Global State of Information Security Survey, 

March 2016

Where do we go to secure that the Financial Institution is equipped to cope with this Complexity?

Service, Risk & Compliance

Sustainable

Organizational Readiness

Banking Has Evolved; Have You (Mr. HR)?

MustConverge

Must beIn Synch! Well

Informed!

The World of HR Has Changed Beyond Recognition . . .

Banking Has Evolved; Has HR?Is HR Ready?

Welfare Officer

Labor Manager

Personnel Management Human 

Resources Management

• Human Capital• HR Business 

Partner• People• People & HR Risk

1890’s2017’s

Organ

izationa

l Scope

Risky Business: you don’t want to be a Human 

Resource Manager in a Welfare Officer’s 

Mentality!

Timeline/Period

NextRobo‐HR Manager

(e.g., HR Self‐service)

HR Management Has Evolved in Response To Yet More Factors: 1,2,3,4,5.

1. New Economic Realities

How to respond to shifts in whatcustomers value and what they’rewilling to pay for.

Forging the more realistic ‘bargain’with staff needed to bring pay ratesinto line with today’s more modestreturns.

How to gain clearer line of sight tocustomers, speed up decision making andovercome institutional resistance tochange.

Shift from product‐push to customersolutions.

2. Changing Customer Expectations andthe Power to Punish

3. Digital Competitors and the Age ofInnovation

Operational barriers to entry aredisappearing as tech‐enabled entrantsuse digital distribution and advancedcustomer profiling to break into themarket.

How to create an adaptable (i.e., Agile)workforce, unbound by hierarchy,organizational siloes or restrictivepractices.

4. Rise of State-Directed capitalism

How to compete in a market in whichhigher capital and compliance costs areeating into margins and making someonce‐profitable business unviable.

How to plan and respond quickly to shiftsin government policy and investment.

Designing the role of the corporate centerto provide more central oversight andoperate in a favorable fiscal and talentrich location.

5. Equipped to Compete

Is your thinking radical enough? Do your organizational capabilitiesreflect your customers’ (and youremployees’) changing expectations?

HumanResourcesManagementLandscape & Governance

HR Management & Governance Framework

Recruitment & Selection

Payroll and otherAdministrative 

issues

HR Training &Development

Coaching &Counseling

Performance Management

Delegating &Assigning Work

CareerPlanning

SkillsInventory

Primarily The Responsibility Of HR Specialists 

Shared Responsibility with the Line Manager

Primarily The Responsibility Of The Line Manager But Shared with HR

The HR System

Who Does What? Learn The Fundamentals…

HR Manager

SalesEngineers

InventoryMaintenanceAdministration

Full and Consistent 

Communication & Coordination with all Business 

Units

HR Manager

Everyone MUST Participate In The Making Of The Organization … Implicate & Involve ALL.

Control

Foreign Corrupt Practices Act Compliance

Environment, Health & Safety Compliance

Regulatory Change Management

Employee Hotline Reporting

Legal Management

Anti‐Money Laundering

Anti‐Bribery Compliance

Competency & Training

Risk Management

Cyber Security & Vulnerability

1 2

3

HR Function HR Operating Model

What are thestrategic businessimperative that willdrive organizationalsuccess?

How will the HR functionprioritize requirements, allocateand align limited resources todeliver HR services thatcontribute to the businessstrategy and people strategy?

Service Delivery:What Activities will the HR Function do themselves? What can be Outsourced? 

Infrastructure:What internal capabilities areneeded to fulfill HR FunctionStrategy?

Align HR with Organizational Strategies; Governance Done Right √

Technology

HR Talents

Processes

Organization

Governance:How will the function be led and how will related investments be managed?How will success be measured?

OUTCOMES(The Bottom Line)

How will theOrganization manageand motivate aworkforce that canexecute the businessstrategy?

What are the most effectivedelivery channels for HRservices and the related service‐level expectations?

TotalRewards

BusinessPartnering

Talent Management 

HROperations 

Business Strategy

People Strategy

Performance Monitoring: Metrics & Benchmarking

HR Function Excellence using existing infrastructure: Enables Execution of Strategic Priorities Throughout the 

Organization• People: Efficient Structure with appropriate mix of

skills, technical knowledge and analytic capability tomeet the needs of the business.

• Process & Organization: Streamlined work processesto enable flawless administration and execution ofservices.

• Technology (and data): Integrated applications toprovide organization wide and timely data.

Informs

HR Strategy aligned with Business Strategy: Determines People Programs, plans, and 

initiatives to deliver business Goals

Business Strategy: Sets Direction and Priorities for the Organization

Measures

HR Ought to Speak The Language of Business: Measurement & Analysis

• Improve Quality of Hire• Increase Workforce Productivity• Maximize Return on Workforce 

Investment

• Improve Leadership• Develop Employees• Compensate Efficiently & Effectively

• Drive Workforce Engagement• Retain High Performers• Create Workforce Alignment

Grow The Business

Improve Profitability

Market Agility & Responsiveness

HR Risk Assessment Framework

Capabilities

Innovations & Learning 

RiskLeadership

People

RiskPolicies & Strategies

Partnerships

Risk Managem

entProcesses

Risk Handling

Outcom

es 

Results

Risk-Based Human Resources ManagementImprove Upon Your  Understanding of HR Outcomes

Increa

sing

 Evide

nce on

 Proba

bility of 

a Certain HR Outcome Occurrin

g

HR Management

Uncertainty

Ambiguity

IgnoranceHR doesn’t know what may happen,nor if it will happen due to lack of dataand information – e.g., ??? !!!HR is in denial: HR Refuses to learn

HR is not aware of the implications of whathappens when it happens due to lack ofdata and information to assist in businessimpact analysis – e.g., absenteeism,pregnancy, sick leave, etc.

Although HR understands theimplications of certain employee‐related events, but it’s completelyunaware of its chances ofoccurrence due to lack of data andinformation on loss data and riskevents – e.g., Employee Turnover,Internal Fraud, etc.

HR know what may happen, and isaware of the business implicationsof these events and is preparedand equipped to guard againstthem.

OUTCOMES

OObjectives what is the employee attempting to achieve?

UUnderstand The reasons behind the objectives

TTake Stock of the present situation . . . The Reality

OOptions Generation! The Pros/Cons of each option need to be discussed.

MMotivate to Action . . . The best way forward is understood and agreed upon.

CClarity of the gap between “What Is” and “What Should Be”

EEnthusiasm . . . Encouragement to do as best as possible

SSupport for the employee in the tasks agreed and planned . . .

OUTCOMES … As Ought to be Expressed By HR

Roles & Challenges For All Concerned The Stakeholders.

EmployeeResponsible For [his/her] Development and career

Supervising OfficerSupports and Challenges To Secure the Attainment

of Organizational Objectives

HR SpecialistProvides Advice, Processes,

Tools, Products

Staff Satisfaction

CustomerSatisfaction

BusinessPerformance

Service Excellence

Growth

Feedback Process!

A Matter of Perception!

A Matter of Taste & Preferences!

A Matter of Commitment!

Converge internally

Workforce

Sustainable

The Stakeholders and the Cycle of Satisfaction

Do the Interests of the Various Stakeholders Converge?

EquitableBearable

Viable

HR Must Do What’s Sustainable!

Attract

OrganizeOptimize

Retain

HR Specialists Ought to Focus on . . .

Through effective partnership with employees, theirrespective supervising officers, and Upper Management….

Make sure there is a clear Audit 

Trail to every step

Human Resources Policies

Implementing and adhering to thepolicies

Reviewing and Updating Policies

Making Sure that Human ResourcesExpertise is Represented as part of theskill set of the Board of Directors.

Policy

Practice

Review

Expertise

The Four Pillars of HR Best Practice

HR Specialists Ought to Do It Right . . .

e.g., … In HR Planning & Development

Staff Development

. . . We Do Not Have A Strategy For Staff Development! In the absence of a clear career path for the

employee, staff development will lead to eitherEmployee Turnover or Employment Dissatisfaction.

Staff development must consist of:Status Test: Does the person have the profile werequire for career advancement? . . . Have weformulated the requirement for the next job.Means Test: Is the person capable of making acontribution to the business unit? Does the personhave a relatively steep Learning Curve? How aboutcommitment? . . .Entitlement: If the person passes the Status and theMeans tests, he/she would be entitled for moreresponsibilities and eventually a promotion.

HR Planning

. . . We Do Not Practice HR Planning! Planning in quality and quantity of staff. . . . More specifically, Succession Planning! Career

Planning! We must plan for those without collegeeducation, but very good elements.

HR Planning significantly reduces operational risk. Performing this task is relatively simple if we know

(1) What we’ve got? (2) What we need? (3) Wherewe are going? >>>> HR Governance.

Training

In the majority of our training we need to provideincentives to encourage the involvement of LocalTalents in training: Train‐The‐Trainer! Very effective,and relatively low cost training approach.

Equally important is knowledge management, andSelf‐Learning.

HR Governance is a Systematic Approach to Management that enablesthe function to achieve strategic and operational objectives andperformance outcomes.

TrustBetween

Employees & Management

Motivation Efforts

Abilities

Performance

OutcomesRewards

Securing Desired Outcomes is a Process; Not a Destination

The Organization

The Employee

Drives Induce

+=

Satisfaction

The Dimensions of Human capital: What to Attract? >>> The “KSA” Vitamin Pill

Abilities

Knowledge

(Knowledge + Skills)X(Attitude) = Abilities

Formal + Self‐Acquired

To Perform, Excel And Grow

SkillsTechnical + Soft

Human Capital Accumulation = ∑Abilities

The Retention Struggle: The Employee’s Vantage Point

Skill Marketability

Loyalty To TheOrganization

Loyalty To One’sProfession

Skill Marketability Reflects FavorablyOn The Career And The Salary Of TheIndividual

Loyalty To The Organization May HelpThe Individual Sustain A Company‐Specific Employment

Loyalty To One’s Profession Exerts TheNecessary Pressure On Knowledge And SkillBuild‐Up (Benefiting Both The Individual &The Organization)

The Struggle to Optimize: Perception is as Colorful As Reality…About You

Skills, Experience, Training, Seniority,Education, Loyalty, Performance, etc.

Your JobLevel of difficulty, Time Span, Duties

And Responsibilities, Etc.

PerceivedJob

Characteristics

PerceivedInput/Output

Of Referent Others

DesiredActual

FavorableJob Satisfaction, and

OrganizationalEffectiveness

Perception ofFairnessUnfavorable

Absenteeism, LowQuality Work,Turnover, etc.

Perception ofUnfairness

Every Employee is constantly Evaluating His/Her Place in the Organization Against Others

Allow me to Endwith …. KEEP ON DOING

DO AGAIN

DO

TRY

PLANNING

ANALYSIS

THINK

START

SUCCESSIs Not A Destination

You will always be in need of this kind ofartistry.

If you measure creativity only by the typeof technical development your team comeup with, you miss on the simple and mostbeautiful side of life! Keep It Simple Sir(K.I.S.S.)

2

34 HyenaWolf

Lion1 White Pelican

fheilim@jtbbank.com