Adapting to a Rapidly Changing

Work ProfileHR Strategic Risk

Mohammad Fheili Over 30 years of Experience in Banking

mifheili@gmail.com (961) 3 337175

Mohammad Fheili “Over 30 years of Experience in Banking. Contact Details: mifheili@gmail.com (961) 3 337175

Mohammad has successfully delivered over 1,500 hours oftraining to professional bankers.

He served as an Economist at ABL, and Senior Manager atBankMed and Fransabank: and he currently serves in thecapacity of an Executive (AGM) at JTB Bank in Lebanon.

In addition, He worked as an Advisor to the Union of ArabBanks.

Mohammad also served as Basel II Project ImplementationAdvisor to CAB and HBTF Banks in Jordan.

Mohammad received his college education (undergraduate& graduate) at Louisiana State University (LSU), and hasbeen teaching Economics and Finance for over 25continuous years at reputable universities in the USA (LSU)and Lebanon (LAU).

Finally, Mohammad published over 25 articles, of thosemany are in refereed Journals (e.g., Journal of MoneyLaundering & Control; Journal of Operational Risk; Journalof Law & Economics; etc.) and Bulletins.”

We Speak Your Language

Adapting to a Rapidly Changing

Work Profile

HR

Strategic R

isk

Information Technology.

Price/Value Propositions.

Customer Expectations.

Digital Competitors.

State-Directed capitalism.

Agility.

What Has Changed? … What Do We Need To Adapt To?

Change Has Implications . . .

Credit Risk

Market Risk

Operational Risk

Reputational Risk

Business Risk

Strategic Risk

. . . Other Risks

Human Resources Management& RISK

People in the Organization are the Risk Takers & Bearers

Human Resources Management & RISK

By Choice: Because There is a Perception of AddedValue From HRM Engagement in Risk Management(Fraud Reduction, Competencies Enhancement,Proper Assignment of Responsibilities, etc.)

In Response to Regulations: Pure Compliance (BDL103/Competencies 106/Governance 271/ComplianceOffice 124/Transparency, Loss Data Reporting, . . . )

An Example

Consequences: Losses

Causes:

Risk Event:

Loan Default

Loan Workout and Recovery

Recovery is a Function of the Quality of theCredit File and the Legality of AccompanyingDocuments

Losses (Total or Partial) of Principal andInterests

Dried up Cash Flow Sources:Client’s business received a badhit.

Collaboration between the RM andthe Client in the provision ofinflated figures (Sales, Revenues,Cash Flows, …) leading to a false-favorable credit decision

Over-worked, and Under-StaffedCredit Administration leading tooverlooking some criticaldocuments in the credit file

Incompetent Credit/Risk Analystproduced false recommendationwhich lead to a False-favorablecredit decision.

Poor Loan monitoring and Reviewsrendering the process weak incapturing “Warning Signals”

Etc.

Is HRM Normally Implicated in any of that; or is it purely Credit Risk?

Now, Do You Think HRM ought to be involved?

Human ResourcesManagement &The Basel Accord

Sources of Operational Risks (Ref: Basel ii)

PRIMARY SECONDARY

PEOPLE

Employee Fraud / Malice (Criminal)

PROCESSES

Payment / settlement / delivery risk

SYSTEMS

Technology investment risk

EXTERNAL

Legal / Regulatory Risk / Public Liability

Unauthorized activity / Employee misdeed (Willful) Employment LawWorkforce disruption Loss or lack of key personnel

Documentation or contract riskValuation / Pricing Internal / External reporting and complianceProject risk / Change management Selling Risks

System development and implementationSystems failuresSystems security breachSystems capacity

Criminal Activities Out-sourcing / Supplier RiskIn-sourcing RisksDisaster and Infrastructural utilities FailuresPolitical and Government Risks

The Credit Approval Process

Acquisition/ Credit

Specific Customer Service

Collect And Review

Data

CreditReview

Assess Collateral And Risk

Document Approval

Sales Financial + Risk Analysis Processing

Establishing Contact

Evaluate first customer info

Customer Meetings

Debriefing

Request documents

Obtain data & information

Completeness/ plausibility review

Follow up

Review document

Follow up with Loan Officer / Account Manager

Standardized Credit Rating

Document on other credit related factors

Inspect Object

Determine Loan-to-value

Evaluate Exposure

Data is Sufficient

Complete Loan Application

Prepare Credit rate

Handover Credit File

Follow Up

Data is Complete

Approval by Decision Makers

Check Compliance with Authority Structure

Prepare Contracts

Get Signatures

Provide Security

Disbursement Review

Disbursement

Plan Monitor & Report

Resolution

Correlations & Loan Portfolio Considerations

Loan/Asset Life Cycle

Credit Approval Process

Implement On the Credit

Decision

Credit Decisions: Involve Everyone, But …

Credit Authority by Total Exposure

SmallExposure

MediumExposure

LargeExposure

Very LargeExposure

InvestmentExposure

RM

s &

Credit

Analysis

Risk

Analysis

Corporate B

oard

RMs/Branch Manager

Sales/Credit Manager

Risk Analysis

Head of Risk Analysis

Executives

Supervisory Board

Credit Committee

- Account Manager

- Group Leader

- Risk Analyst

- Group Leader

+ + + + +

+ +

First Vote Assessment Assessment Assessment Assessment

Opinion Opinion

First Vote

First Vote

Second Vote

Second Vote

Analysis Analysis Analysis Analysis

Second Vote Opinion Opinion

First Vote

Second Vote

First Vote

Second Vote

- - - -

-- -

- - -

---

---

---

-Second Vote

Reduction of the number of persons responsible prevents “Socialization” of responsibility forexposure

What’s the Message if you escalate a “SmallExposure” to an Executive Level?

What Happens if you mandate that the CreditDecision is purely a Back-Office Process?

Etc…?

What is the Object from Dissecting the Process? Better Ability To Capture Risk, Reporting Incidents, Loss Data Collection…

Internalfraud

Externalfraud

Employment Practices

andWorkplace

Safety

Clients, Products & Business Practices

Damage to Physical Assets

Business Disruption

and systems failures

Execution, Delivery & Process

Management

Corporate Finance

Trading & Sales

Retail Banking

Commercial Banking

Payment and

Settlements

Agency Services

Asset Management

Retail Brokerage

(Ref: Basel ii)

Standardised Approach

Corporate FinanceTrading & SalesRetail Banking

Commercial BankingPayment SettlementsAsset Management

Agency ServicesRetail Brokerage

12345678

(break-down into business lines)BL1 Gross incomeBL2 Gross incomeBL3 Gross incomeBL4 Gross incomeBL5 Gross incomeBL6 Gross income BL7 Gross incomeBL8 Gross income

* ß1 =* ß2 =* ß3 =* ß4 =* ß5 =* ß6 =* ß7 =* ß8 =

Basic Indicator Approach

The Entire Business

Organization

Financial Indicator is a Proxy for Operational

Risk Scaling factor

Total CapitalCharge

Gross income α =

* =

Operational Risk Treatment Under The Basel Accord

15%

18%18%

12%

15%

18%

12%

15%

12%

Basic Indicator Approach

Standardized Approach

Advanced Measurement Approach

Gross Income

Operational Risk Treatment Under Basel Accord

Loss data

This is not Risk Management! Simply, it is a way to calculate OR

Capital Charge. It is pure Compliance!

This is Risk Management! The Bank gathers Loss Data, and decides on the Appropriate Capital Charge.

Low Level of Risk

Management Maturity

Advanced Level of Risk Management

Maturity

Risk Event: Employee Turnover…

?Causes Risk Event Effect

Employee Turnover

Work interruption and

Downtime; tension inside the team,…

Management MeasurementLoss-Data is collected here; thenanalyzed and . . .

Managing the riskassociated with employeeturnover is done here . . .

Understanding & Managing HR (or People) Risk

Improve Upon Your Understanding of Outcomes

Incr

easi

ng E

vide

nce

on

Prob

abil

ity

HR Risk

Uncertainty

Ambiguity

Ignorance

The Changing Corporate Landscape,

And the Risk of Not Implicating the HR

Function in the Transformation

Process.

Information Technology at the forefront ofOperational Risk: But ….!

The Introduction of any form of technology in a given productionprocess or the mere modification of an existing IT environmentnecessitates a number of changes in staff skills, workflows,policies & Procedures, and a host of other changes.

In today’s technologically intense production processes, information technology (IT)risks cannot be considered independently of other types of risks, such as people/HRrisk, process risk and others.

Recognizing these challenges and categorizing them as HR-Related risks will putmanagement one step ahead. Must we Appoint

the HR Manager to the IT Steering Committee!

New Economic Realities: A combination oftechnology, easier price comparison and new regulation are intensifying cost pressuresand changing price/value propositions.

How to respond to shifts in what customers value and are willing to pay for.

The need for greater ruthlessness in focusing on core sources of value, withdrawing from unviablebusiness and using automation, offshoring and outsourcing to cut costs in low margin transactions .

How to turn data into insight and revenues.

How to make sure the way clients are segmented and the workforcethat serves them better reflect demographic trends includingdiffering gender and generational expectations.

Forging the more realistic ‘bargain’ with staff needed to bring pay rates into line with today’s moremodest returns.

Should We Implicate the HR Manager at the level of the Customer or not!

Changing Customer Expectationsand the Power to Punish: Power has shifted tothe customer as they become more connected, more demanding and less loyal.

Instilling the vision and values needed to rebuild trust.

Harnessing big data analytics, social media monitoring and other new forms ofinsight to anticipate and respond proactively to changing customer demands.

How to gain clearer line of sight to customers, speed updecision making and overcome institutional resistance tochange.

Shift from product-push to customer solutions.

Accent on product specialization (‘depth’) gives way tobroader engagement, analytical and change managementskills (‘Breadth’).

Should we Expect HR Manager to Play a role in anticipating and responding to changing customer demands!

Digital Competitors and the Age ofInnovation: As the pace of innovation accelerates, developments thatwould have taken years to impact on the market can now become consumerexpectations in a matter of months.

New competitors have head start on trust.

Operational barriers to entry are disappearing as tech-enabled entrants use digitaldistribution and advanced customer profiling to break into the market.

How to create a business model that is flexible enough toreinvent itself when better technologies or potentialpartners come along.

How to lead innovation – even fast following could leave your business marginalized.

How to create an adaptable workforce, unbound byhierarchy, organizational siloes or restrictive practices.

Is the HR Manager involved in creating an adaptable workforce!

Rise of State-Directed capitalism:Strategies and organizational design should reflect the extent of government intervention in the financial system.

Judging how to deliver shareholder value while shouldering increasing levels of socialresponsibility.

How to compete in a market in which higher capital and compliance costs are eatinginto margins and making some once-profitable business unviable.

How to plan and respond quickly to shifts in government policy and investment.

How to manage ring-fencing, which is leading to the creation of what are in effectstandalone businesses.

Designing the role of the corporate center to provide morecentral oversight and operate in a favorable fiscal and talentrich location.

With so much value tied up in the relationship withgovernment (e.g., regulation and joint investment), havingthe people in place to engage.

The HR Manager’s role in providing a favorable fiscal and talent-rich location!

Equipped to Compete: The most successful businesses are goingmuch further by re-engineering their organizations towards new ways of meeting customer demandsand opening up new market opportunities. So is your business up to speed?

Is your thinking radical enough?

Does your mission embrace the values of the post-crisis world?

Do your organizational capabilities reflect your customers’ changingexpectations?

Do your organizational capabilities reflect the neweconomics of your business?

Is your organization ready for change?

Should the HR Manager Be responsible for securing Organizational Readiness!

Challenges for HR Management

The Survey Says: . . .

Top Challenges Facing Organizations

√√

√

√

Challenges From G

lobal Skills

√

√

√

√

Finding Skilled Workers

√

√

√

Main W

eaknesses in Skills of Applicants

√

√

Engaged Employees By Region

√

Internal Talent Managem

ent

√

√

√

√

Engagement Levels D

ifficulties√

√√

The HR Manager is Not The Only One To Blame!

Implicate the Business Lines Or Eradicate the Business

HR Management is a Shared Responsibility

Recruitment & Selection

Wages & SalariesAdministration

Training &Development

Coaching &Counseling

Performance Appraisal

Delegating &Assigning Work

CareerPlanning

SkillsInventory

Breaking The HR Job Down

Into Its PerformanceIndicators

Primarily The Responsibility Of HR Specialists

Shared Responsibility between HR, Management &

Employee

Primarily The Responsibility Of Supervising Officers

Roles & Challenges For All Concerned: Understand The Music; Understand The Player …. Or Bear the Noise!

EmployeeIs Responsible For

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!

Tell your employees that …

Abilities

Knowledge

(Knowledge + Skills)X(Attitude) = Abilities

Formal + Self-Acquired

To Perform & Excel And Grow

SkillsTechnical + Soft

Human Capital Accumulation

= ∑Abilities

The Invisible Parameter that we

often forget

Employment vs. Employability

Skill Marketability

Loyalty To TheOrganization

Loyalty To One’sProfession

Skill Marketability ReflectsFavorably On The CareerAnd The Salary Of TheIndividual

Loyalty To The OrganizationMay Help The IndividualSustain A Company-SpecificEmployment

Loyalty To One’s ProfessionExerts The Necessary PressureOn Knowledge And Skill Build-Up(Benefiting Both The Individual& The Organization)

Perception is as Good 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 Continuously Evaluating His /Her Place in the Organization Against Others

THE STAKEHOLDERS AND THE CYCLE OF SATISFACTION

Employees

Equitable

Sustainable

Bearable

Customers Viable Organization

You may add: The Community and The Government

Where There is Evidence of Risk,

There Ought to be Governance

Human Resources Policies

Implementing and adhering to the policies

Reviewing and Updating Policies

Making Sure that Human Resources Expertise is Represented as part of the skill set of the Board of Directors.

PolicyPractice

ReviewExpertise

The Four Pillars of HR Governance

Attract

OrganizeOptimize

Retain

HR Specialists Ought to Focus on:

Through effective partnership with employees and theirrespective supervising officers

Make sure there is a clear Audit Trail to every step

Business Strategy

Intellectual Capital Strategy

HR Function Strategy

HR Operating Model

How will we secure, manage and motivate a workforce that can secure business strategy?

How will we deliver expected value and contribution to the Bottom Line?

Sourcing:What Activities will we do ourselves/have others do?

Infrastructure:What capabilities are needed to fulfill HR’s Strategy?

How HR Governance Aligns with Organizational Strategies

Organization

Technology

People

Process

Governance:How will we lead the function and manage related investment.

Outcomes(The Bottom

Line)

OUTCOMES … what counts

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.

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

Aim For Better Results…Some

Practical ConsiderationsHR Actions with a [well defined]

Purpose

… in recruitment & Selection “Positive” Recruitment, toreplace depreciating andinappropriate Human Capital

From time-to-time you haveto plan to “Induce aTurnover!” Replace a part ofyour existing work force: tolower the average age, andincrease the level ofeducation, lower the cost odmedical bills, the costassociated with dependents,…

Being Selective inrecruitment does notnecessarily mean aiming forthe best universities: Aperfect match between JobRequirements and CandidateQualifications

“Negative” Recruitment:Allow for a reduction inthe size of the existingworkforce

Induced Retirement Early Termination Ease conditions for

“Leave Without Pay” Consider full process

automation wherefeasible and legallypossible

Introduce the Concept of“Full-Task Employee” toreduce staffrequirements

Candidates

Organization

Competencies & Professional Qualifications

Values &Motives

Job RequirementsBehaviors & Outcomes

Culture &Values

Match CompetencyWith

Job Requirements

Match OrganizationWith

Individual’s Values

FitWithJob

FitWith

Culture

HR Governance is a Systematic Approach to Managementthat enables the function to achieve strategic andoperational objectives and performance outcomes.

Types Of Jobs!

Filling Duties

• Stable Jobs: Duties and responsibilitiesremain relatively constant from year toyear (e.g., Teller, etc.)

• Performance Indicators for such jobsshould be useful overtime, and from oneorganization to another.

• Employees are hired to fill jobs and tomeet predetermined performanceindicators.

Creating Duties

• One characteristic of our socio-technicalage is that many employees are hired tocreate jobs for which predeterminedperformance indicators do not exist (e.g.,Project managers, researchers, etc.)

• The Duties and Responsibilities must beregularly re-negotiated.

Care Taker

Risk Taker

Traditional Organizational Structure

Fluid Organizational Structure

Organizations May Enjoy Both Structures(Both Types of Jobs)

Depending On theManagement layer

Under Consideration!Filling & Creating Duties may be

Within the same job!

… 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 leadto either Employee Turnover or EmploymentDissatisfaction.

Staff development must consist of:

Status Test: Does the person have theprofile we require for career advancement?. . . Have we formulated the requirementfor the next job.

Means Test: Is the person capable of makinga contribution to the business unit? Doesthe person have a relatively steep LearningCurve? How about commitment? . . .

Entitlement: If the person passes the Statusand the Means tests, he/she would beentitled for more responsibilities andeventually 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 thosewithout college education, but very goodelements.

HR Planning significantly reducesoperational risk.

Performing this task is relatively simple ifwe know (1) What we’ve got? (2) What weneed? (3) Where we are going? >>>> HRGovernance.

Training

In the majority of our training we need toprovide incentives to encourage theinvolvement of Local Talents in training:Train-The-Trainer! Very effective, andrelatively low cost training approach.

Equally important is knowledgemanagement, and Self-Learning.

We have good success stories in this respect!

HR Governance is a Systematic Approach to Managementthat enables the function to achieve strategic andoperational objectives and performance outcomes.

My Penny-Worth Wisdom …

If you measure creativity only by the typeof technical development your teamcomes up with, you miss on the mostImportant side of People Management!

Despite the intense Technology We rely Onin our work-stations; we will always be inneed of Simplicity… A Food For The Soul!

1 2

34

How To Pick The RightTalent?Pick one animal to take care of, for aday, inside a 50m2 room; and alone?(A “No Selection” is not an optionyou may exercise!)

Any Questions ?

BIG Thank You From

Mohammad I. Fheilimifheili@gmail.comorfheilim@jtbbank.com