Btm Presentation New Orleans

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<ul><li> 1. Introducing Global Standards to Build a Strategy- Based Culture at Bank of Tokyo-MitsubishiBSCol North American BSC Summit PresentationOctober 7-10, 2003Takehiko Nagumo, VP, Corporate Planning Group, Planning Office for the Americas, HQABalanced Scorecard Collaborative, Inc. 55 Old Bedford Road Lincoln, MA 01773 Tel: 781.259.3737 Fax: 781.259.3389 </li></ul><p> 2. Discussion Topics Background and Context Overview of BTM for the Americas Japanese and American corporate culture The Balanced Scorecard design and re-design process Initial Design: Taking a bottom up assessment Re-Design: Re-aligning strategy from the top down Implementation: Linking the BSC to key programs COSO-based control self-assessment HQA committee structure Regional banking network Key takeaways 2 3. BTM Overview: The NY-based regional headquarters of BTM, BTM HQA managesOverview one of the largest foreign-owned wholesale banking businesses in the Americas. BTM is the largest subsidiary of MitsubishiTokyo Financial Group, a bank holdingcompany listed on the Tokyo, Osaka, NYand London stock exchanges. Formed in 1996 by the merger betweenBank of Tokyo and Mitsubishi Bank, BTM is Subsidiary: 6a leading Japanese bank providing retail, Branch/Agency: 8commercial, and investment bankingproducts and services. Loan Production Office: 2 Rep Office: 2 BTM operates in 44 countries andterritories with more than 350 officeslocated in all of the major commercialcenters of the world. In the Americas region, BTM focuses onSubsidiary: 4wholesale banking business with 11Branch: 3branches/agencies, 10 subsidiaries, 2 loanRep Office: 4production offices, and 4 representativeoffices. 3 4. BTM for the Americas Organizational StructureLevel IBTM for the Americas BTM for the Americas [Enterprise Level][Enterprise Level] Business Business BusinessBusinessBusinessBusiness BusinessLevel II BusinessUnit 2: Unit 2: Unit 3: Unit 4:Unit 1: Unit 3:Unit 4:Unit 1:Global Global Corporate CorporateInvestment Investment CorporateCorporate Treasury TreasuryBankingBanking Banking Banking Center CenterDivision 1Division 2 Division 2 Division 3 Division 1 Division 3Division 1 Division 2Division 3 Division 1Division 2 Division 3Level IIILevel IV Groups Groups Groups Groups4 5. Why Introduce the BSC at BTM? - BTM needed a modern corporate governance framework to cope with 7 major organizational challenges. 7 Major ChallengesDiversified Cultures Expatriate vs. Local4 Business Units housed in a single legal entity, each reportingComplex Organizationindependently to respective Head Office in TokyoSub-Optimized Network Centralized direction vs. Local Autonomy Tug-of-War Misalignment between business promotion and credit approvalRed TapeAmbiguous goal-setting in support and oversight functions Bottleneck Insufficient communication along the supply chainAccountabilityInsufficient internal controls in some areas 5 6. What is Strategy for BTM?: In many ways, BTMs Headquarters for the Americas (BTM HQA) represents the merging of two distinct cultures. Japanese companies American companiesVague Mission and VisionDefinedIncremental Strategy Formulation Process Grand Design Operational EfficiencyCompetitive Edge Differentiation / UniquenessBottom UpDecision MakingTop Down (or Middle-Up-Down)Implicit / Nonverbal / ClosedCommunication StyleExplicit / Verbal / OpenProcess Orientation Performance Evaluation Outcome OrientationDiversified Culture /Single Culture / Cooperative Work cultureCompetitive Adapted from Essence of Failure, by I. Nonaka6 7. BSC Initiative at BTM: BTM adopted the Balanced Scorecard to create strategic BTM alignment, improve risk management, and enhance corporate governance. Balanced Scorecard Vision at BTM Clarify and articulate strategy atStrategy Execution Level multiple levels in the organization. Integrate risk control framework into Highthe Balanced Scorecard. Good Corporate Governance Use measurement to ensure greater accountability and promote collaboration. Enhance internal and external communication of the BTM strategy.Low Link compensation and performance LowHigh evaluation to strategy.Risk Management Level 7 8. Program Timeline: BTM first attemptedBottom-upapproach, but soon shifted to Timeline Top-down. Now, everyone has a strong sense of BSC ownership.3Q01 4Q011Q022Q02 3Q02 4Q02 Soul SearchingAwakening AlignmentTest Run First ReportingImprovement StrategyStrategy is Good. But What is our See if it OK. Lets tryshould beeverybodys some metricsstrategy?worksnew version Top Down! job! are weak InternalizeMake Our MeasureOwn Balanced performance Scorecards Review SocializeCascade Advisory support from BSCol consultants CEOsCompletedDiscussstrategy Balanced Improvements(Top Down)Scorecards Externalize Combine Link to Many facilitatedexisting discussion sessions processes Map yourDetermine andExternalizestrategymap CEOsNew Ideas(Bottom Up) strategy 8 9. Program Timeline: Now, BTMs BSC is moving toward a new stage: Timeline globalization - Tokyo and UK are conducting a feasibility study on BSC.1Q032Q033Q03 4Q03 Tokyo Head OfficeTokyo Head Office Expansion Accomplishment Going Globalhas established ahas established aBSC Project Team atBSC Project Team atcorporate levelcorporate levelLets apply We have RecommendThe BSC story BSCs in Latinbecome an BSCs to HOContinues. America SFO! The EuropeanThe EuropeanHeadquarters hasHeadquarters has Internalizestarted a feasibilitystarted a feasibility BSC as our Feel thestudy on on BSC.commonculturallanguagechange BTM has started aBTM has started a SocializeMoving onto a new project tonew project to new stage: enhance linkagesenhance linkagesGlobalization between BSC andbetween BSC andCSA.CSA. Externalize CombineComplete theEnhance BSC-new BSC-CSACSA linkagesapproach BTM is developingBTM is developingits proprietary BSC-its proprietary BSC-CSA applicationCSA applicationsoftwaresoftware9 10. Initial BSC Design Process: The initial bottom-up approach revealed the need for Process greater consistency and improved horizontal and vertical alignment. Strategy ThemeIncrease in Net Income Through IncreasedTransaction Volume Financial Increase in Net Ex am Over 30 groups and Income throughIncreased Transaction pledepartments built Increase in Fee VolumeIncrease in InterestRevenue fromstrategy maps (likeRevenue Depositthese) within a 30 day Customer period. Ability to Recognition Ability to Secure Accurate Process- as a StableSource ofCompetitivePricingProvideAccountInformation Liquidity on Profitable Terms Only a handful of ing CreditPromptly employees in the Internal Process organization hadAlign toStudy Promote STPBuildRelationshipsexperience building Strategy of Improve Operation CreditDivisions Competitors PricingImproveOperationCollaboratewith IndustryCounter-Balanced Scorecards.with Bene. in Charge TrendsSystemparties Learning &amp; Growth Develop and In many cases, Rationalize/Streamline Organization Retain Experiencedindividuals worked Re-engineerOperationStructure for Global CorrespondentAlign IndividualsAssignments to theStaffMembersindependently to centerOverall Strategy Banking Businesscomplete the exercise.10 11. Initial BSC Design Process: While the initial effort to design scorecards Process demonstrated a lot of progress, several key gaps in alignment were apparent.ObservationsDecisions Beyond the four perspectives, the Re-build maps from the top-down. scorecards lacked a unifying structure. Focus on a high-level story of the The expression of cause and effectstrategy (Strategy maps should describe through arrows created confusion. cause and effect generally, not precisely). On most strategy maps, the internal perspective lacked a sufficient Re-group or re-define objectives description of the key processesaccording to a limited number of required for success. themes. The interdependencies between groups Categorize objectives according to topic was not clear on the scorecards,and organize them according to type suggesting the need for makingcommon, shared, or unique. horizontal alignment more explicit on the strategy maps.11 12. BSC Re-Design Process: To align the organization vertically, BTM established a Process strategic foundation upon which all scorecards would be built.BTM Strategy Map Foundation BTM Strategy Map FoundationIncrease Net Income Increase Net IncomeCategory #1: Category #1: Category #2:Category #2: Category #3: Category #3:FinancialFinancial Revenue Revenue Ris k Ris kEff iciencyEff iciency Interest IncomeInterest Income Credit Costs Credit CostsReduce Costs Reduce CostsNon-Interest IncomeNon-Interest Income Litigation CostsLitigation CostsIncr ease Pr oductivity Incr ease Pr oductivityCustomer: Internal // External (Descr iption)Customer: Internal External (Descr iption) Category #1: Category #1: Category #2:Category #2: Category #3: Category #3:CustomerCustomerRelationshipRelationshipProductProductService Service Understanding customer needs Understanding customer needs FeaturesFeatures Timely Timely Being a trusted advisor Being a trusted advisorPricePriceAccurate AccurateTheme #1: Theme #1:Theme #2:Theme #2:Theme #3: Theme #3: GROW REVENUE GROW REVENUE MANAGE RISKMANAGE RISKENHANCE ENHANCE PRODUCTIVITY PRODUCTIVITY Internal ProcessInternal Process Customer Relationships Customer Relationships CO SO Self-Assessment CO SO Self-AssessmentCross-selling eff ortsCross-selling eff orts Regulatory RiskRegulatory Risk Reengineering Reengineering Market Research Market Research Technology RiskTechnology Risk IIT Init iatives T Init iatives Etc.Etc. Etc. Etc. Q ualit y ControlQ ualit y Control Etc. Etc. Human Category #1: Category #2: Category #3: Capital Human Category #1: Category #2: Category #3: CapitalSkillsSkills Work Environment Work Environment Com pe ns ationCom pe ns ationTr aining, sucession planning, etc.Tr aining, sucession planning, etc.Ethics, culture, etc. Ethics, culture, etc. Pay-for -performance, etc. Pay-for -performance, etc. 12 13. BSC Re-Design Process: In revising their strategy maps, each group defined its Process strategic objectives according to bank-wide themes, categories, and types. Key steps: 1. Referring to the BTM strategic foundation (on the preceding page) as a starting point,each group created a customized version according to how its goals align to thethemes and categories defined in the foundation. 2. Each group discussed and agreed upon how to express its strategic objectives withinthis framework. (For each perspective, questions were provided in a workbook toguide answers.) 3. Each group re-built its strategy map so that its objectives corresponded to the strategicthemes and categories defined on the foundation page. Objectives were depicted inthree types of ovals: Type Definition ExampleBank-wide objectives, mandated throughout the Enhance cost efficiency (financialCommonorganization on every scorecard perspective objective)Inter-divisional objectives shared between two or moreStreamline credit approval process Shared units expected to cooperate in order to achieve the result(internal perspective operationalefficiency objective) Intra-divisional objectives describing an activity expected Maintain know your customer files Unique to be fulfilled independently by that group (internal risk management themeobjective for Treasury)13 14. BSC Re-Design Process: Using the strategic foundation, strategy maps were re-Process built from the top-down. Interdependent groups shared objectives.Increase net incomeIncrease net incomeFinancial PerspectiveMaximize Maximize Increase feeIncrease feeincome from income from MinimizeMinimizeEnhance Enhance costcostSampleSampleincome incomecore core credit costscredit costsefficiencyefficiencycustomerscustomersStrategy MapStrategy MapCustomer Be #1 foreignProvide Provide Perspective Be #1 foreign Be a reliableProvide ProvidewholesaleBe a reliable global speedy and wholesalesource ofglobal speedy andbank in the source of networkaccuratebank in the creditnetwork accurate Americas creditbanking service Americas bankingserviceGrow Revenues Grow Revenues Manage Risk Manage Risk Enhance Productivity Enhance Productivity Tie-up between Tie-up betweenbusiness strategybusiness strategy Execute major Execute majorand risk appetite and risk appetiteBankwide common objective technology andtechnology andStrategically StrategicallyProactive riskProactive riskefficiency projectsefficiency projects focus on regionalfocus on regionalmanagement and management and Internal opportunitiesopportunitiescompliance complianceProcess EnhanceEnhance Perspective CloseClosecollaboration collaborationEnhance riskEnhance risk collaborationcollaboration throughout throughout management in management in Objective unique to GCBU between RMs between RMs supply chainsupply chain Latin AmericaLatin America and POs* and POs* Enhance disaster Enhance disaster Segmentation SegmentationStreamline creditStreamline credit recovery/businessrecovery/businessand tier upand tier upapproval process approval processcontinuity plancontinuity plan Predetermined shared objective HumanProvideProvide Competitive Competitive DevelopDevelop Capital training ontraining on environment:environment:CompetitiveCompetitivesuccessionsuccession Perspective plancredit and credit and teamwork, teamwork, compensation compensation planproducts safe and fairproducts safe and fair 14 15. Implementation Linking COSO to the BSC: With strategies clearly articulated,BSC BTM integrates COSO-based risk management framework into BSC.Strategy-Risk Management Double Loop Once BTM articulated the strategy for alllevels of the organization from the top-down, it became easier to identify and Proactive RiskProactive Riskassess risks associated withManagement and Management andCompliance Complianceimplementing strategy.Corporate level COSO-based control risk assessment(CSA) was introduced on a bankwideCascadingAggregatingbasis to proactively manage risks Strategy Riskderived from the strategy execution BU level (Top-down)(Bottom-up)process. This process was adopted as abank-wide common objective calledProactive Risk Management andDivision 1Compliance in Balanced Scorecards.Division 2 CSA was conducted at the lowestorganization level and CSA results wereaggregated from the bottom.Division 3 The BSC-CSA linkage created aStrategy-Risk management double loopfor BTM. 15 16. Implementation Linking COSO to the BSC: Risks in the strategy executionBSC process are proactively identified and controlled through COSO-based CSA.Goals &amp;Goals &amp; Performance Performance Execution ProcessExecution Process Objectives ObjectivesEvaluationEvaluationFinancialCOSO-Based CSA: Financial Business environment risk Customer Customer Legal and compliance risk Data security risk Internal Process:Internal Process: Technology riskGrow Revenue Grow RevenueManage Risk Business continuity riskManage RiskEnhance Productivity Enhance Productivity People risk Human Capital etc.Human CapitalF...</p>