investor day 2019...eating into our pie due to their agility and advancements in technology and...

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Humanising Financial Services

Investor Day 2019

Risk Management4 July 2019

1

• Need to make faster, timely

and actionable decisions

NIMBLE & AGILE

Imperative to Change – the “WHY” for MAYBANK

Changing operating environment at an increasing rate, beyond our comprehension

Rise of non-traditional players and Fintechseating into our pie due to their agility and advancements in technology and analytics

More demanding and ever-increasing customer expectations for seamless, quick

and personalised banking experiences

Continuous growth of our business beyond Malaysia and across Asia

WHY CHANGE?

While the risk

types may be the

same, our

operating

environment is no

longer the same

• Move from historical

reporting to predictive

analytics

DIGITALLY ORIENTED

• Institutionalise customer-

centricity as part of our risk

culture and processes

ADAPTABLE & ACCOUNTABLE

• More direct connectivity to

the business and geographies

to understand issues and

clear obstacles

EXTRACT SYNERGIES

2

Strategic Risk Imperatives

Enabling a Balanced, Predictable and Sustainable Business Model

Enabling early identification of

non-financial risks and the

effective establishment of the

appropriate risk management

mechanisms

Digitising of risk management

processes to enable quick and

profitable risk informed business

decisions & model development

Developing thought leadership,

risk culture and technical skill

enhancement

Building Capabilities

Technology & Apps

Integrated Assurance

Agile reshaping of portfolios based on

proactive data driven decision making

Building a sustainable financial

ecosystem

Streamlining governance structures to

facilitate enhanced effectiveness and

efficiency of risk governance

Governance Agility

Sustainability & ESG

Active Portfolio

Management Strategy

R E T U R N S

3 3

Active Portfolio Management Strategy

People Transformation Journey – building technical, analytical & leadership capabilities.

Quality Assets

Profitable risk

informed business

decisions

Accurate Risk

Sensitive Pricing

Outcome

Central Economic

Scenario

Industry Lifecycle

Macro-perspectiveBalance Sheet

Optimisation

Model

Development

Transformation

Asset Quality

Management

Business Strategy

Risk Appetite

Profitability Through the Economic Cycle

4 4

Examples of Central Economic Scenario

Our earlier concerns of further tightening of global monetary conditions

has somewhat been neutralised following the dovish communications

from major central banks. This together with a positive outcome from

the US-China trade negotiations will likely provide greater stability.

Upper Case

Global economic growth is likely to moderate with signals from major

central banks suggesting a more dovish stance going forward. The

uncertainty surrounding the US-China trade talks continues to weigh on

the central scenario with no significant change since March 2019.

BaseCase

The probability of a deeper than expected slowdown in China

continues to grow given the prolonged US-China trade negotiations.

A “No Deal” Brexit seems to be slowly priced in.

LowerCase

In the region…

The sudden reversal of monetary policy stance of various major central

banks over the last month has raised the likelihood of further policy

easing in some ASEAN markets.

GDP(%) Policy rate (%)

2019f 2020f Current 2019f

Malaysia 4.4% 4.4% 3.00% 2.75% -

3.00%

Singapore 1.8% 2.1% Tightening bias

Indonesia 5.1% 5.3% 6.00% 5.50%

Philippines 6.0% 6.5% 4.50% 4.00%

Thailand 3.8% 3.6% 1.75% 1.75%

A holistic view of what could potentially impact our strategic objectives

5

• The O&G sector has bottomed and now

entering upcycle stage amidst higher oil

prices and gradual increase in capex level.

• Global oil demand is expected to be in

excess of supply while oil prices would

remain volatile amidst fluctuating supplies

and fear of low demand growth.

• Higher Petronas capex bodes well for

upstream segment but outlook for Oil and

Gas Services and Equipment (OGSE) players

remain uncertain as charter rates seemed

to lag.

• Tight refining margin to persist but recovery

is in the horizon as the new IMO 2020 rule

on cleaner shipping fuel takes effect early

2020.

5

Examples of Sector Outlook

• Unsold residential property units remain at

record high levels at 153k units with the main

contributor being Johor.

• Some modest sales improvement is expected for

2019 on various government policies and

initiatives

• A rate cut by Bank Negara would be a positive

catalyst for the sector.

• We believe 2019-2021 will be very challenging

for both the Shopping Complex and Office

subsector on high incoming supply amid existing

oversaturated market conditions.

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2014 2015 2016 2017 3Q18

Unit

s

Unsold Residential Property

Pulau Pinang

Johor

Kuala Lumpur

Selangor

Others

Source: Group Risk Research, NAPIC

+86k unsold

Note: i) Includes Service Apartments

P R O P E R T Y

8.3%

2.6%

0%

2%

4%

6%

8%

10%

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

3Q

17

4Q

17

1Q

18

2Q

18

3Q

18

4Q

18

%

Construction GDP Growth

YoY GDP Growth (RHS)Source: Maybank, DOSM Note: At 2010 Constant Prices

• Infrastructure projects have been cut with

negotiated terms less favourable for

contractors (PDP to Turnkey) therefore

increasing risks.

• Sarawak and Penang are key growth states

amid overall sector downturn. Klang Valley

maintains large job value despite substantial

infrastructure contraction.

• Contractor PBT margins are expected to

contract 2 to 4 percentage points for

infrastructure jobs.

• There is some increase in construction sector

loan gross impairment loan ratios.

C O N S T R U C T I O N O I L & G A S

Identifying Industry Lifecycles and Priorities

6

GROWTH

Financial and Insurance Activities

Wholesale and Retail

Real Estate Activities

SELECTIVE

Mining & Quarrying

Agriculture

Electricity & Utilities Supply

DEFENSIVE

Construction

Manufacturing

Transportation & Storage

Professional, Scientific and

Technical Activities

6

Examples of Portfolio Allocation Permutation

GROWTH

Financial and Insurance

Activities


SELECTIVE

Construction




DEFENSIVE

Agriculture


Manufacturing

Mining & Quarrying


POINT A – Reduce Risk of Return*maintain level of return

POINT B – Optimal Allocation*by Sharpe Ratio

GROWTH

Financial and Insurance

Activities


SELECTIVE





DEFENSIVE

Agriculture

Construction

Manufacturing

Mining & Quarrying


POINT C – Increase Return*maintain risk of return level

Identification of Optimal Portfolio Mix for risk adjusted returns

7

Product Stewardship

Lead the way in constructive

engagements with customers by

educating & influencing them on

sustainable practices to meet our

Environmental, Social and Governance

(ESG) commitments.

7

Maybank’s 2020 Sustainability Plan

OUR COMMUNITY

Investing for Impact

Through the Group and Maybank

Foundation, we invest in sustainable

programmes to unlock social value and

to realise long-term tangible results in

the following areas:

• Education

• Community Empowerment

• Arts and Culture

• Healthy Living

• Environmental Diversity

• Disaster Relief

OUR PEOPLE

Employee Engagement Platforms

Build an engaged regional workforce

with employee engagement platforms.

Learning & Development

Invest in long-term development and

capabilities improvement across the

organisation.

Talent & Leadership

Nurture talent by providing appropriate

support for growth and the opportunity

to excel.

Diverse & Inclusive Workspace

Maintain an inclusive workforce that

embraces racial and gender diversity.

Safety, Health and Well-being

Build a happier and healthier workforce

by promoting work-life integration, as

well as physical and emotional well-

being.

OUR PRODUCTS & SERVICES

Commitment to the Environment

Manage our ecological footprint by

considering direct and indirect impacts

on the environment as we grow

regionally.

Focus on Customers

Building relationships with customers

by providing convenient access to

financing, fair terms and pricing, and

customised advise based on customers’

needs.

Digitisation

Leverage on life-improving digitisation

to expand our reach in order to bring

our financial services closer to our

customers.

Embedding Sustainability in All We Do

8

Maybank Group’s Environmental, Social and Governance (ESG) Policy

Key Components Scope & Applicability ESG Risk Categories We Collaborate With

Environment• Climate change• Land usage• Water usage• Energy usage• Emissions and Waste• Natural Resource Conservation /

Sustainability

Social• Human rights• Employees rights & benefits• Workforce diversity• Products and services responsibility• Community relations• Supply chain management• Corporate social responsibility• Consumer protection• Animal welfare

Governance• Corporate governance• Transparency and reporting• Financial sustainability• Stakeholders management

Business Activities

• Direct lending/financing

• Direct debt, equity and

advisory services

Lines of Business

• Corporate Banking

• Transaction Banking

• Global Markets

• Investment Banking (excluding

stock brokerage & margin

financing)

• Business Banking

• Retail SME

• Insurance & Takaful for non-

individuals

Black List Activities

Activities deemed not in line with our core

values and international best practicesHigh ESG Risk Sectors

Includes:• Oil palm• Forestry and logging• Oil and gas• Mining and quarrying

An ESG Risk Acceptance Criteria has been

included as part of the application of

accommodation for these industries.

Mandatory RAC Criteria:• National/International certifications for

sustainable practices• Regulatory approvals/licences by the

relevant government agencies for the

specified business operations• No adverse news which may result in

harm to the environment, or legal

claims, disputes, or product boycotts

affecting communities

• World Wide Fund for Nature

• International Finance

Corporation

• Association of Banks in

Singapore

• Malaysian Palm Oil Board

• Asia Pacific Loan Market

Association

• Lead players in specific

relevant sectors.

A Responsible Lending Guideline was initially established in 2015 to manage ESG risks.

This was expanded into an ESG Risk Management Framework and then endorsed as an ESG Policy in 2018, following the Board’s approval.

The Policy was then operationalised throughout the Group, with ESG risk assessments integrated into our day-to-day decisions in relation to financing practices.

The ESG Policy was formulated in alignment with global standards and practices, such as the United Nations’ Human Rights Policy, International Finance Corporation standards and global environmental standards.

Responsible Financing, Promoting Financial Inclusion and helping customers Build Financial Capabilities

9 9

Building Capabilities

Developing Future-Ready Risk professionals to ensure that Maybank has the best in class Risk personnel

S t r a t e g i c O b j e c t i v e s

Talent Management of Risk

Professionals

To enable our people to realise

their maximum potential and

ensure that they are the best fit

for the job at hand as well as to

equip staff with the proper tools to

position them as the most sought

after personnel, not just within

Maybank but across the industry.

Right Capabilities and Skills

To ensure that the organisation

and the staff are future-ready,

agile risk professionals with

capabilities to address risks and

uncertainties in the most up-to-

date, effective manner possible.

Employer of Choice

To ensure that Maybank has the

best in class risk personnel across

the industry, not just domestically

but regionally.

To equip our people with Adaptive

Tools to ensure Agility in the fast

Changing Risk Landscape.

Learning & Development Framework

RecogniseProfessional

Accreditation

StructureTraining

Programmes

Continuing Professional Development

Define current & future skillset

requirements

Identify Pool for

Succession Plan

R i s k P r o f e s s i o n a l s o f

t h e F u t u r e

Able to create value via

collaboration and partnership with

business.

Agile and forward looking to

anticipate and predict emerging

risks thereby harnessing business

potential.

Adept at applying Artificial

Intelligence and Machine Learning

in Risk Modelling and Advanced

Portfolio Analytics.

Applies advanced analytics to

spearhead data driven and

independent decision making.

Anticipates and responds to

regional and global uncertainties

via advanced risk modelling.

10 10

Cyber Security

Focus Areas for Cyber & IT Risk Management

Cyber Risk Assessment

Cloud Risk Assessment

Cyber Defense Capabilities

• Enhancement to cyber risk

guidelines

• Establish risk assessment for

Cloud services adoption

• Enhancing third party risk

management capabilities

• Development of Cyber Defense

Capabilities Programme

CYBER SECURITY

PayNet-Cyber resilience,

BNM-Risk Management in IT (RMiT),

eBanking, Cloud outsourcing

• Drive IT operations compliance

with Regulatory guidelines

• Drive continuous adoption,

assessment and gaps closure

• Drive awareness within Group

Technology

COMPLIANCE &

RESILIENCE

• Enhancement/ Revision on

Technology Risk Management

Guideline (TRMG)

• Managing overall technology

operations risk – PICASO (Project

& Resource management,

Incident, Capacity, Availability,

Security & Operations)

• Addressing point of failures and

adopting enhance technology

capabilities

Risk Control Assessment

IT operation resilience

AVAILABILITY

11 11

Artificial Intelligence & Machine Learning Initiatives

To enhance the Early

Warning System, with

recommended solutions,

through accurate and timely

predictive analysis.

Orbuculum

Standardisation of risk

assessment irrespective of

loan products, hence

eliminating the possibility of

a customer being approved

for one product but

declined for another

product.

Single Customer

Credit Scoring

To enhance Non-Financial

Risk (NFR) Management

from reactive to predictive

by developing machine

learning capabilities (or NFR

Risk Modelling process) for

proactive management of

external fraud attempts.

Development of Predictive Non-Financial

Risk Capabilities

Utilising advanced machine

learning and deep learning

to develop Collections &

Recovery Scorecards (C&R-

Score). This will lead to

improved bank profitability

and capital optimisation, as

well as enhance customer

satisfaction.

Risk-based Collection &

Recover Scorecards

Utilisation of machine

learning algorithms to

analyse customer deposit

behavior patterns across

various dimensions to

enable improved liquidity

management and liquidity

cost reduction.

Modelling Deposit

Run-off for Non-Maturing

Deposits

Enabling Future Risk Decision Making Through Artificial Intelligence & Machine Learning

12 12

Capital Adequacy & Risk Management

Building trust as the Digital Bank of Choice

CARisMa is a suite of applications

and processes that provide the

group strategic advantage in the

areas of ensuring (1)capital

adequacy and (2)risk management.

CARisMa is part of the Group’s

Digital Framework to realise

Maybank’s vision of becoming the

Digital Bank of Choice by 2020.

CARisMa is the first Group-wide

project to run on agile principles

and scrum best practices.

Layer 3

Optimisation Analytics

Layer 2

Risk & Return Measurements & Analytics

Layer 1

Data Architecture & Infrastructure

Strategic Decision Making & High Value Actions!

• Allowing for better utilisation of capital

• Ability to identify fee income opportunities outside the lending

business

• Allow improved liquidity management through balance sheet

optimisation

• Accurately price exposures based on risk return measures

• Utilise capital for most profitable business opportunities

Speed, Highly Scalable & Timely

Hub & Spoke concept – central functional specialist to serve

LOB/Geographies can qualify for:

• Cost reduction via automation of data extraction & analysis

• Future cost avoidance

• Increase digitalisation benefits - speed to decisions

Unlimited benefit for future data driven

decision making

• It can house agile elements

• Focus on future accessibility

• Improves Data Architecture

• Improves Data Accuracy & Standardisation

CARisMa 3 Layer Framework& Value Propositions

13 13

C-Insight

Driving a strong risk culture: Risk Control Dashboard

Identify uncertainties

impacting profitability

and reputation.

Enable sustainable risk

taking.

Risk Control Dashboard

Provide a

combined assurance

perspective for

Management.

RISK

R i s k & O p p o r t u n i t i e s

AUDIT

I n t e r n a l C o n t r o l s

COMPLI

-ANCE

R e g u l a t o r y

Assurance functions such as Risk

Management, Compliance and

Internal Audit play a vital role in

managing risk and strengthening

controls and culture within the

Group.

The Group’s Risk Control

Dashboard is envisioned to

allow Senior Management and

the Board to obtain a

comprehensive, holistic view of

the effectiveness of governance,

risk management and controls.

14 14

Dynamic Regulatory Environment Drivers

Regulatory requirements governing the financial industry have significantly intensified, driven by a few key factors, with a focus on strengthening the resilience of the overall financial industry

Geopolitical Undercurrents

Economical Volatility

Heightened Globalisation

Shifting Customer

Behaviour & Expectations

Technology Advancement,

Increasing Digitalisation

15 15

Managing Regulatory Change

Managing Regulatory Change

Continuous and proactive

benchmarking of internal practices

and standards against proposed

requirements

Fortification of our risk policies,

supporting processes and systems.

Proactive engagement with

regulators on proposed changes and

business impact to allow for a

compliant and collaborative

regulator-regulatee environment

Transparent and agile

communication strategy in place to

provide countries and subsidiaries a

view of the Group standards and

specific local regulatory

requirements for implementation

consideration

Recent Regulatory

Developments

Basel IV

BNM Outsourcing

Policy

Preparedness for transition from LIBOR to

Risk Free Rates (RFRs)

MFRS 9 and ECL

Requirements

Domestic Systemically Important

Banks Framework

(BNM)

Pillar 3 Disclosure

Requirements

Proactive engagement and a forward looking view are essential in shaping regulatory compliant business models

16 16

Navigating Economic and Regulatory Change Through Governance Agility

Agile governance enables organisations to make the right decisions at the right time with the right information

Identify critical management decisions and

optimise the key processes for timely and

effective decision making.

Create decision-making bodies and allocate

clear accountabilities (to individuals, teams

or committees) to reach and execute

decisions.

Facilitate ongoing quality decision making

through timely information and decision

support tools.

P R I O R I T I E S & P R O C E S S E S

S T R U C T U R E & R O L E S

I N F O R M AT I O N & TO O L S

AG ILE

GOVERNANCE

17

MALAYAN BANKING BERHAD

14th Floor, Menara Maybank

100, Jalan Tun Perak

50050 Kuala Lumpur, Malaysia

Tel : (6)03-2070 8833

www.maybank.com

Disclaimer. This presentation has been prepared by Malayan Banking Berhad (the “Company”) for information purposes only and does not purport to contain all the

information that may be required to evaluate the Company or its financial position. No representation or warranty, express or implied, is given by or on behalf of the

Company as to the accuracy or completeness of the information or opinions contained in this presentation.

The presentation does not constitute or form part of an offer, solicitation or invitation of any offer, to buy or subscribe for any securities, nor should it or any part of

it form the basis of, or be relied in any connection with, any contract, investment decision or commitment whatsoever.

The Company does not accept any liability whatsoever for any loss howsoever arising from any use of this presentation or their contents or otherwise arising in

connection therewith.

Humanising Financial Services

investor day 2019...eating into our pie due to their agility and advancements in technology and...

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