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Rising up to face new challenges in banking

  • Published at 10:52 pm March 4th, 2018
Rising up to face new challenges in banking
Several newer risks, growing financial crimes, and several chaotic incidences and corporate scandals have brought fresher challenges for human resource management in banks in global context. For quite some time now, the global financial world has been dogged by greater risk-taking followed by disastrous corporate scandals, market crashes, frauds and embezzlement schemes, and financial crimes, all of which together represent a set of fresh challenges for those working in the banking industry. Banks are thus having to adjust to novel and increasingly complex problems that have far reaching and long-lasting consequences in the incredibly interconnected global financial system. Often, these new set of problems require a correspondingly advanced and specialized set of skills and human resources. As business strategies of banks have undergone major changes, talent strategies must also change accordingly. The expectations for senior leadership in banks have changed drastically as banks are looking for leaders to handle issues about how the business interacts with customers rather than product innovation.
Compliance with regulatory requirements is absolutely necessary for ensuring long term stability, success, and sustainability of the banking sector
The shifting scenario brings several challenges for human resources (HR) in banking. Especially, challenges in the form of regulatory compliance, right remuneration, and development of efficient and ethical leadership are particularly critical in a scenario with struggling corporate governance in several economies of the globe including Bangladesh.

The role of HR

To cope with the changing business environment and newer vulnerabilities, regulatory authorities of the banking industries are consistently introducing new regulations, and compliance requirements. HR departments in banking are busy adjusting to the changes, dealing with regulatory implications, recruiting the right people and preparing employees to ensure compliance. Regulatory expectations continue to rise and regulatory supervision is implemented supported by strong ethics, culture, and related accountabilities to respond to the next potential financial crisis. As such, the job of human resource management is becoming more difficult and requires more expertise. HR itself needs to make sure that it employees have the required skill sets.

Top management

Generally, HR management function is considered responsible for the quality and ethics of the people who work there. However, in order for HR to do its job properly, the role of top management and shareholders (including board of directors) is crucial in this connection. The irrational and unethical behaviour of some boards and top management was questioned following the most recent financial and economic crisis. It was observed that in many instances huge expectations of profits by the boards and very high compensation packages of top executives resulted in excessive risk taking and failure of banks. Such scenarios cannot ensure sound HR management practices in banks.

Retaining skilled employees

In Bangladesh, availability of alternative jobs and growing number of banking and financial institutions are favourable factors for existing employees, especially for the good performers. With regard to the availability of workers, this may also be a matter of comfort. However, banks have been facing turnover costs in the form of retaining good performers. There is no doubt that losing an employee means losing some valuable learning embedded in the departing employee. From the employee’s point of view, a decision to move to another bank should not be based on short-term goals. Currently, banks generally do not have well-articulated retention strategy although a number of retention measures -- such as keeping salary and other benefits at a competitive level, following a suitable transfer and posting policy, arranging training -- are more or less regularly practiced by the private commercial banks. The HR of banks of the country might face growing turnover difficulties unless the bank strengthens its preparedness to face this challenge. Like in any other country, it is a challenge for the banks to implement and manage a business strategy that satisfies the requirements of supervisors as well as the demands of shareholders and investors. Even the existing requirement is not enough -- several regulatory changes, including new requirements to handle money laundering added to the compliance needs of the banks.

Compliance

Indeed, the management of risks of criminal activities and compliance of regulatory requirements are costly, challenging and even cumbersome. However, compliance with regulatory requirements is absolutely necessary for ensuring long term stability, success, and sustainability of the banking sector. It is a serious challenge to the HR of banks in the country to employ and engage competent, capable, and highly-skilled human resources to ensure the required compliance.

Knowledge development

Capturing, learning, and sharing up-to-date knowledge and best practices is essential for developing effective responses to the risks and challenges we face, particularly with regard to human capital in banks. In the context of Bangladesh, the arrangement for data gathering, knowledge creation, analysis, storing and application is not widely practiced. In the long run, it is only by investing in “knowledge development and information storing and dissemination” that we can minimize risks and create a sustainable banking sector for the country. BIBM’s Regional Banking Conference 2018 might help tremendously in this connection where risk issues and human capital development experiences and ideas from Bangladesh, India, Nepal and Bhutan would be shared on the second day.   Dr Shah Md Ahsan Habib is a professor and director (Training) at the BIBM