Volatility, Innovation and Trust

Posted on: Friday, 26 May 2017 at 8:04:33 AM

Article from AICC(WA) Business Lunch featuring Ian Narev, Managing Director and CEO, Commonwealth Bank of Australia at the Hyatt Regency Perth, 24 May 2017 & sponsored by PKF Mack, Penny Inc and Cisco.

 

“Leading for the Long Term” is a keynote topic with plenty of latitude.  The overarching focus of Mr Ian Narev’s inspiring address was to tie together the variables that bind the Commonwealth Bank of Australia’s (CBA) past, present and future as the largest institution in one of the nation’s most important service sectors. 

The scene was set by Mr Mark Patterson, Regional Manager, WA, CISCO, who articulated the challenge of setting the pace of change in a fast moving market whilst maintaining a contemporary value proposition.  Mr John Cluer, AICC(WA) Chief Executive drew further into this theme by noting that every State in Australia is now racing towards an innovation economy under the Federal  National Science and Innovation (NISA) agenda.  He stated “Israel is now a must, not a nice to have” component of this transition, citing the Fintech research that CBA entered under Israel’s Multinational Corporations (MNC) program, led by the Chief Scientist of the Government of Israel.

From L to R - The Honourable Wayne Martin AC, Chief Justice of Western Australia, Supreme Court of Western Australia, The Honourable Malcolm McCusker AC CVO QC CitWA, Mr Mark Patterson, Regional Manager, WA, Cisco Systems Australia Pty Ltd, Mr Ian Narev, Managing Director and CEO, Commonwealth Bank of Australia, Mr John Battley, Chief Executive Officer, Penny Inc, Professor Lyn Beazley AO, FTSE CIE, Sir Walter Murdoch Distinguished Professor of Science, Murdoch University and Board Member, Royal Perth Hospital Medical Research Foundation & AICC(WA), Mr Dean Pike, Managing Partner, PKF Mack and Mr John Cluer, Chief Executive, Australia-Israel Chamber of Commerce (WA)

 

Introducing Mr Narev, CEO of Australia’s largest company by market capitalisation, was host sponsor Mr Dean Pike, Managing Partner of PKF Mac.  Referencing the AICC(WA)’s ability to connect business, PKF Mac’s importance of client relationship management, and CBA’s focus on technology innovation, Mr Pike identified critical and collaborative elements that deliver stability and sustainable growth.

Mr Narev focussed his address on leadership for volatility, innovation and trust.  Citing the example of indigenous business engagement he referenced the virtues of custodianship, stewardship, and story telling as key elements within this theme.

On the topic of volatility, Mr Narev said “We need to accept global volatility as normal and cannot expect a return to an era that is not interrupted on a daily basis by external and unexpected change”.  In the next year he estimated CBA will borrow $100b from offshore sources in a trading environment where CBA’s capital growth will outstrip its asset growth by substantial margins.  The ability of the bank to withstand short-term downward movements and fluctuation shocks is coupled with decision making processes that give regard to volatility within global funding sources.  Australian banks are well positioned in this regard, however it has taken a long-term approach and considered growth to develop our financial institutions capacity for this purpose.

Mr Mark Patterson, Regional Manager, WA, Cisco Systems Australia Pty Ltd

Mr Dean Pike, Managing Partner, PKF Mack

 

When visiting Western Australia Mr Narev is commonly asked about the post resources boom economic climate and how this impacts resourcing decisions.  He affirmed CBA’s commitment to stand by customers in both prosperous and more difficult times saying “that is the business plan.”   He noted the competitive trading environment for banks, paying tribute to “well managed and formidable competitors”, leading into the topic of innovation.  Sharing several examples, including the Commbank App being used daily by 5.5 million people,  Mr Narev talked about thinking disruptively about business; “We have to disrupt ourselves before others do it for us”.  He shared a further experience of a company acquisition in South Africa that uses kiosks to verify customer identity, process biometrics and issue a functioning bank account.  Much of the banks innovation is driven towards lowering cost structures.  “We are not just innovating at the front end for customer experience, but also at the back end to lower operating costs.  On that score we seek genuine alternatives to meet the market , which we are prepared to do on cost, but not on risk.”

Mr Ian Narev, Managing Director and CEO, Commonwealth Bank of Australia

The third theme of trust was described by Mr Narev as “a license to create a relationship with the community”.  Mr Narev was forthright in acknowledging that public expectations of banks have changed and that the sector has been slow in understanding and responding to this.  He asserted that the banking sector is taking ownership and delivering joint commitments relating to experience, grievance and governance matters such as whistle blowing and remuneration. 

Mr Narev addressed the recent bank tax, lamenting a lack of Government consultation over the fundamental details.  He cautioned that all major industry sectors could be targeted during successful eras, a further example of short-term outcomes at the expense of longer term economic drivers.  To further expound he challenged his audience to understand “who banks are?”  Using a “them” and “us” analogy and posing a response to a public sentiment of “they can absorb it”, Mr Narev outlined core stakeholder relationships.

“The question we need to ask is, ‘Who is they?’ The answer is ... ‘they’ is you, ‘they’ is us.

“So ‘they’ can absorb it needs to either be the staff, the SMEs or the community groups, less lending, less tax, less reinvestment or less to the shareholders.”

The distribution of income for CBA supports the employment of 50,000 people, more than 5,000 small businesses in the CBA supply chain, and 800,000 shareholders (net of indirect shareholder interest through superannuation).  Additionally the CBA is already Australia’s largest taxpayer, and through is operational activities enables new business development.  This distribution is pictorially represented as follows:

Mr Narev concluded that the banking sector pushback was principle based and out of genuine concern for the broader economic impact.  He reiterated that a big part of trust is based on lifting standards and listening better, such that the “them” and “us” approach is reframed to be collaborative.  He defined leading for long-term leadership in the context of making the best decision on a spectrum of possible outcomes, without regard to the “popularity contest” where problems are often shifted but not solved. 

 

 Mr John Battley, Chief Executive Officer, Penny Inc

 

From L to R - Consul General Rachel Cooke, US Consulate General Perth, Professor Eeva Leinonen, Vice-Chancellor, Murdoch University, Mr Dean Pike, Managing Partner, PKF Mack, Mr Ian Narev, Managing Director and CEO, Commonwealth Bank of Australia, Mr John Battley, Chief Executive Officer, Penny Inc and The Honourable Malcolm McCusker AC CVO QC CitWA

 

 

About Ian Narev:

Ian Narev has been the Managing Director and Chief Executive Officer of Commonwealth Bank of Australia, Australia's largest company by market capitalisation, since December 2011.

He joined CBA in 2007 as Group Head of Strategy. From 2009 until his appointment as CEO, he was Group Executive, Business and Private Banking, with responsibility for SME banking, private banking and the CommSec retail brokerage business. As CEO he has focused particularly on the application of new technologies to improve customer engagement and productivity, adaptation to new regulatory requirements, and the strengthening of a customer-centric and values-driven culture.

Before CBA, Ian was a partner of McKinsey & Company. He worked in McKinsey's New York, Sydney and Auckland offices from 1998 to 2007. He holds BA and LLB degrees from the University of Auckland, an LLM degree in International Corporate Law from Cambridge University and an LLM degree in Public International Law from New York University.

Ian is a director of the Business Council of Australia and the International Monetary Conference. His involvement in the not-for-profit sector includes roles as Chairman of the Springboard Trust, which helps school principals in New Zealand, Chairman of the Sydney Theatre Company, and ambassador for the Australian Indigenous Education Foundation. 

Mr Ian Narev, Managing Director and CEO, Commonwealth Bank of Australia and Mr John Battley, Chief Executive Officer, Penny Inc and Mr John Cluer, Chief Executive, Australia-Israel Chamber of Commerce (WA)

 

 

 The AICC(WA) acknowledges it’s sponsor organisations, whose generous support enabled this presentation.

 

Host Sponsor:

 

 Co -Sponsors:

 

 

 

 

 

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