BPMN3023 Strategic Audit Report Full Report PDF

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BPMN 3023 STRATEGIC MANAGEMENTSEMESTER ASTRATEGIC AUDIT REPORT(CIMB GROUP HOLDINGS BERHAD)GROUP ASSIGNMENTSUBMITTED TO:PROF. MADYA DR. ABDUL MANAF BIN BOHARICLASS E(GROUP 6: THE GIRLS)NAME MATRIC NO.NUR MAISARAH BINTI RUSLAN 263782NUR KHAIRIAH BINTI KHIRUDDIN 263799NINA AZIRA BINTI ALI MUKHTAR 26388...

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BPMN 3023 STRATEGIC MANAGEMENT SEMESTER A202 STRATEGIC AUDIT REPORT (CIMB GROUP HOLDINGS BERHAD) GROUP ASSIGNMENT SUBMITTED TO: PROF. MADYA DR. ABDUL MANAF BIN BOHARI CLASS E (GROUP 6: THE GIRLS) NAME

MATRIC NO.

NUR MAISARAH BINTI RUSLAN

263782

NUR KHAIRIAH BINTI KHIRUDDIN NINA AZIRA BINTI ALI MUKHTAR

263799 263886

NADZIRAH SALAHUDDIN

264000

AQILAH MARDHIAH BINTI AMRAN

264061

DATE OF SUBMISSION: 7th JUNE 2021 UNIVERSITI UTARA MALAYSIA (UUM) SINTOK, KEDAH, MALAYSIA

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TABLE OF CONTENTS 1.0 INTRODUCTION

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2.0 STRATEGIC ISSUES IN CIMB HOLDINGS GROUP

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2.1 Decrease in net profit due to COVID-19 pandemic

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2.2 Potential consumer data breach

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2.3 The conflict of management policies and procedures.

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2.4 Inefficient features of Touch ‘n Go e-wallet

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3.0 INTERNAL FORCES ANALYSIS

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3.1 Company Name, Type, and Industry

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3.2 Vision, Mission, Objectives and Strategies

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3.2.1 Vision Statement

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3.2.2 Mission statement

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3.2.3 Objectives

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3.3 The List of Board of Directors

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3.4 The List of Top Management Team

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3.5 Organizational Structure

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3.6 Financial Analysis

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3.6.1 Analysis of Statement of Income

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3.6.2 Solvency Ratios

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3.6.3 Market Value Ratios

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4.0 EXTERNAL FORCES ANALYSIS

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4.1 STEEP Analysis

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4.1.1 Sociocultural

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4.1.2 Technological

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4.1.3 Economical

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4.1.4 Environmental

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4.1.5 Political

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4.2 Porter Five Forces Analysis

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4.2.1 Competition in the Industry

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4.2.2 Threats of New Entrants

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4.2.3 Bargaining Power of Suppliers

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4.2.4 Bargaining Power of Buyers

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4.2.5 Threat of Substitute Products

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5.0 SWOT AND TOWS ANALYSIS

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5.1 SWOT Analysis

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5.2 TOWS Matrix Analysis

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6.0 RECOMMENDATIONS

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6.1 Restructure new strategies to be more prepared for unexpected situations and retain profitability

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6.2 Expand the offerings with new products to capture market and revenue

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6.3 Invest in advanced technology to bolster the security of consumer data

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6.4 Provide more comprehensive training programmes to employees

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6.5 Increase partnership with more organisations to expand market size

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7.0 CONCLUSION

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8.0 REFERENCES

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9.0 APPENDICES

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9.1 Group discussion via WhatsApp

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9.2 Group discussion via Google Meet

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9.3.1 Meeting on 16th April 2021 st

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9.3.2 Meeting on 21 May 2021

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9.3.3 Meeting on 1st June 2021

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1.0 INTRODUCTION Strategic management has always been one the important elements in the operations of an organization. It assists the decision-makers of the organization in setting the objectives and paths that it wishes to attain and formulate effective planning that would bring them to get the desired achievements. In addition, effective strategic management helps the organization to actively scan its surrounding environments to forecast any upcoming changes and prepare themselves with suitable measures to overcome it. This strategic audit report has chosen to analyse the performance of CIMB Group Holdings Berhad (CIMB), a local bank in Malaysia that is the second largest commercial bank in the country and the fifth largest bank in ASEAN region. The report would attempt to find the internal issues that the bank is facing in current times. Its internal environments would be analysed using the annual report, financial report and sustainability report that have been published by CIMB for the financial year 2020. The published materials would be used to identify the strengths and weaknesses of CIMB, Meanwhile, the external environments of CIMB would be analysed to determine the opportunities and threats for the banking group. Two approaches have been used for this purpose which are STEEP analysis and 5 Forces analysis developed by Michael Porter. Finally, SWOT and TOWS matrix analyses have been selected as the strategic tool to analyse the best strategy that would be recommended for CIMB to overcome its identified internal issues.

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2.0 STRATEGIC ISSUES IN CIMB HOLDINGS GROUP 2.1 Decrease in net profit due to COVID-19 pandemic Due to COVID-19 pandemic, many nations are forced to go into lockdowns to prevent the spread of the virus. Malaysia was one of it as the government with an order from Prime Minister Muhyiddin Yassin officially promulgated the execution of Movement Control Order (MCO) policy in March 2020, under Prevention and Control of Infectious Diseases Act 1988 and the Police Act 1967. As a result, most firms and institutions were shut down either temporarily or permanently. Almost 700,000 employees were laid off, while many others were given salary cuts as firm could not afford the operating expenses because of loss of income. To relief the cash flow of those who are affected with COVID-19, BNM implemented automatic moratorium on all bank loans for six-months and extended it to allow them to restructure their financial and would resume repayments later. However, margins of CIMB were hurt by the situation. The pandemic has already slowed down the demand for new credits as people were saving for future spending, compelling the banks to spend more on doubtful debt than usual. The moratorium reduced their profits even further as people deferred their repayment of loans and interests. It led CIMB’s profit for 2020 to drop from RM2,783,983 in 2019 to RM1,547,119 in 2020. In its five-year group financial highlight, CIMB recorded the lowest dividend per share payment in 2020 with only 4.8 sen per share compared to previous four years that pay between 20-26 sen. An observation from Maybank Investment Bank Research found that CIMB is the worst performer in 2020 as its core net profit sank 70% year on year compared to peer average of -22% (Paul Raj, 2021). 2.2 Potential consumer data breach Data breach is a situation where information is taken or stolen from the system without legal authorization or prior knowledge of the system’s owner. Stolen data could involve proprietary, confidential, or even sensitive information such as trade secrets, customer data, credit card numbers or matters related to national security. Data breach could bring damage to a firm’s reputation due to perceived ‘betrayal of trust.’ At the same time, the victims will be suffering from financial losses related to the stolen records and information. The issue of data breach in CIMB has long circulated as customers reported problems in CIMB’s online portal, CIMB Clicks, where they were charged with unknown transactions that were only labelled as “directs debit”. As there were no further details on the charged transaction, it prompted the customers to feel uneasy as there were risks that their account has been breached and the safety of their account information was jeopardized. Some customers also alleged that their debit cards were charged to PayPal even though they have never owned a PayPal account before. A customer even reported a loss of about RM4,000 after

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28 unauthorised transactions were made via his debit card to PayPal (Rodzi, 2017). 2.3 The conflict of management policies and procedures. CIMB is a customer-centric banking group that aims to provide services that fulfill the wants and needs of the customers to create loyalty and pleasant banking experience towards customers. It puts major emphasis on good services provided to the customer while building long term relationships with them. They also always enhance and improve their services. However, some of the branches are found to have poor service management based on complaints received by customers who are dissatisfied towards some of the CIMB branches. Complaints were lodged about poor services due to poor skills and lack of product knowledge by the staff in attending the customers inquiries. Others also complained regarding unanswered calls when they contacted the CIMB branches within their area. Moreover, there are customers who are not satisfied with the services of some CIMB employees as they do not know the needs and problems faced by the customer. Some of the branches also do not have enough staff and counters, making customers have to wait for a long time to be attended to. Other than that, the self-service machines in some of CIMB branches are always out-ofservice or in maintenance, causing more inconvenience to the customers. 2.4 Inefficient features of Touch ‘n Go e-wallet The advanced technology is seeing increasing usage of mobile devices not only for communication, but also financial services. It leads to rising usage of ewallets among customers where they can pay for nearly anything just using mobile phones. Even the Malaysian government is encouraging the forming of a cashless society. Former Finance Minister, Lim Guan Eng, pushed the agenda by giving one-off payment worth RM30 to e-wallet users aged 18 and above earning less than RM100,000 annually to encourage e-wallets usage in the country (The Star, 2019). CIMB Group is also moving towards the goal with Touch ‘n Go Sdn. Bhd. (TnG), its subsidiary jointly-owned with China’s Ant Group. Its services evolved from using physical prepaid cards to pay for tolls and parking fees into an e-wallet that includes even more services such as prepaid reload and utility bill payments. However, customers reported inefficiency in the e-wallet as its balance cannot be used to reload the physical TnG cards. Instead, they would have to look for a machine called a Pick-Up-Device in locations such as convenience stores and petrol stations within 24 hours to complete the reload transaction (ACTIONLINE, 2018). The customers find it troublesome to drive to different places and are raising more dissatisfaction about the banking group’s decision to make the balances in the TnG card and the e-wallet as separate and not interchangeable. Opinions are given that the functions of the e-wallet should have been connected to the physical cards since both of them are the same product, despite being in different forms.

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3.0 INTERNAL FORCES ANALYSIS

Diagram 1: Logo of CIMB Holdings Group Berhad 3.1 Company Name, Type, and Industry CIMB Group Holdings Berhad (CIMB) is a player in the financial sector as the second largest commercial bank in Malaysia. It is established in 1974 as Pertanian Baring Sanwa Multinational Bank (PBSM) before changing the name to Commerce International Merchant Bankers Berhad (CIMB) after it is acquired by Bank of Commerce. Its current headquarters reside in Kuala Lumpur, Malaysia. CIMB is a public limited company and it has been listed in Bursa Malaysia since 1987. As on 31 December 2020, CIMB owns market capitalization worth RM43.5 billion while employing approximately 34,000 staff and has over 16 million customers. By assets, CIMB is considered the fifth largest banking group in ASEAN. With its status as a top universal bank in ASEAN which serves as one of its primary corporate advisors, CIMB has its influence spread over in the markets of Malaysia, Indonesia, Thailand, Singapore, Brunei, Cambodia, Myanmar Vietnam, and Laos. Its main corporate entities are listed as CIMB Bank, CIMB Niaga, CIMB Thai Bank, CIMB Bank Vietnam, CIMB Bank PLC, CIMB Investment Bank, and CIMB Islamic Bank. Meanwhile the business units composing the services that CIMB offers are consumer banking, commercial banking, wholesale banking, transaction banking, Islamic banking, and asset management products and services. In Malaysia, there are around 234 CIMB branches serving 8 million customers nationwide. They offer full spectrum of banking services from consumer products to business banking services for SMEs, as well as insurance, investment and wealth management products and services.

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3.2 Vision, Mission, Objectives and Strategies 3.2.1 Vision Statement “To be the leading focused ASEAN bank.” The vision that CIMB has set as its target to achieve is concise and precise, which is easy to understand the ambition that it wants to achieve in the sector. There are three key points in the vision statement. “ASEAN” refers to identity of CIMB as a local ASEAN bank which also serves as crucial differentiation for CIMB because people would associate CIMB as a leading bank whenever they hear the name ASEAN. In addition, introducing itself as an ASEAN bank creates resonance with CIMB staff and external stakeholders in the ASEAN countries and builds sense of unity because they are one as CIMB. Meanwhile “focused” illustrates the aim of CIMB to target and dominates key markets and segments instead of becoming a general image that could be easily dissolved. As for “leading”, it is an indication to the position that CIMB is aiming to achieve which is to be amongst the top quartile banks in ASEAN in terms of return on equity (ROE). 3.2.2 Mission statement “To provide universal banking services as a high-performing, institutionalized and integrated company located in ASEAN and key market beyond, and to champion the acceleration of ASEAN integration and the region’s links to the rest of the world.” 3.2.3 Objectives The objectives in CIMB are categorized as strategic themes, where there are five different themes that portrays the aspects that CIMB wishes to achieve in its operations. These themes are comprehensive as it covers the major themes in business and they are named as follows: i Delivering sustainable financial returns ii Disciplined execution iii Customer centricity iv Transform fundamentals v Purpose-driven organisation To achieve the first strategic theme in delivering a sustainable financial return, CIMB did the reshaping back their business portfolio to generate an accelerated profitable growth. As reported in CIMB financial performance, even business growth impacted by pandemic COVID19, it can be seen that the Group Consumer Banking achieved 6.5% for pre-provision operating growth. Also, their operating expenses decreased by 4.6%. Next factor is they have to fix turnaround underperforming business such as disruption in their operation due to the MCO and safety, health concerns for employees and customers cannot enter in the branch operation. Thus, CIMB implements a stringent health and SOP, and also gets support relief from the government. They also split operation for call centres with work from home, thus it gives minimal 5

disruption to business operation and no decline in employee productivity. Second underperforming business is slow-down in business momentum in Malaysia, Indonesia, Singapore, Thailand, and Cambodia (MISTC), where CIMB central bank rate is cut which impacts performance and profitability. Thus, CIMB focused on consumer account saving accounts (CASA) and tried to increase their investment fee income through sales force and digital engagement. It's work by CIMB CASA grew up to 30.3% year on year and they launched the CASA digital product. Then, drive cost efficiency. It is meant by rebuilding processes in driving factors in a more efficient way and getting improvement as a benefit toward business performance. In this area CIMB included in delivering the improved customer experiences, CIMB did have their website for them to give any feedback or recommendation about CIMB services, this helping them to improve their services process. Also, reducing errors means in CIMB they have a section of compliance where they have to minimize errors and improve their reporting. This is related to good governance. Then, focusing on the employee’s skills in CIMB, they have the digital training for all employees such as online courses and workshops and also the accounting and audit training in conference and seminar. Then focused investment by facilitating the intra, asean wholesale, preferred and wealth management business. In CASA, the ratio increased from 29.4% in 2019 to 33.4% in 2020, Malaysia. This shows engagement between customers increased. Also the fee income and transaction banking such as the deposit transaction grow by 14%. At the same time, CIMB have the Islamic finance in their investment for Muslim consumer such as Shariah-compliant unit trust fund and Islamic Negotiable instrument. In the meantime, they also have selective CIMB digital investments such as e-Gold Investment accounts to invest gold. Second, discipline execution is being developed in CIMB to make sure the reward strategy drives the behavior. So that the management will have accountability in order to achieve their business goal. They implement the value by having a performance culture, simplifying corporate oversight and management structure, and a regional operating model. As for the group human resources, they have the three critical behaviors that have been developed among staff through the role-modelling campaign. It is “ABC Heroes’. So, this campaign is featured through email where it demonstrates the ABC behavior. The examples are such as staff vigilance in leading the customer to being safe from scams. Next is the ‘Have Your Say' mailbox, where at the end of year, staff can give suggestions or highlight their issue about their performance. This performance culture will help in boosting morale for employees. As they work in a pandemic it also reduces their risk of burnout and stress. Third, CIMB values strengthen the reliability of customer centricity. CIMB transforms customer journeys and treats customers fairly. When the pandemic occurs, CIMB ensures all the customers get access to the essential banking services so that customers can manage 6

their finances. Thus, CIMB gives safeguard to customer visits in all CIMB branches such as sanitizing first their branches, employees and customers before entering CIMB branches and making sure they follow the SOP guideline. At the same time, they are actively engaging with customers in providing assistance through payment relief programs and also restructure loans such as M40 and affected customers. Fourth is CIMB transform the business fundamentals, where it touches the risk management such as having internal control to make sure that their system is effective, adequacy and having integrity. In CIMB the group having an effective internal control system for Anti Money Laundering and combating the financing of terrorism which is to report any suspicious transaction happen. Lastly, a purpose-driven organization where CIMB develops the right values and good culture which is respectful. CIMB has an open engagement and good teamwork through their shared vision. As for CIMB sustainability, they held an annual sustainability summit.

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3.3 The List of Board of Directors The board of directors in CIMB is composed of 10 individuals, of which 1 of them is senior independent director, 6 independent directors, and 2 nonindependent directors. The gender distribution of the board of directors are 7 males and 3 females, whereas for the nationality distribution, 7 of the directors are Malaysian, meanwhile 3 others are from Australia, Indonesia, and Singapore, respectively. CIMB GROUPS HOLDING BERHAD BOARD OF DIRECTORS DATUK MOHD NASIR AHMAD (Chairperson/Independent Direct...