New Kids On The Block - Asian Institute Of Finance

ISSUE 09 2012
(838740P)
Managing Talent in a Fast
Changing Environment
Human Capital Development
You Can Lead a Horse to Water
Islamic Finance and
Human Resource Challenges:
Truth or Myth?
Engaging
the
New Kids
On The Block
AIF Board Of Directors
Tan Sri Dr. Zeti Akhtar Aziz
Chairman of the Board,
Governor, Bank Negara Malaysia
Datuk Ranjit Ajit Singh
Vice Chairman of the Board,
Chairman, Securities Commission Malaysia
Tan Sri Azman Hashim
Chairman, AmBank Group
Dato’ Sri Zukri Samat
Managing Director, Bank Islam Malaysia Berhad
Dato’ Hj. Syed Moheeb Syed Kamarul Zaman
Dato’ Dr. Nik Norzrul Thani Nik Hassan Thani
Chairman and Senior Partner, Zaid Ibrahim & Co
Dato’ Yusli Mohamed Yusof
Non-Executive Chairman, Mudajaya Group Berhad
Mr. Hashim Harun
President and CEO, Malaysian Re
Mr. Kung Beng Hong
Director, Alliance Financial Group Berhad &
Alliance Bank Malaysia Berhad
contents
contents
3
Editorial Note
4
Engaging the New Kids on The Block
8
Managing Talent in a Fast Changing Environment
11
Islamic Finance and Human Resource Challenges: Truth or Myth?
15
Human Capital Development
You Can Lead a Horse to Water
18
Potential Risks of Competition Law
Infringement in Mergers and Acquisitions in Malaysia
22
Customer Satisfaction Index for Banks in Malaysia
26
The Winner Takes it All, Really Now?
Discovering Talent Lessons from the Olympics
Editorial Team
Chief Editor
Dr Raymond Madden
Co-editors
Dr Sofiza Azmi
Richard Yu
Assistant Managing Editors
Dr Zamros Dzulkafli
Fara Iza Abd Rahim
Yogaretnam Kanagandram
DISCLAIMER: The Asian Institute of Finance does not
represent nor warrant the completeness, accuracy,
timelines or adequacy of this material and it should not
be relied on as such. The Asian Institute of Finance does
not accept nor assumes any responsibility or liability
whatsoever for any data, errors or omissions that may
be contained in this material or for any consequences
or results obtained from the use of this information. This
publication does not necessarily reflect the views or the
positions of the Asian Institute of Finance.
Asian Link 2
28
The International Conference on
Financial Crime and Terrorism
Financing 2012
editorial
note
Play the Talent Game
The talent market has changed significantly since McKinsey first exposed the “war
for talent” as a strategic business challenge and a critical driver of organisation
performance. Changes in economic and geo-politics dictate a new approach and focus
on talent management. This is even more so in the financial services industry. With
further liberalisation of the financial sector, demand for talent will persist as existing and
new players continue to expand their operations locally as well as regionally. Having the
right talent and qualified employees in the financial industry is critical for the industry
to grow and compete successfully in a rapidly changing financial services market.
In Malaysia, while both private and public universities churn more than 30,000
graduates in banking and finance yearly; there is a limited supply of ‘high quality’ and
‘qualified’ talent. Hence, the issue of employability amongst these graduates remains
high due to talent misalignment. An issue we need to resolve. A report titled Graduate
Employability in Asia which was released by UNESCO recently, highlighted that majority
of graduates were not employable due to lack of generic skills and serious inadequacy
in terms of work-related competencies. Herein lies the paradox of scarcity amidst
plenty. The problem does not lie in the skills shortage but more of skills gaps. The latter
refers to a situation where recruits are available, but they do not have the required
skills demanded by the industry. Concerted efforts and collaborations between
relevant stakeholders are needed to address the issue of skills gaps. Stakeholders
need to up their game in developing the right talent and going as far as detecting
skills requirement, even at the recruitment stage. They also need to consider new
approaches such as internships and apprenticeships to help fill the talent gap.
“Each generation
imagines itself
to be more
intelligent than
the one that went
before it, and
wiser than the one
that comes after
it.” George Orwell
Efforts to upskill the workforce in the financial services industry in Malaysia were given
a boost when the Asian Institute of Finance (AIF) was established. Although AIF focuses
on human capital development in the financial services industry, it is fully committed
to elevating Malaysia’s role as a premier provider of comprehensive solutions for
industry across Asia. These include driving the talent management agenda; develop,
implement and harmonise professional standards across the financial industry; develop
and monitor capacity building initiatives; and produce high quality internationally
recognised applied research with an industry focus. As part of its talent development
strategies, AIF plans to play a prominent role in the Financial Services Talent Council in
providing strategic leadership on human capital development of the financial services
industry and realising Malaysia’s growth ambitions.
With the imminent establishment of ASEAN Economic Community by 2015, greater
integration and competition amongst ASEAN member countries will also result
in greater demand for and mobility of talent. AIF is poised to lead the next talent
transformation by redefining the ‘talent game’.
Dr Raymond Madden
Chief Editor
3 Asian Link
By Dr Raymond Madden & Dr Sofiza Azmi
Engaging
New Kids
on the
block
the
Generation Y or Gen Y for short, has been referred to with many names – millennial, echo boomers,
me first, first digital and net generation. This cohort of individuals is born between 1978 and 1995. Unlike
the generations before them, this group of employees comes with pre-honed technology skills and
ingrained multi-tasking skills (refer to Table 1). However, they remain an enigma to many organisations.
Lindsay Pollack, author and Gen Y theorist, said that when it comes to dealing with Gen Y, “what used
to be common sense isn’t common sense anymore”. She suggested for organisations to rethink their
approach to training Gen Y.
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Table 1: Four Generations at Work
Silent Generation
Baby Boomers
Generation X
Generations Y
Who they are
Born between
1925-1945
Born between 1946-1964
Born between 1965 - 1977
Born between
1978-1995
• “Live to work”
• “Willing to go the extra
mile” for an employer
• “Work to live”
• “Original latchkey kids”
• “Vanguard of the free agent
workforce”
“Like Xers on steroids”
Tagline(s)
“When in command,
take charge. When
in doubt, do what’s
right.”
• Respect, empowerment,
challenge and growth
Values
• Work itself and the
people they work
with.
• Command-andcontrol mindset
•
•
•
•
Work/life balance;family
Individualism; Entrepreneurial
Technology; creativity
Diversity and transparency
• Immediate feedback and
payoff
• Hard work pays off.
• Technology; creativity
To work with strong
leaders with proven
track records
• Work environment
conducive to resultsorientation
• Job stability and security
• Demands immediate rewards for
contributions
• Flexibility, money and portable
benefits, harmonious work
environments and fulfillment
• Work environment conducive to
relationship building
• High expectations of
personal and financial
success
• Seek challenging,
meaningful work that
impacts their world
• Do not like being treated
as the new kid on the
block
Willing to learn new
skills to be more
effective in their
current job
• Include them in
decision-making,
give clear goals and
responsibilities and then
get out of their way and
let them get the job
done”
• Always looking for “bigger/better
deal”
• Less loyalty to an employer; not
intimidated by authority
• More willing to make lateral moves
to add to their skill sets
• More self-reliant and more selfdirected
• Most high-maintenance
generation to ever enter
the work force
• Little loyalty to an
employer; not intimidated
by authority
Preferences
Relationship
to Employer
Source: Bruce Tulgan; Rainmaker Thinking
Gen Y is the largest age group to emerge
since the baby boom generation. And
as this generation grows to become a
significant proportion of the workforce,
recognising the unique forces that shape
this misunderstood generation requires
insights and a fine sense of balance.
According to the Minister of International
Trade and Industry, Dato’ Sri Mustapa
Mohamed in an interview last week, Gen
Y currently makes up about 40% of the
Malaysian workforce. “It was important for
Gen Y workers to have access to companies
with good training, exposure and salaries,”
he was quoted as saying. 1 A Graduate
Employability Blueprint which is set to be
launched by the end of the year is expected
to greatly emphasise on developing
training programmes that hone new skills
for youths in tandem with the future need
of the country as a developed economy.
proportion of the workforce, the primary
source of competitive differentiation for
organisations will be human capital.
Malaysia is not alone in her quest to
develop Gen Y and prepare them for
workforce entry. Representing the future of
Asia’s workforce; countries like Singapore,
Hong Kong, India and China are also
putting their resources in harnessing the
potential of Gen Y workforce. In Singapore,
there are about 400,000 Gen Y in the
workforce, forming about 20% of the
economically active population. By 2015,
this number is estimated to reach about
30%. In China and India, this demographic
cohort makes up about 600 million and 500
million of the labour market, respectively.
As Gen Y is set to become the largest
This is a uniquely global phenomenon
and affects developed as well as emerging
economies. “Britain’s got talent”, a popular
TV talent program in the UK and around the
world has strong parallels for multinational
corporations who need to be aware of the
generational differences of their employees
if they are to maintain performance and
sustain employee engagement.2 Hence, it is
strategically imperative for organisations to
understand the environmental influences
of Gen Y including understanding who
they are and what has defined their
experience. This is particularly more
important and relevant for the financial
1
The Star, October 6, 2012
2
Raymond Madden, Britain’s Got Talent Leadership Lessons and Drive, Changeboard, Top Story, 2010.
5 Asian Link
industry in Malaysia as Mercer’s survey on Total Remuneration
reported that finance jobs are one of the top three categories
of ‘jobs most difficult to retain’.3
Unlock the Values
According to the Robert Half survey of 300 CFOs and finance
directors, nearly half of employees said Gen Y were the hardest
to retain compared with Gen X and baby boomers. More than
60% of them attributed this to high expectations among
Gen Y employees for career advancement, expectations for
remunerations and work life balance. A joint report by ACCA
and Mercer offers interesting insights into the aspirations and
traits of Gen Y finance professionals.4 The report highlighted
that a dynamic career progression is key to attracting,
developing and retaining them. And this entails ambitious,
fluid and continuously evolving career paths.
to provide a number of career options as opposed to
specialising in specific areas of finance.
However, many institutions and organisations are still
wrapping their heads around what makes Gen Y ticks
and how to effectively engage and leverage the newest
entrants to the workplace. Why should organisations care?
Understanding what shapes Gen Y is valuable to employers
if they want to successfully attract, develop and retain this
newest talent. Some of the major characteristics of Gen Y
are described below:
•
It is even more interesting to note that almost half of Gen
Y finance professionals surveyed had diverging career
expectations. Dubbed as “a tale of two career paths”, the
report contended that 40% of young finance professionals
wished to pursue a traditional career in finance whilst the
rest are seeking careers outside mainstream finance roles
(see Table 2).
Those who wanted to remain in finance are looking for
vertical career progression and to develop specialisation in
finance field. Gen Y professionals seeking non-traditional
finance roles prefer to build their financial management
capacity in business and eventually expand their career
beyond finance function. The findings of the survey have
huge implications on the strategies of financial institutions on
talent management. Bottom line, Gen Y expects institutions
•
Gen Y is the first generation to grow up with
technology and rely on it to perform their work
better.
The explosion of technology has shaped Gen Y’s values
and attitudes both in their personal and work life. Being
digital native, this tech savvy workforce is accustomed to
real time information anytime and anywhere. For them,
gadgets like iPad, tablets and smartphones or android
phones are regarded as status symbols. Armed with
these high-tech gadgets, Gen Y is plugged-in 24 hours
a day, 7 days a week and is very good at multi-tasking –
they talk on the phone while surfing on the net and text
messages while listening to music. This ability to multitask can challenge the way baby boomers perceive their
younger colleagues. And because of their deep reliance
on technology, they believe in workplace flexibility and
that they should be evaluated on their work output rather
than on how, when or where the work is being done.
Gen Y’s life is on social networks.
Social media plays a dominant role in Gen Y’s personal
and professional life. Unlike other demographic cohorts
Table 2: Career Expectations of Gen Y Finance Professionals
Traditional Finance Career
New Career Pathway
Traditional finance roles
Broader business goals
Depth of finance knowledge
Breadth of knowledge outside of finance
Career paths within finance roles
Career paths outside of finance roles
Quick vertical progression early in career
Slow vertical progression early in career
Source: Generation Y: Realising the Potential, ACCA & Mercer 2010
3
4
Total Remuneration Survey, Mercer 2009
Generation Y: Realising the Potential, ACCA and Mercer 2010.
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who use social networking mainly for entertaining and
socialising, Gen Y is using this platform in more diverse
ways. Between Facebook, Twitter, Instagram, LinkedIn and
WhatsApp in Asia; these digital natives use social media
sites to connect and communicate with their friends,
colleagues and superiors. To them, social media goes
beyond making contacts, updating status and discussing
life as well as topics of interest. Social and professional
networking sites have evolved to become a platform for
them to expand their professional network and mine for
job prospects. Gen Y is inadvertently blending social and
professional life; blurring the lines between the two. The
Cisco’s Connected World Technology Report revealed
that more than half of Gen Y respondents said that they
“will not accept a job that bans social media”. The fact
that Gen Y prioritized social media access at work over
salary speaks volume! But the financial services industry
is not responding to this need. Most banks ban social
media as they are concerned about open access to their
IT infrastructure.
•
•
5
Gen Y puts personal fulfilment ahead of pay.
In another study, personal growth and work life balance
were found to be important considerations over pay
rates for Gen Y when choosing a job. These results as
reported by Kelly Global Workforce Index (KGWI) survey
provide a startling revelation on the motivations of
Gen Y.5 They have a deep-seated desire for work to be
personally enriching and rewarding. More than any other
generations, Gen Y professionals are attuned to the bigger
picture; seeing everything as connected. They want to
see how their work contributes to the larger corporate
objectives. Essentially, Gen Y seeks greater engagement
and “meaning” from their work. The Asian culture of
working long hours and long term loyalty is also fast
becoming a passé as Gen Y values work life balance over
career. Like their peers in other regions, Gen Ys in Asia are
rejecting the traditional “work hard and get rich” mentality
in favour of a lifestyle devoted to personal satisfaction.
Gen Y is achievement-oriented.
Gen Y professionals grew up with the entitlement
mindset. Jean Twenge, author of the book Generation Me,
describes them as “smart, brash, arrogant, and endowed
with a commanding sense of entitlement’. Nurtured and
pampered by parents to believe in themselves and their
abilities, Gen Y-ers are confident with strong self-esteem.
Such strong self-confidence, she argues, “is what allows
them to accomplish great things and can keep companies
progressing”. Gen Y’s so-called ‘helicopter parents” tend to
hover over their kids, dote on them, and protect them
from criticism and disappointment with constant positive
reinforcement. As a result of such upbringing, these
trophy kids display an abundance of self-confidence
and are very ambitious. Likewise, they are particularly
achievement-oriented, thanks to video games that have
taught them to constantly advance to the next level.
•
Gen Y craves for immediate feedbacks.
The same electronic games that they grew up with also
trained them to receive immediate feedbacks, rewards
and recognitions on their performance. In the workplace;
they favour the same constant and consistent feedbacks
from their managers but in a non-formal fashion. In
this sense, the traditional annual, semi-annual or even
quarterly performance review is not effective with Gen
Y. In a report produced by Kelly Services titled Gen Y at
Work, employers are recommended to “provide regular
feedback sessions and lesser performance review cycles
supported by mentoring or coaching” to retain Gen Y at
the workplace.
Conclusion
With Gen Y employees poised to become future managers
and leaders, employers and HR practitioners need to have a
better understanding of how to work with them and manage
them. It is also important to develop effective strategies to
attract, retain and motivate Gen Y employees from the start.
An important step to attract Gen Y finance professionals is
to clearly communicate with them what career paths and
associated time-lines are available. Since lifestyle is also an
essential consideration, organisation’s brand value is the key to
attract these young finance professionals. In developing these
young professionals, organisations should provide a host
of well-coordinated opportunities for experiential learning.
Organisations should also design learning interventions that
are most suited to Gen Y based on their unique predilections
such as interactive features and social characteristics. The final
challenge is retention. The key here is to offer a compelling
career that matches their dynamic and trendy lifestyles. If in
doubt, ask Gen Y’s themselves. They will tell you what they
want.
Dr Raymond Madden is Chief Executive Officer at the
Asian Institute of Finance and Dr Sofiza Azmi is a Senior
Research Fellow and Head of Policy Studies at the Asian
Institute of Finance.
Acquisition and Retention in the War for Talent, 2012 Kelly Global Workforce Index.
7 Asian Link
Managing
Talent
in a Fast Changing
Environment
By Dr Zamros Dzulkafli
The global financial crisis had taught us many
valuable lessons; it provided unexpected and sudden
deviation in the financial and economic paths and
called for unprecedented remedial actions. Various
policy responses, which had been proven effective in
the past, may have been pro-cyclical this time around.
Mistakes were made along the way and we acquired
new lessons in the process. Businesses too were not
immune from facing the same consequences, and
unless human capital or talents are trained and armed
with the required skills and knowledge for prompt
actions during these uncalled crises, recovery will
take longer and we may well lose the opportunities
to take advantage of the shift in business needs and
demands.
As a result of the recent global financial and economic
crises, unemployment rates have remained at higher
levels especially in developed countries. The demand
for talents has also shifted accordingly as countries
Asian Link 8
began to undergo economic transformation so as to
create a better platform that will allow them to adapt
to new challenges and the changing dynamics in
the global economic environment. Talents must be
ready to change and equip themselves with the latest
required competencies and skills as the evolution of the
human capital demand continues to move in tandem
with the changing dynamics in the global economic
environment.
Hence, talent development will continue to be the
subject of interest in the foreseeable future; from the
formal education delivered at schools and universities,
to on-the-job training and experience gained from the
work place. This is more so as employers are expected to
continue to demand suitable and ideal employees that
can fit well into their organisations and business plans.
Therefore, the question whether our graduates are able
to quickly adjust themselves from being in a theoretical
environment typical of most universities, to being in
a fast-moving and demanding working
environment, is another concern that
requires immediate attention. Certainly,
both the universities and the industry have
to position themselves in addressing this
issue and to come up with a concrete longterm solution for their mutual benefits. To
that end, the Asian Institute of Finance (AIF)
will continue to support the universityindustry collaboration and welcome
engagements that would enhance this
partnership.
Interestingly, despite the rapid exponential
technology advancement, human capital
is still a much sought after asset by
most organisations. As cleverly put by
the management guru Peter Ducker
way back in 1992: “The most valuable
assets of a 20th century company were its
equipment. The most valuable asset of a
21st century institution, whether business or
non-business, will be its knowledge workers
and their productivity”. The compounding
effects from both human and technology
enhancements have produced the positive
synergy that led to the tremendous
growth witnessed during the last few
decades, which also saw an increase in
productivity and efficiency. While research
and development continue to be given an
emphasis in the field of technology, the
same level of importance should also be
placed on producing and managing the
best talents to ensure sustainable growth,
not just for the current but also for the
future generation.
The recently concluded sports event, the
Euro 2012 held in Poland and Ukraine
where 16 European teams took part in
competitive football, is a good case study
to understand the dynamics of managing
talent in the real working environment.
Undoubtedly, all 16 teams have the best
talents available in Europe with their
high-level of skills and lucrative pay. These
talents were managed by their managers
who were entrusted with the task of
ensuring that all players within the team
are able to understand and execute the
intended game plan. The vision is to be
the best football team in Europe and
the mission is to score as many goals as
possible as well as to avoid conceding
goals; however, not all managers were
successful in achieving this. We have seen
high profile teams such as Holland, the
runner’s up during the World Cup 2010
in South Africa, unable to progress into
9 Asian Link
the quarterfinal of Euro 2012. This
was despite them having among the
best talents in the world. Team spirit
was low and the hunger to win was
lacking. In the end, of all the 16 teams,
Spain had proven to be the best and
emerged as the European champion.
One could certainly argue that the
reason for this was the excellent work
of the manager in managing the team
particularly the players - and of course,
with the help of a little bit of luck.
The demand
for talents has
also shifted
accordingly as
countries began to
undergo economic
transformation
so as to create a
better platform
that will allow
them to adapt to
new challenges
and the changing
dynamics in the
global economic
environment
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Another clear example of a team that
possesses great talents but failed to
live up to expectations is Chelsea FC
under the management of Andre
Villas-Boas (AVB). Players did not
perform well during his watch and fans
sensed that there was something not
quite right with the manager-player
relationship, management style and
communication. The team was fast
losing its grip on the English Premiere
League, and consequently, AVB was
replaced with Roberto Di Matteo.
Under Di Matteo’s watch, Chelsea
seemed to be re-energised and with
the same pool of talents, managed to
win the UEFA Champions League title
for the 2011/12 season.
These situations are real and could
also be observed unfolding in the
workplace. Sometimes, we have
talents who have the competencies
and ability to execute the business
plan or perform their daily duties; we
have talents with different roles in
the company in which each needs to
work together and bond as a team to
ensure company’s success and to be
the best in the industry; and we also
have supervisors or heads to supervise
the team and ensure that everything
runs smoothly and according to plans;
but somehow, success still seems
to elude us. This is because, merely
having good talents without also
having effective leaders who have
the capability to encourage positive
thinking and maintain a positive team
spirit would cause things to not work
out as expected. Moreover, under the
current challenging economic and
corporate environment, having highly
qualified and certified talents with
the required skills to perform their
jobs are necessary but not necessarily
sufficient to ensure success. There are
other essential soft skills required such
as creativity, critical thinking, effective
communication and continuous talent
improvement.
Maybe it is time for both the university
and industry to give more emphasis
and focus on developing the talents’
soft skills. It may be the case that too
much weight was given to developing
the technical skills and that the soft
skills have been neglected and more
often than not, taken for granted. How
many times have we come across
communication breakdowns at the
workplace? These are costly errors
that may result in giving the wrong
message and is certainly unhealthy
for the organisation. What is more
important is that communication
is a two-way street; it requires both
speaking and listening.
The recent financial and economic
crises had again demanded us to put
on our creative and critical thinking
hats. Our immediate responses and
strategies should not only be aimed at
recovering from the current crises, but
also to prepare ourselves for possible
future shocks and opportunities.
Hence, the mandate is now to produce
a continuous supply of talents who
are well equipped with both technical
and soft skills. The challenges are
real; so let us work together as a
team to create better synergy and
share the understanding on the new
prospects and risks from the effect of
globalization.
This article was featured in the
Malaysian Reserve, 6th July 2012 .
Dr Zamros Dzulkafli is a Research
Fellow at the Applied Finance
Research and Publication Centre,
at the Asian Institute of Finance
By Dr Wafica Ali Ghoul
Islamic Finance
and Human Resource
Challenges:
Truth or Myth?
T
he current global financial crisis has
alerted the international financial
community to the distinct nature
and inbuilt strengths of Islamic finance, as
pointed out by Muhammad bin Ibrahim
(2010) Deputy Governor of the Central
Bank of Malaysia, who adds that the crisis
thus has provided an opportunity for
Islamic finance “to strategically position itself
as a stable form of financial intermediation, .”
The continued growth of the lucrative
Islamic financial industry is currently
hindered by a global deficiency of
qualified personnel who have a thorough
knowledge of finance as well as Shari’ah.
This fact serves as an indication that the
growth of the industry is faster by far than
the emergence of adequate Islamic finance
expertise.
The International Centre for Education
in Islamic Finance (INCEIF) in Malaysia
projects that 50,000 Islamic finance (IF)
experts are needed in the next decade,
30,000 of whom are needed in GCC
countries, whereas only 1000 new
graduates currently enter the job market
annually (cited by Khnifer 2010).
Impact of Human Capital
Deficiency on the IF
Industry
The scarcity of skilled IF human resources
has been causing an unjustifiably high
inflation in compensation packages and
a high turnover rate. In addition, the
prevalent hiring of conventional finance
personnel has been taking the Islamic
finance industry away from its right path;
it is hindering innovation, and it involves
a high cost of training these people in
Shari’ah and its application in Islamic
finance.
Main Causes of the Human
Capital Deficiency
In Islam there are different schools of
thought and religious sects which exist
across the various Muslim countries, a fact
that results in different interpretations
of Shari’ah. This difference impacts the
IF education and training programs and
makes it harder to match the supply of IF
graduates from a country such as Malaysia,
with the demand for IF experts in GCC, for
instance KPMG (2007) notes that the sector
11 Asian Link
lacks a global industry body that oversees the standardization of
continuous education and training. The problem is that many
academic programs are producing mostly “unemployable” IF
graduates, who usually have to compete with experienced
people from the conventional banking sector. Parker (2011b)
claims that most IF programs are “ordinary and mediocre”.
Opportunist universities and professional training companies
all over the world have been jumping on the bandwagon to
benefit from the rising demand for IF degrees and certificates; the
credibility of most of them is questionable due to the absence
of a global accreditation body thus far.
Others have criticized ‘textbook-based’ as opposed to ‘experttaught’ online as well as on-ground degrees which might be
questionable in terms of the quality of the education and
training.
One would expect people from the conventional sector to be
able to teach themselves enough about IF, if it was not for the
shortage of adequate textbooks on Islamic finance, the scarcity
of published research, and the inaccessibility of most Islamic
finance journals.
Another factor that adds to IF human resource shortages is the
frequent emergence of new IF institutions, due to low barriers
to entry and weak government regulations of the IF industry in
most countries. These institutions are constantly on the prowl,
seeking to lure away IF professionals without being limited by
geographic borders, which plagues the industry with a high
turnover rate and unjustified high wages.
Other critics lament the fact that what is claimed to be an Islamic
finance degree program in most cases is a conventional finance
program with a few Islamic finance classes that are taught by
conventionally trained professionals (Ghoul 2012).
There are also some claims of preference being given to Muslims
when hiring, even if they are less qualified, or to put it another
way, discrimination against non-Muslims even if they are more
qualified. This is inconsistent with the observation that Western
names dominate large IF institutions in Muslim countries as well
as many conferences.
Critics of the progress of the IF industry have expressed some
disapproval of the first generation of Islamic bankers who for
the most part came to Islamic banking from the conventional
sector and who learned the IF jargon in a haste, without fully
understanding the field.
Another contributor to the personnel shortage is the fact that
IF graduates may be requiring a higher starting salary which
might be justified due to their highly specialized skills which
are in demand, but which may be making them too expensive
to hire.
The IF industry is also criticized for following the example of its
conventional counterparts by being unfair to women when
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In Islam there are different schools of thought and religious
sects which exist across the various Muslim countries, a fact
that results in different interpretations of Shari’ah
recruiting, and for having a similar glass
ceiling, since women have not thus far
been given senior position at IF institutions,
with Malaysia being an exception.
Another topic which has been discussed
extensively is the shortage of Shari’ah
scholars, the reliance by most IF institutions
on a select small number of highly visible
scholars, who end up serving on an
excessively high number of Shari’ah
supervisory boards (SSB). This raises
concerns about the independence and
objectivity of scholars who get paid by
the financial institutions to issue opinions
and certify products as Shari’ah compliant
(Ghoul 2008). A recent survey by Funds@
Work found that the top 20 scholars
accounted for over 619 board positions,
over half of the 1,141 positions available.
Two of those scholars held 85 positions
each and four held 14 board positions
each. In Malaysia a Shari’ah scholar may
serve on only one SSB at a time, whereas
there is no such restriction in the GCC
region.
Are the Shortages True or
Mythical?
There have been some allegations of
a lack of proper recruitment policies,
namely that the human resources (HR)
departments at some IF institutions may
not be very familiar with the skills that
are needed when selecting IF recruits,
that their employment selection criteria
may be biased towards hiring from the
conventional finance sector, and that they
are less likely to hire fresh graduates even
those from top IF programs, many of whom
are eliminated by computer programs that
sift through stacks of applications.
According to K hnifer(2010), “many
Islamic banks prefer experience from a
conventional background”, instead of
recruiting IF graduates, they look for people
with a solid background in conventional
finance who are familiar with Islamic
finance.
training workshops, promoting research,
and offering scholarships for doctoral
candidates.
Khnifer quotes graduates from some top
programs who point out that the shortage
of personnel in IF is a “propaganda”, Khnifer
quotes John Board, Dean of Henley
Business School “Our students are finding
that searching for jobs in IF has never
been harder at a time when demand for IF
services has never been stronger”.
Malaysia’s Efforts to
Rectify the Human Capital
Deficiency
Khnifer also notes that the embedded
‘indiscriminate hiring’ policies have resulted
in hiring people who are not qualified in IF,
he quotes Gilles Rollet, Head of Swiss Bank
Mirabaud’s Middle East unit who notes that
a “possible shake-out of less qualified people
would benefit the nascent sector, I wouldn’t
be surprised in a year’s or two year’s time if
some of these people will be on the street, .”
Main Centers for Islamic
Finance Human Capital
Training
Malaysia has been playing a leading role
in the development of human capital for
Islamic finance which will be discussed
further below. The next main player is
the United Kingdom where successive
governments have been introducing
legislation that helps facilitate the
introduction of Islamic financial products,
for the purpose of developing London
into a major international Islamic trade,
investment and finance centre.
The United Kingdom is also home for
the leading Islamic finance university
degree programs with Durham, Reading,
Bangor, and Aston universities, and the
Markfield Institute of Higher Education. In
the Middle East the Islamic Development
Bank which is based in Saudi Arabia
leads the human capital development
efforts through organizing conferences,
Malaysia has been known as the benchmark
for the Islamic finance industry in the areas
of regulation and product innovation.
However, despite having some of the top
Academic Islamic finance degree programs
in the world, Malaysia is currently suffering
from a flight of Islamic finance talent to
GCC countries, where Islamic finance is
experiencing extraordinary growth (KFH
2010).
In response to the brain drain issue, Bank
Negara Malaysia (BNM) has been trying
to restore the balance between the
talent supply and demand for Shari’ahqualified banking professionals. BNM has
established the Asian Institute of Finance
as well as the International Centre for
Education in Islamic Finance (INCEIF)
to continuously develop new talent in
the industry. INCEIF offers programs for
practitioners and post-graduate studies.
Halim (2011) points out that Malaysia faces
the challenge of retaining and nurturing
the current Islamic finance talent pool in
the country, especially with many global
players pursuing Malaysian IF experts
who are eager to venture abroad in hopes
of new experiences and more generous
compensation packages, while not being
prepared for the cultural issues, language
barriers, and inadequate family support
systems (Thomson Reuters 2011).
As a step towards stopping the brain drain
crisis and in order to bring experienced
Malaysian personnel back home, Malaysia
has established the Talent Development
Corporation in 2011.
Moreover, Malaysia’s Prime Minister Mohd
Najib Abdul Razak has launched the
13 Asian Link
Economic Transformation Program the objective of which is
to transform Malaysia into a global leader for Islamic finance
education hubs. This sector is expected to contribute RM1.2
billion to gross national income and to create 4,300 related
jobs by 2020.
Malaysia has also initiated the Association for Islamic Finance
Advancement (AIFA), an accreditation body for Islamic finance
programs worldwide which was recently authorized by Bank
Negara Malaysia (BNM). The International Islamic University
of Malaysia (IIUM) is leading the AIFA initiative. AIFA aims to
develop a program that sets quality standards as well as the
practical relevance of Islamic finance education and related
fields. Its plans include collaboration with the USA-based
Association to Advance Collegiate Schools of Business (AACSB)
and other international accreditation bodies to help Malaysian
universities in developing curricula and quality measures.
Additionally, five standard Islamic finance textbooks are
planned by John Wiley the USA publishing company.
Recommendations to Help Offset the
Human Resources Bottleneck In the
Industry
The Islamic finance industry needs long-term strategic
plans that produce an appropriate pool of skilled talent to
maintain the sustainable long-term growth of Islamic finance.
IF institutions need to invest time and capital in designing
appropriate HR policies; unfortunately their main priority is
typically the meeting of profit targets.
Islamic financial institutions may also want to consider
the allocation of resources to launch graduate training
programs or at least partnering with academic institutions
for that purpose. Universities are well advised to consider
exerting more effort to develop placement services for their
IF graduates, at least with the same vigor that they show in
“dishing out” expensive IF degree programs and certifications.
If that does not happen soon enough, universities are likely
to experience a loss of interest from potential IF applicants.
Additionally, instead of focusing on pure IF specialization,
universities may want to develop dual degree programs which
emphasize IF and conventional courses equally, since some
parts of the world such as Hong Kong for instance, might
require less IF expertise.
As for IF graduates, Islamic finance expertise in one jurisdiction
is no longer sufficient to catch head-hunters’ attention,
graduates could differentiate themselves through seeking an
international experience and/or training.
Conclusion
Sami Al-Suwailem (2006) of the Islamic Development Bank
reminds us that Islamic finance is not only for Muslims, it is
for the entire humanity. Al-Suwailem adds that this presents a
Asian Link 14
serious challenge to Muslim economists, namely to successfully
deliver Allah’s message to humanity, and positively contribute
to world economic stability and prosperity. At a recent World
Bank conference, The Islamic Development Bank President Ali
noted that “the main message of Islamic finance, while ethical,
is also universal; at a time when world leaders are calling for
financial reforms, it is appropriate to have our financial systems
rebuilt on widely accepted ethical and moral bases to serve the
common good of humanity”(cited by Parker 2011a).
Now that Islamic finance has started making headway around
the globe, it would be a great shame to let this golden
opportunity slip away due to the short sightedness inherent
in Islamic financial institutions, governments and universities,
if they were to allow the shortage of human capital to be able
to change the course of the industry or slow it down!
References
Al-Suwailem, Sami(2006), “Hedging in Islamic Finance”, Jeddah,
150 p; ISBN: 9960-32-160-6.
Bin Ibrahim Muhammad (2010), “Evolving the Next Frontier Of
Islamic Finance Development Through Innovation” Speech
at the Mock Cheque Exchange Ceremony between
(INCEIF) and Bank Islam, Maybank Islamic and Affin Islamic,
Kuala Lumpur, 15 June, BIS Review 87/2010
Ghoul Wafica Ali(2008), “Shariah Scholars and Islamic Finance:
Towards A More Objective and Independent ShariahCompliance Certification of Islamic Financial Products”.
Review of Islamic Economics, Vol. 12, No. 2, page 87-104,
December, 2008, UK.
www.sbp.org.pk/library/ContentsJuly2009.pdf
Ghoul Wafica Ali(2012), “Islamic Finance in the GCC Region:
Human Capital Challenges and the Role of Universities”,
Presented at The 2012 Gulf Research Meeting, July 11– 14,
2012, University of Cambridge, United Kingdom
Halim Nazneen(2011), “The Talent Tussle”, Islamic Finance
News, October
Khnifer Mohammed (2010), “The Human Remains of Islamic
finance”, available at www.cpifinancial.net DECEMBER
2010 | Islamic Business & Finance 37, and www.ssrn.com
KPMG(2007), “Growth and Diversification in Islamic Finance”,
http://ribh.files.wordpress.com/2008/05/growth__
diversification_in_islamic_finance_reported_by_kpmg_.
pdf
Kuwait Finance House(KFH) Research Ltd. (2010)”Islamic
Finance Research”.
Parker Mushtak(2011a), “ World Bank Meet Fails To Address
Islamic Finance Role In Development”, Arab News, Oct 2
Parker Mushtak (2011b), “Madrid aims to become education
hub of Europe”, ARAB NEWS, Dec 12.
Thomson Reuters(2011), ‘Cross pollinating’ Islamic finance
in GCC, Malaysia”, available at http://alifarabia.
com/2011/11/30/cross-pollinating-islamic-finance-ingcc-malaysia/
Dr Wafica Ali Ghoul is a Professor of Finance at the
Lebanese International University.
By Dr David Bobker
HUMAN
CAPITAL
DEVELOPMENT
You Can Lead
a Horse to Water
There have been and will continue
to be buckets of ink spilt about “talent
development” and shortages of “human
capital”. Risk management is often singled
out as an important area where there will
be a growing requirement for competent
risk managers if Malaysia’s ambitious
economic development plans (particularly
in the financial sector) are to be realized.
Is JP Morgan Chase (JPM) short of risk
managers? One assumes not. Just as
the other hitherto blue chip institutions
which blew up in the crisis (AIG, UBS,
HBOS, Lehmans, Bear Stearns, RBS etc)
all had armies of rocket scientist, - PhD
risk managers. These disasters happened
because either the risk managers, following
standard practices, got their models wrong
or because the decision makers knew
It is easy to understand why there is a
focus on risk management. Even as this
is being written, once again one of the
world’s leading banking institutions has
hit the headlines for all the wrong reasons.
JP Morgan Chase’s shock and awe tactics
in the derivatives markets have resulted in
losses which were initially stated to be $2b
but soon sparked feverish speculation in
the blogosphere as to when they will hit
$5bn or $10bn or possibly even more. This
is a significant case because it is not a lone
“rogue trader” behind the disaster, but a
whole department.
better and ignored the risk managers’
advice. Either way, it seems clear that
lots of risk managers trained in standard
methodologies are not a complete solution
to the ongoing litany of disasters in the
banking industry.
Ultimately all the failures are primarily that
of the CEO either for poor strategy, poor
execution or, as it appears to be in the JPM
case, poor control. It was also very much
the board’s failure in each case for not
exercising their responsibility to supervise
the executive.
The episode has clearly dented the
reputation of JPM’s well-known CEO, Jamie
Dimon. But it is significant that Dimon
is both Chairman and CEO of JP Morgan
Chase. This contravenes the very first rule
of almost every corporate governance
code (except in the US) and is just plain
prohibited for banks in Malaysia. And for
good reason: an executive chairman has
far too much power which means there is
no effective check and balance on his or
her actions.
So what can we learn from this latest
episode? Actually not much more than
we should have learned from previous
40-50 episodes but apparently did not!
But just to spell it out one more time:
First, over-confident individuals with too
much power and influence over decision
making, without sufficient checks and
balances pose intolerable risk in a bank.
This particularly applies to “star” traders
and some CEOs. The only potential check
and balance on the CEO is the board of
15 Asian Link
directors, a responsibility it is generally reluctant
to assume, and is almost impossible if the CEO is
also chairman of the board.
Second, standard risk methodologies which
depend fundamentally on the continuation of
historic market patterns cannot be relied upon
to manage very large risks and in particular, many
economic capital models are fundamentally
flawed.
By this time the reader is doubtless wondering
what all this has to do with the development of
risk management talent in the financial sector. In
fact there is an underlying theme relating talent
development to the many episodes of company
failure, namely attitude and culture.
First, it is generally accepted that risk management
is primarily the responsibility of management
and the board, and only secondarily that of the
risk support functions (risk management, internal
audit, compliance, etc). Therefore, training
in risk management needs to be directed to
all senior managers and board members in
financial institutions, not just risk managers.
In terms of bang per buck, getting deeper
understanding of financial risk into the thinking
of top management will pay off far more than
concentrating solely on risk managers.
However, here we run up against the attitude
problem. Senior executive managers tend to
be highly business delivery focused. Anything
which diverts them from delivering results tends
to be sidelined, dismissed, or at the very least,
not embraced with enthusiasm. Because risk
management falls right into that category it is
difficult to get risk management messages across
to top management.
Asian Link 16
be general resistance. Any attempt to move
beyond the comfort zone and the day job is
met with “how will this help me do my work?”
Unfortunately this laudable focus on the job in
hand leaves neither room for thinking as well
as just doing, nor for self development. It also
misses the point that, as in JPM, just doing what
you have done before is not enough in risk
management. Unfortunately the incentives do
not appear to be there to go against the grain,
challenge conventional wisdom and, in short,
innovate. And effective risk management above
all requires an ability to think well outside the box
about things which may never have happened
before, such as the breakdown of long term
patterns and relationships or the emergence of
threatening new trends.
These issues are indicative of a general cultural
issue and seem to be common, to a greater
or lesser extent, globally. Management theory
is partly to blame, having brought about a
general belief that success invariably follows a
set formula of writing down clear objectives,
formulating strategy, getting buy-in and then,
almost robotically carrying out the plan while
monitoring performance and so on. For example,
it is common to hear at conferences on talent
development many managers bemoaning the
work un-readiness of new graduates as if the
work of a university is to produce ready-made
little robots who can be programmed to carry
out instructions and deliver his or her KPIs in the
most cost effective manner, thus achieving the
grand plan. The job of universities is primarily to
educate and above all to teach students to think
and to understand that most real life problems
do not have text book answers but require
the ability to analyse a problem in the round
considering it from all angles.
An experienced, senior loan or insurance
salesman, or a results-driven CEO is not usually
the sort of person that likes to dwell for too long,
if at all, on the potential disastrous consequences
of their actions. We have termed this condition
“risk blindness” and it is precisely those at the
top of an organization who seem to suffer most
from it.
We run across a similar negative attitude to selfdevelopment in those risk managers who say, “I
do not need to know any theory – the system
does everything”. In risk management this
attitude is more than a little scary and also makes
one want to ask “if the system does everything,
what are we paying you for?”
Second, a similar problem affects risk managers
themselves. Again being KPI and target driven,
when it comes to training there seems to
The truth is that to develop talent there needs
to be, above all, a willingness constantly to learn
and change and adapt. In other words, talent
Management theory is partly to blame, having brought about a general
belief that success invariably follows a set formula of writing down clear
objectives, formulating strategy, getting buy-in and then, almost robotically
carrying out the plan while monitoring performance and so on and so on.
development, especially in an area like
risk management, requires people with
the right attitude to be developed. It has
long been recognized that the learning
organization, one which innovates and
adapts quickly to changing conditions is
the one to succeed. But all this requires a
significant change in attitude from top to
bottom in many organizations.
How can this be brought about? As
in any type of change, until the need
for the change is accepted in a critical
mass of people, change will not occur.
Move towards change can be via push
or pull or a combination of both. Push
towards increased learning could come
from regulatory requirements for risk
certification both for senior managers in
financial services institutions and for risk
managers. We do not however see any
current moves towards that anywhere
even though it would have obvious
advantages.
Pull towards change would be to encourage
upward salary movement for certified
managers and fast track promotion paths.
This is essential incentivisation without
which learning more than the essentials
of a specific job, being more analytic and
broad thinking just does not in itself appear,
to be a sufficiently attractive proposition to
the majority.
Given that certification seems ultimately
to be one of the most effective ways of
achieving any significant movement, at the
Asian Institute of Finance we are currently
working on a certification programme for
risk managers, - designed to contain the
essential, common core elements. This
certification will be a suitable foundation
both for specialist risk managers (from
any industry) and, equally important, it
should be an attractive qualification for any
aspiring senior manager.
The intention will be to cover not only the
essential, core, elements of risk, but also
lay equal emphasis on enhancing strategic
and analytical thinking skills to ensure the
risk or the general manager of tomorrow
is much better equipped to succeed in a
world of ever more rapid change.
Dr David Bobker is Deputy Director of
Risk Management at the Asian Institute
of Finance and may be contacted on
[email protected]
17 Asian Link
Potential Risks
of
Competition Law
Infringement in
Mergers and
Acquisitions
in
Malaysia
By Dr. Haniff Ahamat & Norhisham Abd Bahrin
T
he Competition Act 2010 of Malaysia (CA 2010) is the first comprehensive competition policy in
Malaysia. CA 2010 which was passed in June 2010 and came into force on 1 January 2012 has put an
end to the piecemeal approach to competition regulation in Malaysia. As of this date, CA 2010 has
provisions regulating market behaviour by prohibiting anti-competitive agreement and abuse of dominant
position. However, CA 2010 does not specifically address market structure as it lacks clearly stipulated rules
controlling or prohibiting anti-competitive mergers and acquisitions.
To many, Malaysia does not need competition law that regulates market structure as yet. Economies that
have not really matured may need a legal regime that is conducive for firms and companies to consolidate
their market power in order to compete with foreign players on the level playing field. Some far more
developed jurisdictions like the EU took more than 20 years to introduce a merger control
regime. However, it is important to note that some neighbouring countries the likes
of Indonesia and Singapore have enforced merger control regulation. Thus,
prompting the question whether Malaysia is indeed actually lagging
behind in introducing its own merger control regulation. The
focus of this article is to see how far the application of CA
2010 affects the activity of mergers and acquisitions
in Malaysia. It is to be noted that the term
mergers and acquisitions are used in
their general parlance and not
intended to constitute their
technical meaning.
Asian Link 18
Mergers and Acquisitions in
Malaysia
There is no statutory definition of a takeover under the Companies Act 1965 or
the Capital Markets and Services Act 2007
(CMSA). However, Section 216 of the CMSA
defines a take-over offer to mean an offer
made to acquire all or part of the voting
shares or voting rights, or any class or
classes of voting shares or voting rights,
in a company. Since there is no statutory
concept of mergers in Malaysia, hence
merger activities typically involve an
acquisition of shares and business assets
and liabilities of companies.
Sections 216, 217, 218, 219, 220 and 221 of
the CMSA contain the provisions governing
takeovers, mergers and compulsory
acquisitions in Malaysia. Apart from these
provisions, takeovers and mergers are also
governed by provisions of the Malaysian
Code on Take-Overs and Mergers 2010, the
Listing Requirements of Bursa Malaysia (to
the extent that a listed entity in involved)
as well as the Equity Guidelines issued by
the Securities Commission (SC).
At the moment, Malaysia has no merger
control regulations and as a result, no premerger competition clearance is required
to be complied with. Although the CA
2010 has no provisions for merger control,
it does prohibit anti-competitive practices
and abuse of dominant market position.
Despite the absence of a comprehensive
regime in controlling mergers and
acquisitions, Malaysia has a number of
sectoral regulators (which include Bank
Negara Malaysia, Energy Commission,
the National Water Services Commission
and the Malaysian Communication
and Multimedia Commission) who are
responsible for issuing operating licenses
covering various industries including
banking and insurance, power, water and
telecommunications.
1
A takeover offer may therefore be subject
to prior approval from such a regulator.
For example, the approval of Bank Negara
Malaysia is required if a financial institution
changes its shareholding by 5% or more.
In the event a mandatory offer requires
the approval of a sectoral regulator, it then
becomes a requirement for the bidder to
procure all the necessary approval of such
sectoral regulators.
It is important to note that competition
regulation of mergers and acquisitions
is wider in scope than the regulation of
mergers and acquisitions by the SC. In
defining “concentration”,1 the EU Merger
Control Regulation (Regulations) stipulates
that a concentration arises when there
is a change of control on a lasting basis
resulting from:
(a) the merger of two or more previously
independent undertakings
(“enterprises” in Malaysia) or parts of
undertakings, or
(b) the acquisition of control of whole or
parts of an undertaking by person(s)
controlling another undertaking, or
by that other undertaking whether
by purchase of securities or assets, by
contract or by any other means.
The Regulation further provides that control
can be constituted by the ability to exercise
decisive influence on an undertaking via:
(a) ownership of or the right to use the
assets of an undertaking, or
(b) rights or contracts that give decisive
influence on the composition, voting
or decisions of the organs of an
undertaking.
This means the extent to which competition
law will be applied in relation to mergers
and acquisitions goes beyond the realms
of securities law which are concerned with
the creation of an independent company
Economies that have
not really matured may
need a legal regime
that is conducive for
firms and companies
to consolidate their
market power in order
to compete with foreign
players on the level
playing field
Concentration is the term used in the EU to mean both merger and acquisition.
19 Asian Link
(enterprise) out of the merger of smaller companies
or the carving out of a parent company’s division,
or with the purchase of one company by another
company (normally via transfer of shares).
Thus the purchase of assets of one company
by another company will have different impact
under securities law and competition law. While
such purchase does not invoke the regulatory
powers of the SC, it will be subject to legal scrutiny
in accordance with competition law. A similar
situation occurs in a joint venture (JV) between
two enterprises which does not result in the
establishment of an independent entity.
Since the current CA 2010 does not have merger
control provisions, this article will emphasise on
the risks of enterprises infringing CA 2010, by them
participating in a merger or acquisition. As said,
merger and acquisition here is broader in scope
than merger and acquisition regulated by the
Malaysian securities laws and regulations.
What are the Risks When Mergers
and Acquisitions Take Place?
It is important to note that the risks identified
above refer to the possible infringements by the
participants of a merger or acquisition of Chapter
1 and/or Chapter 2 CA 2010 that prohibits anticompetitive agreement and abuse of dominant
position respectively.
Parties to a merger or acquisition may risk
breaching the said provisions of CA 2010 in 2
ways: (1) they risk infringing CA 2010 before the
merger or acquisition is completed, and (2) they
incur liability upon the completion of the merger
or acquisition.
Before Merger or Acquisition is
Completed
Like other corporate transactions, the conduct
of merger and acquisition by the relevant parties
require them to go through a process by which a
potential buyer of a company, potential merging
companies, or potential parent company which
seeks to reduce its holding of a subsidiary, will
get pertinent information that will influence
the decision to proceed with the merger or
acquisition in question. The process is known as
due diligence.
Asian Link 20
Infringements of CA 2010 can be a valid
concern as one looks at the conduct of the
parties during due diligence. It is normal for the
parties to exchange the information that they
hold before reaching a deal. If the information
exchanged falls within the category of market
sensitive information, the exchanging parties
and other enterprises that have knowledge of
the information must be cautious as they may
get involved in anti-competitive agreement.
Parties involved in the due diligence process
may exchange documents such as purchase
orders, balance sheets etc. If these documents
contain “market sensitive information”, they
may be liable of information sharing. Market
sensitive information refers to information that
an enterprise will not, in the normal course of
business, share with its competitors and/or
business partners.
CA 2010 does not explicitly prohibit information
sharing but as stated in the Malaysian
Competition Commission’s (MyCC) Guidelines
on the Chapter 1 Prohibition (Guidelines),
the sharing of price information could fall
within the conduct that has the object of
significantly preventing, restricting or distorting
conduct includes but is not limited to:
(a) imposing unfair trading conditions on
suppliers or customers
(b) limiting production and market access
to the prejudice of consumers
(c) refusing to supply
(d) buying up a scarce supply of
intermediate goods or resources
required by a competitor without
reasonable commercial justification.
competition in the market. However not
all pricing information, if shared will result
in a prohibition. The risk of infringement is
high if the conduct involves the sharing
of current and future price information.
However, the risk of infringement in the
exchange of historic prices and other
historic information is likely to be low.
As regards non-price information, the
exchange of information concerning
future sales or output also has high risk of
infringing CA 2010, in particular Section 4.
The documents exchanged in a due
diligence exercise may contain price
and non-price information. Caution
must be exercised by the exchanging
parties if the documents indicate future
prices, sales, output and other market
sensitive information. Thus efforts must
be taken to ensure that only historic data
is exchanged. Nevertheless there is still
risk of infringement if the exchange of
the historic data still allows a competitor
to detect the strategy of an enterprise it
may not be genuinely historic making it
market sensitive.
After Merger or Acquisition
is Completed
Section 10 CA 2010 prohibits abuse
of dominant position. Based on this
prohibition an enterprise emerging from
merged enterprises or an enterprise
which has successfully acquired another
enterprise’s assets or shares, will incur extra
obligation under CA 2010 if it becomes
a dominant player in the market. The
obligation is that the enterprise should
not abuse its dominant position in the
market.
Merely being dominant in the market
is not prohibited. In the absence of
merger control regulations in Malaysia,
competition law scrutiny over a merger or
acquisition will not look at the legality of
the merger or acquisition per se, but will
consider the ex post effect of the merger
or acquisition. MyCC will not decide
whether or not a JV for example, is to
be cleared on competition law grounds.
Instead it will evaluate the conduct of the
parties to the JV in so far as they would
possibly engage in abusive conduct. As
enumerated in Section 10(2) CA 2010, the
Apart from abuse of dominant position,
parties to a merger or acquisition must
be aware that the merger or acquisition
can lead to a cartel. Cartel refers to an
agreement between competitors and
based on Section 4 CA 2010, it is per
se prohibited for having the object of
restricting competition in the market.
An acquisition may open a window of
opportunity to parties to know more
about each other’s market share, prices,
outputs etc. In case they acquire each
other’s subsidiary(ies), it is possible for the
acquisition to facilitate the sharing of the
markets held by both enterprises or the
reduction of output by either or both of the
enterprises. If this happens, the parties to
the acquisition may risk infringing Section 4
CA 2010 without MyCC having to establish
the deleterious effect of the acquisition on
competition in the market.
Conclusion
At present, Malaysian competition law has
no merger control regulations. However
this article has illustrated that the spillover effects of a merger or acquisition can
still trigger an action based on Chapter 1
(anti-competitive agreement) or Chapter 2
(abuse of dominant position) or both. Thus,
it is advisable for parties to such corporate
transactions to reform their practice to
minimise the risks of infringing CA 2010.
Dr Haniff Ahamat is an Assistant
Professor at the Ahmad Ibrahim
Ku l l i y ya h ( Fa c u l t y ) o f L aws,
International Islamic University
Malaysia (IIUM). Norhisham Abd
Bahrin is a Senior Associate 1 at Azmi
& Associates, Advocates & Solicitors,
Kuala Lumpur. Dr Haniff Ahamat can be
contacted at [email protected] and
Norhisham Abd Bahrin at norhisham@
azmilaw.com).
21 Asian Link
Customer
Satisfaction
Index
For Banks in Malaysia
By Dr Zamros Dzulkafli
T
Asian Link 22
he Asian Institute of Finance (AIF) had conducted
a Customer Satisfaction Survey, carried out in
August 2011. Feedbacks were obtained from
respondents from a total of 17 banks in the Klang
Valley area (12 local banks and 5 foreign banks). The
survey is designed to measure the level of customer
satisfaction of products and services provided by
the banks. Customer satisfaction is defined as the
degree of optimism and satisfaction of the services
provided by the financial institutions that customers
are expressing through their banking activities.
industry benchmarks from which financial institutions
can measure themselves against in terms of service
quality of their respective institutions and henceforth
identifying best practices that can help improve the
service quality of financial institutions. The survey
looks at six main features of customers’ level of
satisfaction related to their banking experiences. The
main features looked at ‘Bank Staff’, ‘Service Counter’,
‘ATM Service’, ‘Products and Services’, ‘Bank Image’ and
‘The Environment’.
Findings from the survey deliver valuable inputs for
AIF and the industry as they provide quantitative
measurements indicating customer ’s level of
confidence in the financial institutions, providing
Customer satisfaction in the banking industry has
always been an important issue. In the long run,
customer satisfaction has effects on customer
loyalty and overall profitability. It is also crucial as an
input for success in the very competitive business
environment within the banking industry. As the retail
banking industry goes through transformations and
changes, in addition to increased competitiveness,
studies in customer satisfaction, especially in gauging
satisfaction levels, are important for customer
retention. Furthermore, as the retail banking industry
involves frequent customer interactions, service quality
and customer satisfaction are instrumental in ensuring
enhanced customer satisfaction and consequently,
customer loyalty as well.
To achieve the aims, the survey conducted has the
following specific objectives :
a. To identify factors that influence customer
satisfaction in retail banking in Malaysia.
b. To assess the relative importance of these factors
on the overall satisfaction.
c. To determine the customer satisfaction index of
retail banking.
What is Customer Satisfaction
Customer satisfaction is the feeling or perceived
reaction followed by the attitude of a customer
towards a product or service after it has been utilised.
Most researchers agree that customer satisfaction
refers to an attitude or evaluation formed by a
customer comparing pre-purchase expectations of
what they would receive from the product or service
to their subjective perceptions of the performance
they actually did receive (Oliver, R. L. (1980) 1 and
Soderlund, (2006) 2). Past researchers have noted
that customer satisfaction serves as a link to critical
consumer behaviours, such as cross-buying of financial
services, positive word-of-mouth expressions, willingness
to pay a premium-price, and tendency to see one’s bank
as a ‘‘relationship’’ bank.
It is also a central element in customer loyalty, which
subsequently contributes to improving the financial
performance of a store, or a company. Customer
satisfaction has a positive impact on key corporate
outcomes, such as retention rates, average deposit
amounts, cost to the bank in providing services, and
future earnings. Some had also established the idea that
unsatisfactory customer service could lead to a drop in
customer satisfaction and willingness to recommend
the service to a friend. This would lead to an increase in
switching by customers to other banks.
The Survey
The study was conducted in two phases; focus group
discussions (as well as a pilot survey) and the actual
survey. Based on the feedbacks received from the pilot
survey, the survey questionnaire was revised to ensure
that the questions would truly reflect measurements of
customer satisfaction. A focus group discussion session
was held with participants representing several banks in
the country. Subsequently, the pilot test was performed
with data collected using mall intercept i.e. face to face
approach in several banks. The final revised questionnaire
was set in the English language, and consisted of
four sections comprising close-ended questions. The
customers were selected based on quota sampling
involving age, ethnic group and banks patronized.
Summary of the Questionnaire
Section
1
2
Items
Details
Section 1
Respondent Background
Details on respondent background
Section 2
Banking Information
Name of bank, type of bank, facilities and frequency of
using internet banking.
Section 3
Banking Experience
Ranking of customer satisfaction features and criteria
based on Likert scale of 1 to 5.
Section 4
Overall Satisfaction Level
Level of overall satisfaction of the banking service.
Oliver, R. L. (1980a), “A cognitive model of the antecedents and consequences of satisfaction decisions”, Journal of Marketing Research, vol. 17(November), pp. 460-469.
Soderlund, M. (2006), “Measuring customer loyalty with multi-item scales: a case for caution”, International Journal of Service Industry Management,
vol. 17, no. 1, pp. 76-98
23 Asian Link
The Customer Satisfaction Index
The Customers’ Satisfaction Index is computed based on
coefficients obtained from the regression of all six dimensions
on the ‘Overall Satisfaction’ level. The “Environment”, “Staff”
and “Image” are found to be the three most important
factors influencing overall customer satisfaction, followed
by “Counter” and “Products and Services” while ‘ATM’ services
was marked as being of least importance.
The industry Customers’ Satisfaction Index is estimated at
69.83% (100% being fully satisfied customers). Seven of the
17 banks are found to have performance index below the
industrial index with the highest and lowest being 73.21%
and 65.27% respectively. The range difference is about
8% which, for practical purposes may not be of much
significance. The calculated figure indicates that customers
are moderately satisfied with the products and services of
banks in Malaysia. In addition, customer satisfaction does not
correlate strongly with bank size. It seems that the smaller,
more specialised banks are able to satisfy the customers
better. Six of the smaller banks are placed in the top 10.
Takeaway for the Industry
The study has revealed exciting inputs, by investigating
factors which customers perceived as important to their
satisfaction level in dealing with banking services. Results
from the survey give valuable inputs for the industry in
strategizing their position to increase their service level and
be ready to face the competitive environment in attracting
customers. Our interest in this study focused on identifying
factors that influence customer satisfaction in retail banking
in Malaysia and developing the customer satisfaction index
of banking institutions in Malaysia which can be called as
the Malaysia Banking Customer Satisfaction Index (MBCSI).
Hence, based on the study, the most important results
include:
•
A total of 9 of 17 banks have their highest score for
‘Staff’, whereas 7 of the 17 banks have ‘Image’ as their
highest score.
•
The MBCSI is estimated at 69.83%, which can serve as
the industry benchmark. Seven of the 17 banks are
found to have performance index below the industrial
The Six Dimensions of Customer Satisfaction
1) Bank Staff
2) Service Counter
1. Level of banking knowledge and skills
1. Waiting time before you are served
2. Warm and friendly gestures
2. Operational hours of the bank
3. Appropriate solution and feedback to customer’s
problem or problems
3. Handling the banking transaction accurately
4. Respect to customers
4. Number of operating counters at any point of time
5. Understanding banking needs of customers
5. Overall online banking services
6. Delivery of services promised
6. Bank call-centre services
3) ATM Service
4) Products and Services
1. Safety of ATM location
1. Financing charges
2. Waiting time at ATMs
2. Variety of product offering
3. Availability of ATM machines
3. Hidden cost/fee
4. Conducting banking transactions through ATMs
4. Quality of products and services
5. Availability of cheque deposit machines
5. Customised products and services
6. Security transaction at ATM machine
5) Bank Image
6) Environment
1. Trustworthy bank
1. Location of the bank
2. Competent bank
2. Parking facilities
3. Financially sound bank (solvency, liquidity, quality of
assets)
3. Quality of promotional materials
4. Customer orientation
4. Information provided by the bank
5. Technology excellence
6. Appearance of the premises
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•
•
•
•
•
index with the highest and lowest being 73.21% and
65.27% respectively. The range difference is about 8%
which, for practical purposes may not be significant.
The domestic banks posted lower average score for
‘Products and Services’ and “Counter” as compared to the
foreign banks. These show that respondents are more
satisfied with products and services as well as counter
services offered by foreign banks.
“Staff”, “Image” and “Environment” were the three most
important factors used by banks’ customers to be
engaged with satisfaction. These factors are perceptual
and subjective, thus, banks need to make sure that
factors contributing to the build-up of these perceptual
images are taken care of.
“Image” and “Staff” are the top two dimensions that
received the highest score in terms of satisfaction by
customers. This bodes well with the efforts taken by
Bank Negara Malaysia in improving the image and
perception of customers on the banking industry in
Malaysia and the continuous enhancement in the
quality of talent in the industry.
‘Service Counter’ and ‘Products & Services’ received
the least score in terms of satisfaction by customers.
Customers are relatively less satisfied with the level
of services provided on items such as waiting time,
operational hours, transaction accuracy, online services
and call centre performance. There is also a need for
further improvements in areas involving financing
charges, products, information on possible hidden cost
or fees, quality of products and customised products
and services.
Even though the relatively more tangible aspects
(i.e. products / services offered and ATM services) are
not considered as of much significance, these factors
Banks Average Score Based on Dimensions
of Customer Satisfaction
Overall
Image
Staff
Environment
ATM
Product and
Services
All Banks
Domestic Banks
Counter
Foreign Banks
3.2
3.3
3.4
3.5
3.6
Score
are still important as they actually contribute to the
actual determination of the image perception by the
customers.
It is vital to understand that customer satisfaction is a
dynamic parameter of the well-being of the business
organisation. Therefore, changes in the current market
may affect customers’ preferences and expectations and
as a result, some satisfaction dimensions may become
more important in the near future if customers give more
importance to them such as in the case of usage of internet
banking.
Dr Zamros Dzulkafli is a Research Fellow at the Applied
Finance Research and Publication Centre at the Asian
Institute of Finance
25 Asian Link
By Joyce Nesamani Simson
The
Winner
Takes it
All
Really Now?
Discovering Talent
Lessons from the
Olympics
O
nce in every four years, the world comes
together to share in the excitement of a
sporting event that binds people in a spirit
of competitiveness, excellence and camaraderie. The
Olympic creed which appears on the scoreboard during
the Opening Ceremony of each Olympic reads, “The
most important thing in the Olympic Games is not to win
but to take part, just as the most important thing in life is
not the triumph but the struggle. The essential thing is not
to have conquered but to have fought well.”
In a greatly competitive world, we wonder whether the
Olympic motto of ‘Citius, Altius, Fortius’ (Swifter, Higher,
Stronger) still rings true not only in the sporting arena
but also in the larger walks of life. It should be noted
that the call is not be to be ‘swiftest, highest, strongest’
as the Olympic ideal encourages athletes to view
success in terms of effort and the constant striving for
improvement to achieve one’s personal best.
With the Olympics as a background, the world’s biggest
sports stage can indeed teach talent managers a great
deal of lessons that are not only applicable in the sports
arena but also in the corporate minefield. The business
battlefield is getting extremely competitive and talent
scarcity is the common buzzword in the corporate
Asian Link 26
scene as businesses acknowledge their
competitive advantage is derived by
a well-managed talent pool. As talent
becomes more mobile while brain drain
and brain gain can be seen as the twofaces of the same coin, talent managers
need to master the skills to choreograph
an environment conducive for talents to
thrive and grow. Employees too can be
regarded as athletes whereby without
continuous communication, coaching
and opportunity, talent cannot improve.
Set short, mid and
long term goals
Organising the Olympics is a huge project
which takes at least a decade of planning.
There are various elements that have to be
considered before a nation can bid for the
honour of hosting the Games. Much like
the Olympics, talent leaders must be able
to strategically plan and set short, mid
and long term goals for the organisation.
They must be able to visualise where the
organisation will be headed towards and
the talent needs of the organisation in
the future. Clear and compelling goals
certainly provide focus and direction for
the organisation.
It is often said ‘Failing to plan is planning
to fail’. Though this may seem like
an overused phrase, the truth of this
statement cannot be denied. Organising
the Olympics as well as preparing to
compete for the Olympics is a longterm goal. What we see during the two
weeks of action is a culmination of a
decade of planning and the success of the
actual event resounds from the detailed
planning and intensity of execution.
This certainly rings true in organisations
whereby the leaders must have clarity
of vision and detailed plan set in motion
to chart the organisation through the
turbulent business currents.
Constantly coach
employees to be on
the top of their game
Training is extremely important for a
world class athlete. Each athlete who
qualifies for the Olympics has to undergo
rigorous training to reach the world stage.
Talent managers must constantly coach
employees to be on the top of their
game. The business world certainly can
learn valuable lessons from the sporting
arena whereby coaching plays paramount
importance in enabling the athlete to push
his boundaries and perform extraordinary
feats.
Talent managers must view coaching as an
important organisation tool to build their
talent pool. Training and development
is needed to expand and polish the
employees’ capabilities. Training and
development enables the employees
to keep abreast with the competition
around them and develop their personal
capabilities. Coaching has to become
more than just a buzzword and needs to
be weaved into the organisation as a way
of life to produce talent who will be able
to perform beyond borders.
Communicate the
employees fit in the
bigger picture
Thousands of hands are involved in the
production process of any Olympic Games,
from planning staff to construction workers
and even volunteers. It has been reported
that his this year’s London Olympics will
include 70,000 volunteers who will work
8 million hours over the 17-day event. In
a corporate organisation, employees must
understand and appreciate how they fit in
the bigger picture. This will enable them
to view themselves as worthy contributors
towards the organisation’s goals and
mission.
Just like at the Olympics, not every
person is called to be an athlete or the
construction worker or the planner, yet no
role is less important or less worthy. Each
person is needed to make the Olympics
a success. In the same manner, each
employee brings his own strength and
capability into an organisation and the
organisation relies on this talent pool to
take it to the next sphere of success. The
talent managers must communicate the
distinct role each employee plays in the
organisation to enable the employees
to feel a sense of belonging towards the
organisation as well as contribute to its
success.
Tailor motivation needs to
the individual
At the Olympics, each athlete has a
different training agenda and dietary
requirement as required by the respective
sport they are involved in. The training
and dietary requirements for a swimmer
certainly differ from the requirements for
a gymnast. Though both compete for
the gold medal in their sport, the means
to achieve this goal is not the same. With
this, it will certainly be unwise to attempt
to use the same training methodologies
for both the swimmer and the gymnast.
In the same manner, talent managers
must be able to ascertain the strength
and motivation of their employees and
tailor the motivational needs to the
respective individual. The diversity of
today ’s workforce which constitute
various generations working together and
the blend of different personalities and
nationalities in the workplace creates a
unique challenge for the talent managers
to provide the relevant motivation for
their employees. Just as the right training
is vital in the athlete’s quest for gold, the
right motivation is vital for the employees’
quest for professional excellence.
Though much has changed since the
inception of the Games in Greece, the
spirit of sportsmanship still rings loud and
clear each time the nations gather for the
Games. The sight of our fellow human
beings accomplishing great physical
and mental feats can inspire nations
and individuals to strive for excellence.
Translating this analogy into the corporate
world, talent when managed at its best
can deliver world class results.
Joyce Nesamani Simson is a Manager,
Programme Development at the Asian
Institute of Finance.
27 Asian Link
By Fara Iza Abdul Rahim
International
Conference on
Financial Crime
and
Terrorism
Financing 2012
The
T
he Asian Institute of Finance (AIF), in
collaborations with the Compliance
Officer Networking Group (CONG)
and the Institute of Bankers Malaysia (IBBM),
has successfully organized the International
Conference on Financial Crime and Terrorism
Financing (IFCTF) 2012.
Held on September 24 and 25, 2012 at the
Shangri La Hotel Kuala Lumpur, the 4th edition
of the IFCTF saw a record number of 600
Asian Link 28
delegates from across the financial industry,
government bodies, policymakers, regulators
as well as foreign and local universities.
Themed “Compliance, Challenges and
Effectiveness: The Next Level”, the Conference
was a continuance from the previous
edition’s “Raising the Bar in Compliance and
Enforcement”. While the past 3 years had
emphasised more on awareness and creating
understanding, this year the conference
focused on measuring the effectiveness of our effort
and help prepare Malaysia for the assessment by
international bodies such as the World Bank, Asia Pacific
Group and the International Monetary Fund.
The event was officially graced by the Deputy Inspector
of Police, YBhg Tan Sri Khalid Abu Bakar. Tan Sri
Khalid had emphasized the need for enforcement
agencies such as the Royal Malaysia Police (PDRM) to
continuously keep abreast with new technologies. In
his speech, Tan Sri Khalid stressed that the police must
also keep pace with the latest financial crime tactics.
The Plenary Session which followed the Opening
Ceremony, had showcased several international experts
discussing on “risk-based assessment”, measuring the
“effectiveness of compliance”and corporate as vehicle
for money laundering.
Focus was also on the implementation of the new
guidelines by the Financial Action Task Force (FATF),
an international body to develop policies to combat
money laundering and terrorism financing. This is
eminent as on Feb 16, 2012, the FATF issued revised
guidelines to strengthen global safeguards and further
protect the integrity of the financial system. Four key
issues addressed by the guidelines were financing
of proliferation, corruption and politically exposed
persons, tax crimes and terrorist financing.
In summarising the 1st day of the Conference, Dato’
Latifah Merican Cheong, Advisor, Chairman’s Office,
Securities Commission Malaysia, had stressed the
importance of collaborations between authorities in
the region to tackle money laundering and financial
crime in order to boost investors’ confidence.
The IFCTF 2012 also addressed the frightening increasing
trend in cyber security issues as well as insurance fraud.
CONG Chairman who is also the Conference Chairman,
Encik Mad Yusof Yazid had said that the inclusion of
cyber security was due to the growing threat especially
of Internet scams in the country involving financial
institutions. This helps to increase awareness as well
as able to share the best practices from other parts of
the world in terms of managing and detecting fraud
and money laundering.
Supported by BNM, the 2-Day Conference featured
prominent speakers and personalities from around
the world, sharing their views and experiences. Over
40 speakers spoken at the 2-day Conference, including
from the U.S. Department of the Treasury, Federal Bureau
of Investigation (FBI), The Government of the Hong
Kong Special Administrative Region of the People’s
Republic of China, Austrac Australia, Royal Customs of
United Kingdom, Bank Negara Malaysia (BNM), Royal
Malaysian Customs, Security Commission, Malaysian
Anti-Corruption Commission as well representatives
from universities and notable compliance officers and
authorities from other parts of the world.
Overall, the Conference was a huge success and has
helped to enhance knowledge and capabilities of the
compliance officers in Malaysia and increased the level
of understanding as well as cooperation with other
parts of the world in our efforts to combat financial
crime and terrorism financing.
Fara Iza Abdul Rahim is a Manager at the Applied
Finance Research and Publication Centre, Asian
Institute of Finance.
29 Asian Link
Forum
Symposium 2011
4th International Conference on Financial
Crime and Terrorism Financing 2012
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31 Asian Link
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