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ANNUAL REPORT 2015

MANAGEMENT DISCUSSION & ANALYSIS

7.0. DEPLOYED RESOURCES

7.1. OPERATIONS

In 2015, the Bank continued to make progress in its transformation plan whose aim is to implement an operational model based on industrialisation and digitisation of business operations, with the core objective of enhancing customer experience and operations efficiency. To support this change process, the Bank launched, in March 2015, a bank-wide communication initiative called “Audi Upgrade” reaching to all stakeholders, branches and head office through the intranet and a periodical newsletter. Below is a list of achievements completed throughout 2015 in Lebanon under the umbrella of the “Audi Upgrade” initiative.

REACHING OUT TO CUSTOMERS

The Bank continued its channel expansion strategy to reach out to customers through the following:
  • Opening New Branches with an Innovative Model:two new branches – Neighbourhood and Lounge – were opened. These branches are designed to improve customer relationships and business development, and to improve servicing through an advanced self-service area.
  • Strengthening the Bank’s Electronic Services through the deployment of new electronic branches and the roll-out of Interactive Teller Machines enabling the customers to do all counter transactions through video banking and after hours.
  • Rebranding Branches: the Bank rebranded its branches’ exterior and interior architecture to provide a better customer experience and journey.

Our alternative delivery channel (ADC) offering is key for operational efficiency and customer satisfaction. During 2015, a large number of transactions shifted from counter to digital channels, surpassing the number of transactions at the counter for the first time.

IMPROVING PERFORMANCE

New Monthly Automated Incentive Model Linked to KPIs: following the successful roll-out of the improved performance management system in branches in 2014, the Bank continued this project in 2015 by providing the staff with a visibility on their monthly incentive, directly linked to individual and team KPIs. This model ties KPIs to the Bank’s strategy. KPIs and Collaboration Tools in the Head Office: the Bank rolled out KPIs and collaboration tools in back office departments, such as Consumer Lending and Central Operations. To enhance communication and performance, whiteboard performance meetings were introduced, boosting results through clear objectives, tactical plans and a continuous improvement culture.

Staff Relocation/Regrouping in Bab Idriss Head Office: to ease communication between head office employees and enable efficient collaboration, the Bank relocated the employees that were operating from Ashrafieh to a new building near Bank Audi Plaza, the M1 Building in Bab Idriss – downtown Beirut. Six floors were fully equipped to welcome the workforce, while providing room for growth.

DIGITISATION AND OPERATIONS EFFICIENCY

Technology transformation is a strategic priority for Bank Audi. During 2015, the Bank launched new technology projects to complement what was started 3 years ago.

Core Banking System: during 2015, the Bank launched a key project to deploy a new, state-of-the-art core banking solution that will enable it to improve its operations’ customer-centricity and reporting. This is a long-term project that will be deployed over the coming years. Business Process Management: to enhance turnaround time, process efficiency, and internal control and reporting through automation, the Bank launched a project to implement a business process management tool that will eventually cover most of the Bank processes. It also continued to work on the Document Management System (DMS) solution roll-out to cover all the Bank’s departments and move closer to a paperless environment.

Omni-channel: during 2015, the Bank initiated the development of a true Omni Channel Model through the inception of a set of new projects involving mobile banking and a contact centre that will facilitate customers’ relations with the Bank anytime and anywhere.

DATA ANALYTICS AND CUSTOMER-CENTRICITY

The Bank is still working on growing its data analytics capabilities, and tools were incorporated to provide customers with insight and control. In that line, several analytical models producing real time dashboards and views were developed and implemented in 2015, namely, a Customer 360 View dashboard, AML-enhanced Due Diligence analytical reports providing key highlights on customers in few seconds, Consumer Lending Risk and Fraud Monitoring improving risk lending criteria, and identifying early warning signs of possible fraudulent actions, in addition to enhanced capabilities and monitoring through real time dashboards at the level of central and group departments.

CUSTOMER CARE AND TRANSPARENCY

Transparency Initiative: in line with BDL’s initiative to promote transparency and fair treatment of customers, Bank Audi engaged in a multi-discipline project to align with the requirements set in the related circulars. A Transparency unit was created to promote and control transparency throughout the institution. Trainings for all front liners were provided to increase awareness and promote transparent dealing and suitability, as well as new processes (complaints handling, documentation, etc.).

Customer Satisfaction: in addition, “Happy or Not” machines are now installed in most of our branches, and the Bank continued engaging customers through phone surveys whose results showcase a 10% improvement year on year. These initiatives reflect Bank Audi’s commitment to continuously improve customer retention through the quality of service. As for the complaint management process, complaint boxes were placed in all branches, in addition to the online complaint channel. All complaints were followed up on and solved by Bank Audi.

INTERNAL CONTROL AND COMPLIANCE

Deployment of Compliance Officer: line with the request of the Central Bank of the Banking Control Commission to have dedicated compliance officers in each branch and to improve AML/CFT compliance control, the Bank deployed this function in every branch with a key objective to ensure its adherence to compliance requirements. Moreover, a Regional Compliance Manager function was created to monitor the work of compliance officers and of branches, with a focus on AML/CFT compliance and internal controls.

7.2. INFORMATION TECHNOLOGY

In 2015, Bank Audi’s IT continued the implementation of multiple transformational business projects across many of its affiliates.

In Lebanon, Phase 2 of the new Enterprise Resource Planning system went live, namely the Asset Liability Management System and Human Resources Management System, while work is still in progress on subsequent phases of this project, covering risk management and profitability management systems. Eventually, this system will be the central information control portal for the Bank, and will play an intrinsic role in the strategic business decision making process.

In addition, analysis, selection and high-level design have been completed – and the implementation work initiated – on several strategic projects: Core Banking replacement, new Omni-channel banking platform, new automated Business Process Management system, and a new Customer Relationship Management system. When operational, these systems will redefine the way the Bank produces and delivers state-of-the-art services to its customers.

In Egypt, a new online banking solution was made available to all the Bank’s customers, which allows for the serving of the customers efficiently by catering to the needs of the growing number of technology-aware customers through capabilities that significantly improve their online experience.

Furthermore, Bank Audi Egypt has joined other entities in using Murex for its trading activities and management of its Foreign Exchange position, liquidity and credit risk in real time. Phase 1 of this project, covering foreign exchange and money markets (with limit checks and credit risk management), went live in 2015; Phase 2 has been initiated and is expected to cover Capital Markets, securities, FX options and interest rate swap modules.

Work is also underway on replacing the Core Banking system and implementing a new Enterprise Resource Planning system covering financial management, central bank regulatory reporting, and asset and procurement management.

In all entities, new systems are being deployed while leveraging Bank Audi IT’s strategy of service-based architecture, with the Enterprise Service Bus being at the core of the environment, orchestrating and integrating the different components together.

From the technology side, Bank Audi’s IT is achieving additional milestones across several entities, in its strategic journey towards IT-as-a-service, whereby all components of the IT services stack – compute, networking, storage, security, data, and application logic – are provisioned, operated, and managed through software and automation, and delivered as a service. This will allow the Bank to provide fast, reliable and secure services to its customers, while driving IT costs down. Bank Audi has also adopted the latest software development methodologies (namely DevOps) that emphasise flexibility, agility and fast time-to-market, while ensuring quality and security. For that reason, a new IT organisational structure was put in place to ensure the support of the new method of producing and serving.

Lastly, Bank Audi IT has dedicated sizable efforts and resources in 2015 to research and develop the latest trends of technology, the future of banking, and the means to implement those findings in existing and potential new entities.

7.3. HUMAN RESOURCES

HR DEVELOPMENTS

The year 2015 can by far be described as the year of change since it marked the achievement of several milestones and projects related to organisational development, recruitment and selection, relationship management, and training and development.

Bank Audi has always been a pioneer in constantly exploring the newest trends on international markets and carefully selecting those that will drive the business into an even better future, setting high standards for other institutions in the banking sector to follow. The Bank’s profound interest in acquiring and implementing the latest technologies within its different operational levels has become a second nature. Technology is at the core of its various functions and the Human Resources (HR) department is not excluded.

Driven by the same spirit, the HR department took a big leap forward in the information and communication technologies and held its own in the overall Audi Upgrade culture: the Human Resources Management System (HRMS) was set for launching beginning 2016. The shift from previously used systems – PeopleSoft and Logos – to a one unified system was neither simple nor easy. Considerable effort was deployed from different parties involved in order to meet the set deadline.

The new system will transform the way HR and employees interact on a daily basis: as major component of e-Business Suite directly linked to the finance system, the adoption of HRMS aimed at ensuring greater efficiency in service delivery through the implementation of several modules. HRMS will lead the HR team and the business into a paperless environment and a new era where HR data has an immense and direct impact on the Bank’s systems.

A full-fledged supporting operation was set in motion to guarantee smooth and successful go-Live: (1) user manuals were developed; (2) a detailed launch campaign was planned in coordination with the Marketing and Communications team; and (3) introductory presentations were carefully prepared for both Senior Management and employees. HR processes and procedures were completely reengineered to incorporate the changes brought about by HRMS.

On another note, HR has always believed in the importance of revolutionising the selection methodologies used and offering both internal and external candidates a chance to grow within the Bank. For that, the ”Branch Management Program”, a selective developmental program providing qualified employees with equal opportunity to assume managerial positions within branches, was designed and launched to identify, train and develop future branch managers and assistant branch managers through exposure to an intensive learning environment.

Throughout 2015, the Recruitment and Selection (R&S) team was able to successfully hire over 280 new employees in Lebanon within the branch network and head office departments. Same as every year, R&S also participated in job fairs, locally and internationally, with the aim to connect with graduating students and attract potential talent for various positions.

In order to obtain a fresh view on the HR’s applied methodologies, the ”New Recruit Survey” and ”One-Year Employment Survey” were designed and launched. Results allowed the HR team to identify and tackle areas for improvement, notably in the on-boarding, training and employee relations fields.

Honoring Civic Role as one of Bank Audi’s core value and adhering to all that it entails, the Bank, through its HR team continued playing a role in its commitment to social and cultural environment by further developing the ”Student Internship Program” in the aim of offering selected interns the opportunity to learn within the assigned departments/branches, in addition to acquiring soft skills through weekly trainings offered at the head office. As such, 474 university students were able to live an internal banking experience during 2015.

Bank Audi’s perpetual dedication to its human capital can be sensed in its strong belief in offering employees diversified learning opportunities throughout their careers, which allow them to grow and move upwards and/or laterally within the organisation. This has set the Bank apart, time and time again, from its peers. In fact, investments – monetary and/or in working hours – continued to be hugely placed to ensure that the Bank’s employees remain up-to-date with global market trends related to their fields, while developing their soft skills.

As such, Bank Audi delivered over 115,000 training hours and 280,000 on-the-job training hours during 2015. These aimed at upgrading the human capital’s technical and behavioural skills for enhanced individual and organisational performance, benefiting both new recruits and existing employees.

Training activities were mainly centered on academy courses, as well as managerial and behavioural trainings:

market risk management

Within the context of the Training Academy, more than 230 sessions covering specialised technical/behavioural courses were offered to approximately 950 registered employees, allowing them to advance in their careers.

Moreover, the Risk Training Program under the Risk Academy offered over 250 head office employees the opportunity to participate in a series of internal courses aimed at strengthening awareness of risk management, fostering the Bank’s risk culture, and providing a common and consistent learning approach to risk issues.

As a result of the strategic partnership created with the American University of Beirut, the first cohort of 20 participants graduated from the ”Advanced Management Program” (AMP). The program, also initiated during 2015, saw a group of potential participants go through an intensive assessment program with the aim to select the second cohort of employees.

With compliance being an important subject that the Bank is constantly foscusing on, it is worth mentioning that, in addition to the regular compliance trainings delivered to employees, the Compliance Forum was created and attended by Top and Senior Management, and brought together 140 branch managers, assistant branch managers, regional managers, as well as concered head office Managers, to raise awareness on compliance issues, locally and regionally. Bank Audi’s prominent figures gave some opening remarks and interactions to draw the audience’s attention on the importance of compliance at the Bank, depicting the many risks and drawbacks of non-compliance.

Moreover, Group Risk Management and Group Finance teams conducted a joint offsite in Turkey to which all heads of countries and of departments were invited to discuss various in common strategic projects, with the objective to draw a roadmap for the year ahead.

Supporting and encouraging employees’ continuous education remains a high priority for the Bank. In the year 2015, Bank Audi sponsored over 50 employees to further pursue their education in both local top-tiered universities and international ones such as Harvard Business School, INSEAD, IMD Business School, Instituto Empresa in Spain, and SOAS University of London.

In addition, “Enrich” sessions were re-launched and employee wellness schemes were enhanced to tap into new areas, aiming at relieving employees from work-related stress and encouraging them to maintain a good work-life balance. The Bank’s leisure clubs continued to promote a variety of activities covering different employee interests.

The year 2015 brought change and transformation at the Bank’s operational level as well. The branch network was revamped and 7 additional regional managers were appointed. This led the way for an optimised provision of service to clients, while opening development and growth opportunities for employees.

As part of the Bank’s commitment to transparency and removing subjectivity from the incentive scheme, while taking into consideration sound and effective risk management, a new branch incentive model was designed. Variable compensation became directly linked to the branch’s carefully identified financial and qualitative key performance indicators, as well as to individual targets defined for branch employees. The new incentive model is calculated and viewed by employees on a monthly basis.

The Relationship Management team continued to provide support to stakeholders in branches and head office departments through field visits and follow-ups. A total of 300 promotions and 500 transfers took place throughout 2015.

As part of HR’s belief in transparent communication, the HR team continued delivering “Ask your HR” sessions to network and branch managers, for the second consecutive year, with the aim to listen to branch employees’ concerns while discussing the latest HR goals and current projects, and assessing solutions, exploring needs and disclosing future action plans.

In addition, throughout the year 2015, HR kept on providing the needed support and assistance in the implementation of the New Branch Operating Model project within branches in different regions.

Since the Bank fully recognises the importance of constantly being prepared, 2015 was characterised by the design of the Bank’s Succession Planning Process and Model (SP) which was successfully implemented on a list of identified key positions. The objectives of SP are to: (1) plan strategically for the future; (2) identify risk ke positions where no immediate or potential successors exist; (3) increase the availability of experienced and capable employees; (4) have in place contingencies that will help the Bank stay afloat if, in fact, immediate vacancies in key positions occur; and (5) comply with local regulations.

The Bank’s human capital remains the focal point around which the Human Resources department evolves with the aim to continuously offer the latest services for a better working experience.