RI-based firms teach valuable lessons on crisis management<\/p>\n
Endy Bayuni, The Jakarta Post, Jakarta<\/p>\n
What do Ramayana Lestari Sentosa, Bank Central Asia (BCA),
\nCitibank in Indonesia, and Astra International have in common?<\/p>\n
They all provide valuable lessons in managing a company in
\ntimes of financial crisis, lessons that have found practical
\nusefulness for companies in Japan, Germany and as far away as
\nArgentina.<\/p>\n
Dominic Barton, one of the three authors of the newly launched
\nbook Dangerous Markets -- Managing in Financial Crisis (2002,
\nJohn Wiley & Sons Inc.), said these companies had succeeded in
\nweathering the 1997-98 financial crisis -- some have even thrived
\n-- and that they gave some useful tips for companies in other
\ncountries now facing similar problems.<\/p>\n
\"We actually learned some very good lessons from Indonesia,\"
\nBarton, director of McKinsey & Company's South Korea office, told
\nThe Jakarta Post on Thursday shortly after holding a discussion
\non the book organized by the Harvard Club of Indonesia.<\/p>\n
\"Argentineans are particularly interested in what the
\nIndonesians did, or did not do,\" he said.<\/p>\n
Dangerous Markets, which Barton co-wrote with fellow McKinsey'
\nsenior staffers Roberto Newell and Gregory Wilson, was
\nsimultaneously launched on Thursday in Jakarta and in Buenos
\nAires.<\/p>\n
Why Jakarta?<\/p>\n
\"We actually have quite a few good Indonesian examples that
\nwe're using. So it's emotional from a personal point of view,\"
\nBarton, a Canadian national, said.<\/p>\n
Ramayana was mentioned in the book repeatedly as a model of
\nhow the giant Indonesian retailer thrived during the crisis.<\/p>\n
The publicly listed company saw its sales grow by 15 percent
\nbetween 1997 and 1998, from Rp 1.13 trillion to Rp 1.30 trillion.
\nAlthough its margin as a percentage of sales dropped, from 28.8
\nto 25.9 percent, the figure still represented a very healthy sum.<\/p>\n
Barton said Japanese banks would be interested to know how BCA
\nwas able to deal with deposit runs, while Astra, the automotive
\nconglomerate, gave a glimpse of how it handled its creditors when
\nit had the big crunch.<\/p>\n
Citibank did not run away from the crisis, he said, noting
\nthat, instead, it expanded operations in Indonesia, setting up 61
\nmini-branches in four cities and saw its deposit accounts
\nincrease 300 percent between 1998 and 2000.<\/p>\n
The authors in Dangerous Markets cite five boundary conditions
\nthat are changing in times of crisis, and that some companies saw
\nstrategic opportunities in these changes.<\/p>\n
The five \"degrees of freedom\" in volatility are:<\/p>\n
* Regulatory regime<\/p>\n
* Competitive landscape<\/p>\n
* Customer behavior<\/p>\n
* Organizational capacity for change<\/p>\n
* Social values<\/p>\n
It is the ability of the managers to grasp the impact of these
\nchanges, prompted by the crisis, and then turn them into
\nopportunities that led to the many success stories of companies
\nhighlighted in the book.<\/p>\n
Besides Ramayana, other companies prominently featured in the
\nbook include:<\/p>\n
* Korea's Housing and Commercial Bank, which turned from a
\nmedium-sized government controlled bank into one with a market
\ncapitalization of US$ 7.1 billion after its merger with Kookmin
\nBank.<\/p>\n
* Roust, Russia's vodka distributor, which has become a
\nholding company that includes a major bank built from scratch.<\/p>\n
To those who feel that they may have already missed the boat,
\nBarton said the volatility would continue in the coming years,
\nalthough the crisis would not be as bad the one that struck Asia
\nfour or five years ago.<\/p>\n
\"Regulations are still not fixed because of volatility. We see
\na lot of opportunities in Korea because of that,\" he said.<\/p>\n
He put Singapore at the top of the list of countries that are
\naggressively changing the regulatory regime that has created the
\nopportunities for business, underlining the fact that the
\nfinancial services were now driven by the private sector.<\/p>\n
Korea was also shifting its regulatory approach, and came a
\nclose second, while Japan and China are also at the top.<\/p>\n
What about Indonesia?<\/p>\n
\"Indonesia is actually doing something, but the perception
\nfrom outside is that it is not as programmatic or coordinated,\"
\nBarton said.<\/p>\n
He compared it with Korea's approach in restructuring the
\nbanking sector, where it announced its targets about how many
\nbanks would emerge out of the process, and then set out to
\nachieve that goal.<\/p>\n
Barton believes that opportunities are plentiful in Indonesia
\nin spite of concerns about terrorism and the country's political
\nstability.<\/p>\n
He equated risk, or rather perceived risks, with
\nopportunities.<\/p>\n
\"There is a big opportunity for Indonesia. CNN may have you
\nthink that there's a bunch of terrorist cells. I don't think
\nthat's true. There's a vibrant Muslim population, but that's
\nfine.<\/p>\n
\"If I look at Indonesia as a private equity opportunity with a
\nfive-to-seven-year time frame, I think there's a good
\nopportunity. I would put my money where my mouth is.\"<\/p>\n
He said Indonesia's fundamentals remained quite good, given
\nthe huge size of the economy, the presence of a strong business
\ncommunity and spending consumers, and its natural resources.<\/p>\n
\"If you look at it that way, and hold a longer horizon, there
\nare opportunities, especially when a lot of other people are
\nrunning the other way,\" he said, adding that he also believed
\nthat Argentina was another country with a lot of opportunities.<\/p>\n
Barton admitted that not all companies who recognized the
\nstrategic opportunities and took the risk have succeeded, while
\nothers did not have the means to tap on the opportunities.<\/p>\n
A strong cash flow position and a healthy debt structure would
\ncertainly help, but if not, having access to private equities
\ncould offer an alternative.<\/p>\n
The most important point perhaps is having a visionary CEO who
\nis courageous to take the necessary risks, he said.<\/p>\n
At a time when CEOs in America are getting a lot of bad press,
\nBarton said he found his CEO role models here in Asia.<\/p>\n
He named in particular Kim Jung-tae, the man who turned
\nHousing and Commercial Bank into the new and bigger Kookmin Bank.<\/p>\n
\"The Kookmin Bank CEO is very modest, just a good humble
\nbusinessman, not a guy with some big yacht.\"<\/p>",
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