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