RI-based firms teach valuable lessons on crisis management
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."