Sustaining success and staying primed for the future requires shaping the Bank’s strategy for growth today, adapting to change, identifying opportunities in challenges, and seizing the opportunities that change itself may present. In a rapidly changing environment, where unprecedented technological, social, and environmental upheavals present new risks and new opportunities, the wealth of intellect the Bank has built over a century plays a pivotal role in formulating a strategy primed for the future. A strategy that continues to deliver value to all our stakeholders and, in turn, derive value from them.
In formulating a strategy fit for the time, the Bank analysed its external environment to identify matters arising from emerging trends and their relevance to key stakeholder groups, as given below:
Analysis of Commercial Bank’s external environment
Figure – 06
| Political | Economic | Social | Technological | Environmental | Legal/Regulatory | |
Investors
|
1 Instability and lack of policy consistency | 2Economic slowdown | 3Growing influence of social media | 4Unorthodox competition and financial disintermediation | 5Implementation of SLFRS 16 – Leases | |
| 6Directed lending | 7Depreciating currencies against USD | 8Demand for non-financial information and long termism | 9Basel III compliance requirements | |||
| 10Negative rating outlook for sector | 11Demand for more transparency and accountability | 12Higher regulatory capital | ||||
| 13High CAPEX requirements | 14New Banking Act | |||||
| 15New tax reforms | 16Pending Basel IV compliance requirements | |||||
Customers
|
17Envisaged upturn in private sector credit and improvement in asset quality | 18Changing customer expectations | 19New technological advances such as AI, Robotics and Blockchain | 20Compliance requirements and regulations such as Foreign Account Tax Compliance Act (FATCA), General Data Protection Regulation (GDPR), and Base Erosion and Profit Shifting (BEPS). | ||
| 21Import restrictions | 22Cybersecurity threats | |||||
Employees
|
23Need to enhance productivity | 24Staff recruitment and retention becoming more challenging | 25Technology driving change in job skills | |||
Society and environment
|
26Geopolitical conflicts | 27Declining worker remittances | 28Need to commit to Sustainable Development Goals (SDGs) | 29Increasing frequency and magnitude of natural disasters and poor disaster preparedness | ||
| 30Increasing levels of corruption | 31Sri Lanka’s global competitiveness declining | 32Increasing conflicts | 33Increasing demand for green banking and green lending | |||
| 34Increasing drug pedaling and drug and alcohol addiction | 35Viral outbreaks hampering world trade and economy | |||||
| 36Infrastructure out of sync with development needs | ||||||
Business partners
|
37A more collaborative approach |
These emerging trends presents risks, opportunities or both and their impact is felt by the stakeholders and the Bank alike on varying degrees. The topics that stem from these trends and are material to the Bank according to their impact on stakeholders and the Bank itself are portrayed in the matrices that follow. For the purpose of this study, the Bank defined material matters as those that significantly affect the Bank’s ability to create value over the short, medium and long term. Materiality of each matter is determined by its relevance, the magnitude of its impact, and the probability of occurrence.
Following this study, the Bank formulated strategies necessary to seize opportunities, mitigate risks and continue its value creation journey under the four strategic imperatives as outlined in the section on Management Discussion and Analysis. These strategies were then embedded in the Corporate Plan for execution by the Management together with underlying KPIs for measuring successful achievement.
Management approach
The Bank manages its material topics through its strategic planning process by assigning responsibility to the heads of the relevant divisions of the Bank, allocating necessary resources based on the significance of each material topic towards achieving the aforesaid strategic imperatives. Goals and targets, where relevant are embedded into the KPIs of the Key Management Personnel to ensure that the organisation achieves its objectives with regard to its material topics and are reviewed at regular intervals.
Many policies are in place guiding its people to conduct activities in a responsible, transparent, and ethical manner in managing the material topics. These policies are duly approved by the Board of Directors and are reviewed at predetermined intervals to stay current with the changing environment.
Where relevant grievance mechanisms are in place with assigned responsibility to the relevant divisional heads to manage, address and resolve grievances.
Screening is carried out into the social and environmental aspects of the Bank’s lending to its customers and dealings with its business partners.
Internal and external auditing and verifications are carried out to ensure that the internal controls, policies and procedures laid down to achieve the objectives of material topics are adhered to. Findings are reported to the Board of Directors and/or to the Management Committees on a regular basis for corrective action where necessary.
External ratings and awards and accolades bear testimony to the success of the Bank’s approach in managing its affairs.
While majority of material matters affect the Bank's economic performance (GRI 201: Economic Performance) following are matters identified by the Bank as material and are discussed within this report. Where relevant GRI disclosures are mapped to the material matter as given below:
Material matters
Table – 05
| Materiality topic | GRI Disclosure | |
| 1 | Instability and lack of policy consistency | GRI 201: Economic Performance |
| 2 | Economic slowdown | |
| 4 |
Unorthodox competition and financial disintermediation |
|
| 6 | Directed lending | |
| 10 | Negative rating outlook for sector | |
| 12 | Higher regulatory capital | |
| 15 | New tax reforms | |
| 17 | Envisaged upturn in private sector credit and improvement in asset quality | |
| 18 | Changing customer expectations | |
| 19 |
New technological advances such as AI, Robotics, blockchain |
|
| 22 | Cyber security threats | GRI 418: Customer Privacy |
| 23 | Need to enhance productivity | GRI 404: Training and Education |
| GRI 405: Diversity and Equal Opportunity | ||
| 24 | Staff recruitment and retention becoming more challenging | GRI 401: Employment |
| 25 | Technology driving change in job skills | GRI 404: Training and Education |
| GRI 405: Diversity and Equal Opportunity | ||
| 28 | Need to commit to Sustainable Development Goals (SDGs) | |
| 29 | Increasing frequency and magnitude of natural disasters and poor disaster preparedness | GRI 302: Energy |
| GRI 305: Emissions | ||
| 33 | Increasing demand for green banking and green lending | |
| 36 | Infrastructure out of sync with development needs | GRI 203: Indirect Economic Impact |
| 37 | A more collaborative approach |