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Management discussion and analysis

Operational excellence

Enhancing operational efficiencies for better productivity and customer service

In 2023, the Bank continued to navigate the dynamic landscape shaped by the unprecedented challenges of the previous years. The lessons learned from the disruptions over 2020-22 prompted the Bank to further strengthen its adaptability and operational resilience. The cultural shift towards remote work and technology-enabled operations, catalysed by the global impact of COVID-19, remained a focal point. Embracing the evolving paradigm, the Bank continued to prioritise virtual collaboration, flexible work hours and net productivity models. Recognising the necessity of breaking away from traditional approaches, the institution diligently implemented readymade, time-tested systems. This strategic shift enabled the Bank to proactively address emerging threats and solidify its position as a fast learner in the continually evolving landscape defined by the “new normal” of the post pandemic era.

The notion that learning requires unlearning implies a willingness to embrace change, allowing it to foster a range of new developments. These transformations encompass reduced face-to-face interactions, a proliferation of digital communication apps and software and a gradual shift toward nurturing a remote workforce, altering the traditional dynamics of work and business.

In the past year, the Bank demonstrated notable progress in adapting to the evolving paradigms triggered by the pandemic. Fueled by integrated thinking, the institution implemented customised insights and forward-thinking designs, propelling it toward new milestones and maintaining control over both foreseeable and distant futures.

Functioning as a finely tuned financial engine, the Bank ensured seamless coordination among its functional divisions, fostering synergies that contributed to value creation. Looking ahead to 2024 and beyond, the banking operations aspire to uphold the same ethos, aiming to ascend to greater heights through a dual strategy of leveraging strengths and maintaining agility to navigate the intricate operating landscape. The Bank is gradually executing a systematic digitalisation strategy to streamline and automate work processes with the objective of widening the scope of its commitment to a paperless operational environment.

The numerous awards and accolades garnered by the Bank bears testament to the strength, innovation and resilience of the Bank. Please refer the list of awards on Awards and accolades.

Key productivity and efficiency ratios depicting operational excellence are given below:

Productivity and efficiency ratios

Table - 14
2023 2022 2021 2020 2019
Cost to income ratio (Including taxes on financial services) (%) 40.31 29.22 37.97 39.96 49.41
Cost to Income ratio (Excluding taxes on financial services) (%) 36.11 26.29 31.61 33.95 38.51
Revenue per employee (Rs. Mn.) 64.559 53.787 31.720 29.605 29.377
Profit per branch (Rs. Mn.) 70.313 79.480 82.251 57.050 59.320
Profit per employee (Rs. Mn.) 3.934 4.485 4.654 3.238 3.363

A transformed working environment

In 2023, the Bank underwent strategic transformation in the realms of financial intermediation and maturity transformation, aiming to ensure seamless service delivery to stakeholders through the adoption of the Business Continuity Management (BCM) framework. Throughout this process, the Bank maintained a steadfast focus on prioritising its human resources, delivering exceptional services to customers and safeguarding the health and well-being of its employees. Additionally, the Bank remained committed to meeting regulatory obligations and upholding principles of good governance at all times.

The key principles of the BCM include,

  • Support the Bank’s core banking systems and assuring that all mechanisms and processes are marshalled by the Bank’s guiding principles to ensure service continuity.
  • Ensure availability of the systemically important payments and securities settlement systems by meeting the predefined service levels after a disruption.
  • Minimise the financial, legal and other operational risk associated with disruption of operations or failures.
  • Protect human life and ensure minimal exposure to hazards and dangers within the Bank’s ecosystem.
  • Safeguard the Bank’s image and reputation.
  • Minimise the impact of disruption and ensure that maximum resources were streamlined to resume normal operations by implementing effective incident and crisis management and business continuity.

Risk aversion and management

The Bank maintained effective management of its risk appetite and tolerance, particularly amidst the challenges confronting the banking sector. Emphasis persisted on preserving the loan book’s quality, handling interest rates and liquidity and enhancing compliance to minimise reputational risks.

The incorporation of risk-control self-assessment exercises, regular evaluations of risk management processes and tools and scrutiny of Key Risk Indicators (KRIs) became ingrained in the Bank’s culture. Pragmatic adherence to relevant laws, regulatory guidelines and internal controls across all business operations underscored the Bank’s adept risk management. Critical risk domains encompassed credit, operational, market, liquidity, IT and other factors that could adversely impact the Bank’s sustained growth, influencing both governance and operations.

In 2024, the Bank is poised for prudent, cohesive and sustained growth while strategically leveraging key risks to enhance confidence. A crucial aspect of this approach involves managing emerging risks, including model risk, conduct risk, bribery risk, among others, to foster sustainable value creation for its stakeholders.

The transformation of the banking model

The banking industry is undergoing a significant transformation marked by heightened competition from expanding utility companies and emerging Fintechs, the transformative impact of blockchain and cryptocurrencies facilitated by digitisation and increasing regulatory and compliance pressures. Additionally, banks are entering a new era where they must proactively manage risk exposures without historical precedent, with a limited timeframe to adapt to emerging scenarios.

Technology is reshaping the landscape of the banking sector, necessitating a surge in digital products. This shift demands an enhancement of digital literacy, both externally for customer interfaces and internally for employees who need to excel in tailored systems. In response to the challenges posed by the COVID-19 pandemic, the Bank undertook a thorough review and revision of disaster recovery plans. This process considered the impact of the pandemic-related issues such as long COVID and co-morbidities on employee health and productivity.

Allocating resources to manage diverse risks and cultivating a positive risk culture throughout the Bank remained a top priority. This approach was championed from the highest levels, with the Board of Directors, the Board Integrated Risk Management Committee and the Corporate Management leading by example. Efforts included leveraging Early Warning Systems (EWS) with a heightened focus on real-time data and machine learning models, as well as gradually bolstering Foreign Currency Reserves to previous levels of strength.