Across the Pacific Ocean
 - Building an Enterprise-wide Strategic Platform -




             November 5, 2008

       Uni...
Agenda
Company Profile

Brief History of BSC at BTMU / UBOC

Evolution of Strategic Platform:

1) Enterprise-wide Risk Man...
MUFG Profile
                        Mitsubishi UFJ Financial Group


Bank of Tokyo-Mitsubishi UFJ   Mitsubishi UFJ Trust ...
BTMU & UBOC Profile
                                           <Total Assets JPY192.9 Trillion>

                         ...
MUFG Global Network
 Domestic Branch Network                                    Overseas Branch Network


                ...
Brief History of BSC at BTMU / UBOC
  BTMU Americas (NY)               BTMU Global (Tokyo)                      UBOC (SF)
...
Across the Pacific Ocean

                                               HQA (NY) to BTMU
                                ...
Cross Cultural Context - Culture Matters
Japanese Companies                                                    American Co...
Strategy Execution Platform at Glance

【Customer Value Proposition】                                                   【Cor...
COSO   Six Sigma   CSR




Integrating Risk Management with BSC


    Public’s Trust & Confidence                         ...
COSO   Six Sigma   CSR




COSO ERM-Inspired BSC Evolution

COSO ERM Framework     Committee of Sponsoring Organizations o...
COSO   Six Sigma   CSR




    COSO ERM-Inspired BSC Evolution
Strategy-Risk Management Double Loop                       ...
COSO   Six Sigma   CSR




     COSO ERM-Inspired BSC Evolution
(1) BSC: Objective Setting                            (2) ...
COSO     Six Sigma   CSR




     COSO ERM-Inspired BSC Evolution
        Performance Driver                              ...
COSO      Six Sigma   CSR




COSO ERM-Inspired BSC Evolution
                Board
                                      ...
COSO     Six Sigma     CSR




       Strategy Execution Platform at Glance

【Customer Value Proposition】                 ...
COSO   Six Sigma   CSR




Performance = Mindset x Execution Skill
                                                       ...
COSO    Six Sigma   CSR




BSC-Six Sigma Integration Benchmarking

   Management Philosophy
                             ...
COSO   Six Sigma   CSR




BSC-Six Sigma Integration Benchmarking
               JQA                        BSC           ...
COSO     Six Sigma   CSR




    BSC-Six Sigma Integration Concept
                       Market Segmentation / Customer-B...
COSO     Six Sigma     CSR




       Deepen Customer Understanding
                         Customer Satisfaction Level
 ...
COSO                    Six Sigma                                             CSR




            Translate VoCs to Metric...
Bsc North American Summit 2008 Tak Nagumo
Bsc North American Summit 2008 Tak Nagumo
Bsc North American Summit 2008 Tak Nagumo
Bsc North American Summit 2008 Tak Nagumo
Bsc North American Summit 2008 Tak Nagumo
Bsc North American Summit 2008 Tak Nagumo
Bsc North American Summit 2008 Tak Nagumo
Bsc North American Summit 2008 Tak Nagumo
Bsc North American Summit 2008 Tak Nagumo
Bsc North American Summit 2008 Tak Nagumo
Bsc North American Summit 2008 Tak Nagumo
Bsc North American Summit 2008 Tak Nagumo
Bsc North American Summit 2008 Tak Nagumo
Bsc North American Summit 2008 Tak Nagumo
Bsc North American Summit 2008 Tak Nagumo
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Bsc North American Summit 2008 Tak Nagumo

  1. 1. Across the Pacific Ocean - Building an Enterprise-wide Strategic Platform - November 5, 2008 Union Bank of California The Bank of Tokyo-Mitsubishi UFJ Takehiko Nagumo
  2. 2. Agenda Company Profile Brief History of BSC at BTMU / UBOC Evolution of Strategic Platform: 1) Enterprise-wide Risk Management – COSO 2) Customer-Centric Strategy Execution – Six Sigma 3) Management Philosophy – CSR Conclusion – BSC as Learning Dynamics 2
  3. 3. MUFG Profile Mitsubishi UFJ Financial Group Bank of Tokyo-Mitsubishi UFJ Mitsubishi UFJ Trust Bank Mitsubishi UFJ Securities Mitsubishi UFJ Mitsubishi UFJ NICOS Lease & Finance MUFG is a fully-fledged comprehensive financial group owning the commercial bank, the trust bank, the securities company, top-class credit card, consumer finance, asset management, leasing, and other companies, as well as a U.S. bank (UBOC). To Be a Premier, Comprehensive, Global Financial Group 3
  4. 4. BTMU & UBOC Profile <Total Assets JPY192.9 Trillion> Mitsubishi UFJ Financial Group 100%(inc. shares held by MUTB) 100% 100% Bank of Tokyo-Mitsubishi UFJ Mitsubishi UFJ Trust Bank Mitsubishi UFJ Securities Total Assets: No. 1 in Japan Trust Assets: No. 1 in Japan Customer Assets: No. 4 in Japan UnionBanCal Corporation Union Bank of California (as of March 31, 2008) 4
  5. 5. MUFG Global Network Domestic Branch Network Overseas Branch Network East Japan EMEA Retail: 453 Corporate:180 35 West Japan 633 336 Retail: 252 Americas Corporate: 117 55 Union Bank 30 244 of California Asia and Oceania (UBOC) 369 Central Japan Retail:165 Corporate:79 Domestic Total: 1,246 Overseas Total: 456 (as of March 31, 2008) 5
  6. 6. Brief History of BSC at BTMU / UBOC BTMU Americas (NY) BTMU Global (Tokyo) UBOC (SF) 2001 July - 2004 July- 2008 July - Organization: Organization: Organization: Mgmt Foundation: Japan Mgmt Foundation: Japan Mgmt Foundation: US Best Practice: US Best Practice: Japan Best Practice: US Headcount: Approx. 2,000 Headcount: Approx. 54,000 Headcount: Approx. 10,000 Motivation: Motivation: Motivation: Linkage b/w org and individuals Alignment of mgmt processes Regional Governance Balance (risk/return, HQ/Br, etc) Cross-org. Collaboration (Strategy & Risk Mgmt) Clear Roles & Responsibilities Execution Capability Key Results: Key Results: Key Results: Integration / alignment b/w strategy and risk management Successful merger integration High marks in US regulatory Net profit increase by 117.5% examination Credit rating improvement Enhanced communication No. 1 rating in Brand Survey b/w expats and local etc. employees 6
  7. 7. Across the Pacific Ocean HQA (NY) to BTMU Americas 2001 - Union Bank of California 2008 - BTMU Tokyo to the Global Operations 2004 - 7
  8. 8. Cross Cultural Context - Culture Matters Japanese Companies American Companies Vague Mission and Vision Defined Incremental Strategy Formulation Process Grand Design Operational Efficiency Competitive Edge Differentiation / Uniqueness Bottom Up Decision Making Top Down (or Middle-Up-Down) Implicit / Nonverbal / Closed Communication Style Explicit / Verbal / Open Process Orientation Performance Evaluation Outcome Orientation Diversified Culture / Single Culture / Cooperative Work culture Competitive Adapted from “Essence of Failure,” by I. Nonaka 8
  9. 9. Strategy Execution Platform at Glance 【Customer Value Proposition】 【Corporate Social Responsibilities】 External CS Management Brand Image Voice of Score Sat. Score Score Stakeholders Initiative Business Line Evaluation Sat. Score 【Compliance & Risk Management】 ISO9001/14001 Branch Office Regulatory Internal & Audit & Exam. Sat. Score Exam. Results External Audit CSA SOX 404 【Employee Engagement】 Score Test Results Employee Opinion Poll Compliance Info. Security Sat. Score Results Check List Test Results Strategy Formulation Strategy Execution Strategy Review (P) (D) (CA) SWOT Analysis, 5 Forces Analysis, etc. 9
  10. 10. COSO Six Sigma CSR Integrating Risk Management with BSC Public’s Trust & Confidence Corporate Value Credit Strategy Risk Risk Governance Framework Legal & Regulatory Operational Risk Market Risk Risk People Risk IT Risk Crisis Money Management Laundering Country Risk Risk Settlement Risk Information / Data Security Liquidity Risk Risk Systemic Risk Reputational Compliance Risk Risk 10
  11. 11. COSO Six Sigma CSR COSO ERM-Inspired BSC Evolution COSO ERM Framework Committee of Sponsoring Organizations of the Treadway Commission (COSO) is a U.S. private- sector initiative for enhancing risk management and internal control, sponsored and funded by: American Institute of CPAs Association of American Accountants Financial Executives International The Institute of Internal Auditors The Institute of Management Accountants COSO ERM framework is the global de facto standard or “common language” of enterprise-wide risk management, adopted in various regulatory frameworks and activities such as: BASEL II SOX Regulatory examinations 11
  12. 12. COSO Six Sigma CSR COSO ERM-Inspired BSC Evolution Strategy-Risk Management Double Loop Once strategy is articulated for all levels of the organization from the top-down, it became easier to Proactive Risk Proactive Risk identify and assess risks associated Management and Management and Compliance Compliance with implementing strategy. Corporate level COSO-based control self- assessment (CSA) was introduced Cascading Aggregating on to proactively manage risks Strategy BU level Risk derived from the strategy execution (Top-down) (Bottom-up) process. This process was adopted as a bank-wide common objective called “Proactive Risk Management Division 1 and Compliance” in BSC. CSA was conducted at the lowest Division 2 organization level and CSA results were aggregated from the bottom. Division 3 The BSC-CSA linkage created a Strategy-Risk management double loop for BTMU. 12
  13. 13. COSO Six Sigma CSR COSO ERM-Inspired BSC Evolution (1) BSC: Objective Setting (2) Process Map : Business Process Analysis Process Process Process Process Process (Step 1) (Step 2) (Step 3) (Step 4) (Step 5) Risk? Risk? Risk? Risk? Risk? (3) Risk Scenario : Hypothesis of “cause-event-effect “chain (4) Risk Assessment & Control Cause A Risk Event A Cause B Effect (Loss) A Risk Event B Cause C Effect (Loss) B Risk Event C Cause D 13
  14. 14. COSO Six Sigma CSR COSO ERM-Inspired BSC Evolution Performance Driver Performance Outcome (Leading Indicator) (Lagging Indicator) Proactive Risk Proactive Risk Management and Management and Brand Image Corporate level Compliance Compliance RAROC* Corporate level Score Cascading Cascading Aggregating Aggregating Strategy Strategy Risk Risk (Top-down) (Top-down) BU level BU level (Bottom-up) (Bottom-up) # of Operational # of Compliance Incidents Violations Division 11 Division # of Information # of Fin / Non-fin Division 22 Division Leakages Reporting Errors Division 33 Division Audit / Exam # of Misconducts Results % of issues proactively identified Result vis-à-vis past 3-term Ave: by business line before anyone else “Improved” = +2 points (auditors / regulators) “Unchanged” = 0 point “Degraded” = -1 – -5 points % of issues closed by the deadline Major Incident Damaging Corporate Reputation: -5 points (trigger item) *RAROC = Risk-Adjusted Return on Capital 14
  15. 15. COSO Six Sigma CSR COSO ERM-Inspired BSC Evolution Board Internal Audit Management Total Risk Aggregation (Vertical) Corporate Risk Management Lines Reputational Risk Business Risk Risk Aggregation Market Risk by Risk Category Credit Risk (Horizontal) = Operational Risk Corporate Risk KPIs Operation Risk IT Risk Compliance Info. Security Acc. & Tax Risk Operation & IT People Risk, etc. 15
  16. 16. COSO Six Sigma CSR Strategy Execution Platform at Glance 【Customer Value Proposition】 【Corporate Social Responsibilities】 External CS Management Brand Image Voice of Score Sat. Score Score Stakeholders Initiative Business Line Evaluation Sat. Score 【Compliance & Risk Management】 ISO9001/14001 Branch Office Regulatory Internal & Audit & Exam. Sat. Score Exam. Results External Audit CSA SOX 404 【Employee Engagement】 Score Test Results Employee Opinion Poll Compliance Info. Security Sat. Score Results Check List Test Results Strategy Formulation Strategy Execution Strategy Review (P) (D) (CA) SWOT Analysis, 5 Forces Analysis, etc. 16
  17. 17. COSO Six Sigma CSR Performance = Mindset x Execution Skill High Performance Financial targets continuously rising high Execution / Problem Solving Skill Increasingly complex customer needs and business requirements Strategic Mindset Building Customer-Centric Strategic Mindset Lack of Execution / Problem Solving Skill Low Performance 17
  18. 18. COSO Six Sigma CSR BSC-Six Sigma Integration Benchmarking Management Philosophy JQA (Leadership & Management Maturity) Strategy Execution Management BSC (Objective Setting & Performance Evaluation) Initiative Execution Management Six Sigma (Strategy Execution & Problem Solving) 18 JQA = Japan Quality Award
  19. 19. COSO Six Sigma CSR BSC-Six Sigma Integration Benchmarking JQA BSC Six Sigma Useful for management Useful for strategic Useful customer-centric quality assessment objective setting / strategic execution and prioritization & cascading problem solving Standardized technique. management quality Useful for performance assessment methodology measurement, evaluation Promote management and linkage to reward by fact (data-driven) programs Not useful for Not a management Not suitable for prioritizing objectives / quality assessment tool prioritization of strategic initiatives objectives / initiatives Not a strategy Not useful for execution or problem Not a performance performance solving technique itself evaluation and measurement and compensation tool evaluation 19
  20. 20. COSO Six Sigma CSR BSC-Six Sigma Integration Concept Market Segmentation / Customer-Base Selection Business Strategy Customer Value Proposition Selection Survey (Benchmarking Customer Focus & Prioritization) Analyze “Voices of customers” Voices customers Customer ( VOC) KPI Setting Translate to Behavioral Change concrete action Target Setting & Action Planning Performance Evaluation Leading to & Compensation financial results Business Performance Revenue growth 20
  21. 21. COSO Six Sigma CSR Deepen Customer Understanding Customer Satisfaction Level Customer Satisfaction Factor Customer Delight Factor • Important service quality to • Key differentiator often associated provide but competitors can also with innovative ideas. Essential to provide similar type / level of foster customer loyalty and service. advocacy • Consequently, competition on • Must exceed customer this basis will soon face a zero- expectations sum game situation, particularly in a saturated market. • Generally used for growth strategies. Service Level Customer Dissatisfaction Factor • Used to be a differentiator but turned out to be a minimum requirement today. • Customers will feel “being satisfied” but will easily leave if this basic requirement is not properly met. 21
  22. 22. COSO Six Sigma CSR Translate VoCs to Metrics and Actions KPIs Benchmarking Strategic Priority # of security-related customer complaints Singificance to Customers (1, 3, 5, 7, 9) Customer Significance x Upgrade Ratio Time spent to write an application # of teller counter per customer Average transaction cycle time Normalized Weight # of branch offices Upgrade Ratio Target Quality Competitor C Competitor D Competitor A Competitor B Competitor E BTMU Y = f(x) Customer Requirements (VOC) "I want convenient location." 9 9 3 9 7 1 5 1 5 167% 15.0 31% "I do not want to wait in line." 5 9 1 9 7 5 3 9 1 1 7 100% 5.0 10% "I want a simplier application form." 3 9 7 9 1 1 5 3 9 129% 3.9 8% "I want quick transaction processing." 7 3 3 3 9 5 9 7 1 3 1 9 180% 12.6 26% "I want high security." 7 9 3 9 7 5 1 1 5 167% 11.7 24% KPI Prioritization 102 66 53 108 63 Normalized weight of significance to customers 100% 26% 17% 14% 28% 16% Legend Survey-Based Score Conversion 9 = "Strongly related" 1st place = 9 3 = "Related" 2nd place = 7 1 = "Weakly related" 3rd place = 5 0 = "Not related" 4th place = 3 5th place or below = 1 22
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