Making it big through innovation and diversification


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Making it big through innovation and diversification

  1. 1. Making it Big through Innovation and Diversification LEADING FROM THE FRONT Muhammad Hanif Jakhura (pictured right) is the CEO of Central Depository Company of Pakistan Limited (CDC), the country’s only securities depository serving all three stock exchanges of Pakistan. Hanif being part of the depository from day one and actually the first employee of the entity recounts the journey of the company from a rudimentary depository to a world class organization and a role model for other entities in the capital and financial market as well as its counterparts in innovation. CDC came into being after legislation of Central Depositories Act in 1997 to cater the settlement issues faced by the capital market constituents with a technology-based solution. It was the time when existing trade settlement mechanisms were no longer able to sustain the burden of increasing trade volumes and an entirely new system was developed for electronic custody and settlement of securities. The introduction of a technology-based solution in a market accustomed to manual processes was an arduous task where tangibility of currency and stamping of certificates were considered as the only signs of authenticity. The company in order to overcome these challenges focused on building a strong brand image and introduced benchmarking mechanisms that enabled the company gain a strong position in the hearts and minds of its customers, building on a reputation as an ‘Ultimate Custodian’ being at the forefront of Capital market development. AUTOMATION BEING THE PRIMARY DRIVER Imbued with the spirit to revolutionize, which is the key foundation behind existence of CDC, the company brought unprecedented advancements in the Capital Market with new products and solutions streamlining processes. The company developed National Clearing and Settlement System (NCSS) for providing centralized clearing and settlement services to the Pakistani capital market which it operated from 2002 to 2005 and then handed over to an independent management. Being the largest and most preferred provider of Trustee and Custodial Services in the private sector and realizing the need to provide efficient and automated solution to the trustee clientele, the company launched a comprehensive Fund Management System, an electronic system for Straight Through Processing (STP) for settlement of transactions. The solution provides online link between the Trustee & Custodial Services at CDC and Asset Management Companies & Settling Banks. Adding yet another channel for increased Customer Convenience, the company launched CDC Access that enables investor account holders to access their account information through multiple channels including Web, SMS and IVR.
  2. 2. Similarly, CDC has taken a step further and developed a high-tech Share Accounting System with Authority & Security Management System and workflow components for efficient R/TA services to achieve competitive edge over other service providers. These initiatives have made a remarkable difference on how the market operates, introducing new service levels and at the same time enabled the company to increase transparency, efficiency, reliability and enhance governance using technology. FILLING IN THE GAP The depository felt that a large number of Investors wanted a dependable custodian and only wished to use the brokerage community for trading purposes. Since the banks were not very eager to play that role, a relatively unique service was launched in 1999 by the name of Investor Account Service (IAS) which allows retail investors to directly open and maintain accounts with CDC in Central Depository System. Through this service, Investors have direct access to their securities, which are maintained by CDC and operated on the instructions of investors. By opening Investor Accounts with CDC, investors are able to directly control their electronic securities. Although trading is still done through brokers, settlement is done through CDS on written instructions of investors. Introduction of such an indigenous service not offered by any other depository is indicative of a company’s willingness and capability to fulfill the needs of the local market enabling the company to gain such a large share of the market. Such initiatives are necessary for catering specifically to a well-defined target audience. DIVERSIFICATION ENSURED SUSTAINABILITY It takes an inherent desire to make a difference that inspires an institution to challenge the traditional boundaries. CDC not only established itself on the best principles, but also diversified its business keeping in mind the need of efficient capital market services in a number of areas. Apart from the core depository services, CDC is now also known for its Trustee and Custodial Services for mutual and pension funds, Investor Account Services providing retail investor accounts, Share Registrar Services and IT Consultancy & Implementation Service by the name of ITMinds Limited. This business related diversification enabled the company hedge risk by not relying upon one service and create synergy and efficiency in response to the increasingly crucial environmental and political considerations. The company has nevertheless achieved distinction by diversifying and developing new service offerings and at the same time able to manage leading position in almost all of them.
  3. 3. INVESTOR PROTECTION & CONVENIENCE CDC’s philosophy is based upon a basic principle that customer services is not just about meeting customer expectations but exceeding them. Investor protection is necessary to harness the investor’s confidence and experience, it is imperative to have sound investor protection and facilitation procedures in place that not just meet investor’s expectations but exceeds them. The lifecycle model of CDC is based upon proactive approach that rotates around investor. The company ensures that all investment applications are dealt expeditiously, transparently and equitably and further enhanced by the availability of quality physical infrastructure, high-standard business processes and talented and flexible work force enabling the company maximize effectiveness through all stages of the investment cycle. LEARNING FROM OTHERS In response to an increasingly unpredictable and dynamic business environment, CDC continuously enhanced its knowledge and capabilities to develop collective as well as individual learning to achieve better results. The company is an active member and also in executive committee of Asia-Pacific Central Securities Depository Group (ACG), an international organization working to facilitate the exchange of information and to promote mutual assistance among member securities depositories and clearing organizations in the Asia Pacific region. It is also a member of Association of National Numbering Agencies (ANNA) and the only National Numbering agency in the country, South Asian Federation of Exchanges (SAFE) and International Securities Services Association (ISSA). To avail benefits of cross-border cooperation, explore avenues of mutual assistance and enhance coordination with international depositories, CDC has signed ten Memorandums of Understanding (MoUs) with regional and international depositories. These include: Korean Securities Depository (KSD) Japan Security Depository Centre (JASDEC) China Securities Depository and Clearing Corporation (SD&C) Indonesia Clearing & Guarantee Corporation (KPEI) Depository Trust & Clearing Corporation (DTCC), U.S.A. Thailand Securities Depository (TSD) Central Securities Depository of Iran Abu Dhabi Securities Market (ADSM) Dubai Financial Market (DFM)
  4. 4. Taiwan Depository & Clearing Corporation (TDCC) These MoUs entail cooperation in the areas of technology exchange, operational procedures, mechanism for cross-border listing of securities and exchange of information. These affiliations, MoUs, techs and practices help the company to learn from each other’s experience so there is no need to reinvent the wheel. HIRING THE RIGHT PEOPLE Recognizing the role and importance of human resource management in the workplace has long become one of the dire needs for thriving organizations worldwide. Similarly, the demand for qualified and trained employees is rising in every industry discipline. Organizations are micro- scoping every opportunity to find, recruit, train and develop high quality human resource. Central Depository Company of Pakistan Limited (CDC) deals with such demands by not only hiring highly qualified and trained individuals but is now also adopting international best practices ensuring that the right talent is retained and groomed. MAKING IT WORK – INVESTOR FOCUS A strong brand image is necessary to occupy a distinct image in the minds of consumers. Information Technology (IT) should be used as an enabler and not just a support. You can do wonders and achieve something which is unthinkable. Diversification helps hedging the risk in response to the increasingly crucial business and political environment. Investor protection and facilitation ensures that all investment applications are dealt expeditiously, transparently and equitably. This should be the key driver for sustainable operations. Collaboration helps in achieving what appears improbable Learning from others speeds the growth and fuels innovation allowing organization to adapt to changes in the state of the market, technology and practices worldwide. Hiring the right people. New problems and challenges can be met faster by ensuring that the right talent is retained and groomed.