Time to Shift to New Strategic Paradigm

Cho Yong-byoung

By Cho Yong-byoung
Executive Vice President

The key objective of our globalization drive is to secure diversified revenue sources through localization. In addition, we aim to stave off growing risks stemming from intense competition in the overcrowded domestic market.

Shinhan Bank has already built up a wide business portfolio covering banking, securities, cards, insurance and asset management through its successful transition to a financial holding company.

However, it still lacks scale beyond Korea. Therefore, we seek to achieve a well-diversified, stable profit base by building up a well-balanced geographical portfolio through successful globalization.

I believe that achieving globalization does not mean simply expanding our overseas network. Genuine globalization requires we give up deep-rooted customs and practices, and open up to a new business environment.

It means making full use of our creativity and dedicating our efforts to finding fresh sources of profit as an alternative to surviving in the saturated domestic market.

It's essential to maintain a business structure that secures soundness and stability in the domestic market while pursuing globalization, which would provide the capability to cushion the blow stemming from economic and financial risks in the countries in which we seek to advance.

There exists a wide variety of difficulties and risks associated with globalization, such as a lack of information about the overseas market, political risk, business risk, cultural issues and regulatory differences.

To minimize such risks, it is very important to select optimal timing, optimal business form and the best areas for penetration. It is also vital to undertake an accurate analysis of the broad spectrum of external risk factors, including the characteristics of a specific country's financial system, market structures and legal criteria.

In fact, Korean banks have bitter memories of overseas expansion, having had to shut down many of their overseas branches during the 1997-1998 financial crisis due to inefficiency and poor risk management.

In tandem with the worldwide globalization drive, local banks again moved back into global business on a major scale from 2007. However, since late last year, they have scaled back or put off their plans in the wake of the global financial crisis triggered by the U.S. subprime mortgage meltdown.

Given growing uncertainties stemming from the ongoing crisis, adjustments must be made to globalization strategies. However, over the medium and long-term, it is the global sector that must still be acknowledged as having the capacity to deliver further growth momentum to Korean banks.

Globalization can be fully achieved only when an organization has global ability and by first securing global capacity in appropriate risk management, locally focused marketing and a deep understanding of the language, culture and society of the countries in which we wish to advance.

Now is the time to shift to a new strategic paradigm focusing on qualitative growth. Success or failure in global business in the next few years will depend very much on how well we can turn this crisis into opportunity by beefing up internal capabilities and making ourselves better suited for globalization.