See how BCG helped a major Asian retail finance institution restore public trust through compliance management.
FinCo was one of the major retail finance institutions in Asia. It had multi-billion-dollar revenue and was lending money in millions of small accounts.
It was alleged that some of its employees had violated laws and collected debt from customers illegally, and therefore suffered penalties for infringement of the regulation laws for money lenders. As a result, FinCo's entire operation was shut down for some time, an occasion that caused it to lose many accounts and that hurt its corporate brand severely.
BCG was hired by FinCo to diagnose the root causes of the legal infringement, to propose a set of fundamental reform measures for reinforcing compliance management, and to help develop a detailed action plan for restoring public trust and confidence in FinCo by remolding it into a more socially responsible organization.
In the first phase, BCG conducted an organization audit, including in-depth interviews with FinCo's corporate executives, questionnaire surveys with its staff, interviews with outside vendors, and external benchmarking studies. The case team also performed an analysis of the past records of customers' claims and employees' suspicious behaviors and investigated a structured view of root causes.
As the next step, BCG organized a series of executive workshops with all of FinCo's managing directors and senior managers to share and discuss these cases and possible solutions until all the key managers became fully aware of these issues.
Finally, BCG helped develop a set of solution measures and a detailed action plan and organized executive workshops again to align the leadership team to be fully ready for implementation.
BCG's recommendations included:
A review of the corporate value statement, with more emphasis on compliance and social responsibilities
The establishment of a compliance management division
A revised incentive scheme for rewarding employees' compliant behavior
More customer-oriented lending and collection approaches
Revised internal control regulations
Reinforced staff training and guidance
Tightened checking mechanisms
Communication plans inside and outside of FinCo about the reform and progress on it
One of the most important recommendations was a cultural reform. To start the cultural changes, BCG proposed an "Executive Caravan," where all the corporate executives were required to be fully committed to becoming advocates and missionaries of the reform in the organization. All of them were asked to walk down to every part of the organization to personally communicate with the staff repeatedly in the following several years.
FinCo had lost significant brand value after the announcement of penalties, but soon after BCG's support and implementation of the compliance-improvement strategy, the company successfully recovered part of its brand image and public confidence.
In the years since this project, FinCo has fully implemented the recommendations. It has organized more than 1,000 Executive Caravan trips to more than 10,000 employees and has developed about 2,500 compliance officers so far. FinCo also monitored more than 100,000 telephone calls by tellers to customers per year in the first two years after the start of the project. It has held 1,000 staff workshops on compliance each year and has inspected all the branch offices for compliance every year.
FinCo still issues progress reports on compliance improvement regularly. Since the project, no serious compliance issues have been reported at FinCo. As a result, public confidence has gradually come back, and FinCo has been able to resume focusing on business development and restructuring.