Case Study: Risk Management at NIB Bank, Pakistan
Fullerton Financial first invested in NIB in February 2005

Before Fullerton Financial Holdings invested in NIB, the Bank's primary focus was on Corporate Banking business. With the assistance provided by Fullerton Financial Holdings, NIB started the Consumer and Commercial and SME businesses using FFH models. Both are high margin business, and been significant engines of growth in the last couple of years.

One critical element to its successful growth has been risk management, a function for which it has received significant support. Mr Akbar Chugtai, Head of Risk said, "Fullerton Financial Holdings has been very helpful in implementing an architecture for risk management and helping us to establish a new risk management structure."

Comprehensive Risk Architecture

NIB used Fullerton's proprietary seven pillars framework of risk management as a model to develop it's own risk management practices. This framework has helped NIB ensure that all areas of risk from corporate governance to credit, market, liquidity and compliance risks were holistically looked at and addressed. Mr Chugtai added "The impact of what Fullerton brought to NIB is very clearly evident in the relatively low credit losses in all our portfolios compared to our peers. Also, the banks net interest margin has since increased by 80%".

Implementing granular risk management of SME portfolio

Another example of Fullerton's contribution is in the area of lending to the small and medium enterprise and commercial banking (SMEC) which is another new business established with their help. In an effort to understand the needs of the small and medium enterprise and commercial banking (SMEC) customer, the bank conducted exhaustive studies of a few major industries, which helped it develop products that match customer needs without exposing the bank to excessive risk. Previously the bank had applied risk management across products and across market segments. The new model requires risk management criteria to be established for each product in each segment. This granulation technique lightens the workload of the credit officer, since there are now objective criteria for each loan. Mr Chugtai said, "The efficiency of our new credit programme results in faster service to the customer, giving us a competitive edge that should lead to higher market share." In addition, our loss experience in this segment is also very low thanks to Fullerton's tested model which we adapted to our environment.

Practical contribution

Besides bringing NIB their proven risk management architecture, processes and models, the Fullerton Financial Holdings team was able to give practical assistance in terms of job descriptions, standard operating procedures, KPIs, MIS, as well as other operating and reporting guidelines. Mr Chugtai said, "Fullerton Financial Holdings helped to accelerate change helping to give our team a real sense of momentum." Drawing from a pool of seasoned bankers with international experience, Fullerton Financial Holdings had the capacity to provide both practical advice and manpower so that the bank could implement credit programmes quickly. The bank's risk management group also has access to its peers at Bank Danamon and Alliance Bank which helps them share experiences and learn from each other.