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Maybank's Business Strategy Shift Amidst Covid-19

Article · October 2021

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Lim Shi Tong

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 Maybank’s Business Strategy Shift Amidst Covid-19
LIM SHI TONG
A180172

Email: a180172@siswa.ukm.edu.my

ABSTRACT

Many organizations and employees have been forced to change their working
practices due to the Covid-19. Economies worldwide are also affected by this
pandemic, and many companies are experiencing significant sales and financial
losses as a result. Maybank, as a Malaysian universal bank with crucial operating
"home markets" of Malaysia, Singapore, and Indonesia also affected by the
Covid-19 pandemic. In order to maintain their operation, Maybank took several
steps related to the business management process to solve the obstacles caused by
the Covid-19 pandemic. They protect their employees and assist society and
customers overcome financial problems during the pandemic period. In this
report, the methods taken by Maybank to ensure sustainability during the
pandemic and the preparedness entering the endemic of Covid-19 will be
visualized and analyzed by producing a Business Process Management (BPM)
tree with the BPM ambidexterity theory.

[Keywords: Covid-19 ; Maybank ; Business Process Management Tree 3;

financial ; sustainability]
INTRODUCTION
Coronavirus disease 2019 (COVID-19) is a contagious disease which spread across the
world in 2020. The first known case of the Covid-19 was in Wuhan, China, in December
2019. This disease diffused rapidly across the globe during 2020 and brought many deaths of
people. Covid-19 has become the concern of people all around the world. Many countries
enforced lockdown when the cases of covid-19 increased rapidly in their country.

On January 25, 2020, the first Covid-19 case was discovered in Malaysia. The number of
reported COVID-19 cases grew relatively slowly in March 2020 until a religious event took
place at Sri Petaling, Kuala Lumpur. After this event, the number of positive cases of Covid-
19 in Malaysia was growing exponentially. Malaysia's government was forced to lock down
the country and shut down the place for gathering to curb the spread of Covid-19 among the
people. Thus, many companies and organizations were affected and forced to change their
way of operation and working. The global economy has suffered greatly as a result of the
Covid-19 pandemic. Maybank's financial performance in Malaysia has also deteriorated.

Malayan Banking Berhad, which is doing business as Maybank, is a Malaysian universal

bank. Maybank was established in 1960, and it is the largest financial service group in
Malaysia. Maybank has an international network of over 2,400 branches and offices in 20
countries and employs 45,000 employees. The Maybank Group offers a comprehensive range
of products and services, including commercial banking, investment banking, Islamic
banking, offshore banking, leasing and hires purchase, insurance, factoring, trustee services,
asset management, stockbroking, and nominee services, venture capital, and Internet
banking.

MAIN ISSUE & CENTRAL IDEA STATEMENT

As a result of the spread of Covid-19 in Malaysia, the Malaysian government implemented
a Movement Control Order (MCO) as a pandemic prevention method. The lockdown
involved the closure of all industries, except for infrastructure services, supermarkets, wet
markets, and multi-functional stores selling daily necessities. Thus, it caused the firms that
rely on direct customer contact to lose their revenue sources, and the households working in
these sectors face the problem of losing employment income. Hence, the Malaysian economy
was severely harmed.
 Bank sources of income are from interest on loans and investments, fees income, forex
operations, and commission on third-party products. The drastic drop in economies in
Malaysia caused the Maybank's income to decrease. This decrease is because some of the
bank's sources of income such as interest on investment, interest on loans and fees income are
affected.

Maybank takes several actions to try to minimize the financial losses due to the pandemic.
These actions are included the business process management to adapt to the environment
during Covid-19 and Standard Operating Procedure (SOP).

PROBLEM STATEMENT

The economic crisis in Malaysia has resulted in the income of Maybank decreasing. Some
companies that rely on direct client contact have to halt the work and miss out on revenues
due to the Movement Control Order. As a result, these businesses are unable to repay their
bank loans. Due to financial difficulties during MCO, the company was forced to lay off the
employee in order to cut costs. According to the department statistic Malaysia, the
unemployment rate in Malaysia in 2019 is 3.3%. However, the unemployment rate in March
2020 has grown to 3.9% and still increased to 5.0% in April and 5.9% in May. As the
statistics show, the unemployment rate drastically increased starting from March 2020. This
increase is because the government of Malaysia started to implement the MCO on 18 March
2020. Thus, households who lose their family income or have less income due to the
pandemic will be unable to repay the loan. Maybank will lose interest on loans as a result of
this. Maybank's profits and capital will be severely impacted if the company's or household's
repayment capacity is permanently impaired.

Maybank also suffers losses due to market rate and price fluctuations, such as interest rates,
foreign exchange rates, commodities, and stock prices. Because the Covid-19 pandemic has
significantly impacted Malaysia's finances, the market rates/prices will experience significant
movement. However, the majority of market rates/prices will fall. Due to the pandemic,
Malaysia's currency has depreciated. Maybank may be forced to accept a revenue loss as a
result of this.
 The government of Malaysia has introduced the load deferment, which allowed lenders to
make a deferment on their payments for six months. Together with a handful of other leading
banks, Maybank was instrumental in putting into motion the loan moratorium, which brought
immense relief to millions of Malaysians impacted by the COVID-19 pandemic. However,
the moratorium and repayment assistance granted may have an impact on liquidity and
profitability on Maybank.

METHODOLOGY

Maybank needs to manage the business process to overcome the challenges and adapt to the
pandemic environment in 2020, which will be full of challenges and deviations from daily
life.

Business process management (BPM) is the discipline in which people use various methods
to discover, model, analyze, measure, improve, optimize, and automate business processes.
According to ambidexterity theory (March 1991; O'Reilly III & Tushman, 2011), an
organization should balance between exploitation and exploration, which dual approach leads
to increased business performance (Chi, Zhao, George, Li, & Zhai, 2017; Prester, Hernaus,
Aleksic, & Trkman, 2019). When applying ambidexterity theory to BPM, exploitation
primarily focuses on continuous process improvements, whereas exploration facilitates
digital process innovations.

The BPM tree is an ambidexterity metaphor, which needs to be strategically balanced the
exploitation and exploration to realize the company goals and business model. Exploitation
means incrementally improving the "tree" while exploration is more radically revamping the
"tree". Over time, organizations must strike a balance between incremental and radical
changes. The figure below shows a BPM tree, which balances the exploration and
exploitation process according to the ambidexterity theory. Maybank's actions in response to
the Covid-19 pandemic are depicted in this BPM tree.
Figure 1 : The Business Process Management Tree

Maybank pays attention to the funding management at Group and overseas centres during
the Covid-19 pandemic. since Maybank has provided financial relief and support to affected
customers and clients through a six-month moratorium on loan repayments, which the
Malaysian government introduced to facilitate restructuring and refinancing. Thus, Maybank
needs to ensure sufficient liquidity to support the loan moratorium. Not only that, refinement
in daily Liquidity Coverage Ratio reporting for Group and key entities as per regulatory
requirements is also the action taken by Maybank during the Covid-19 pandemic.

COVID-19 has accelerated the pace and intensity of cyber-attacks and caused a significant
shift in banking behavior. With increased online transaction volumes and cyber-attack
attempts, Maybank upgraded the Information Technology (IT) infrastructure to minimize the
possibility of the IT system and resource constraints and data breaches.

Maybank has introduced a Mobile Work Arrangement Policy. The policy reflects the
organization's overall mobile working arrangement, which will allow it to balance its
objectives of achieving a highly productive and harmonious work environment that is
responsive to today's workforce's changing professional and personal needs while also taking
into account business and organizational needs to ensure business continuity and
sustainability. The policy enables employees to work from home, on-site and at split
locations. It is a bilateral agreement between Maybank and the employees that offer
mutually-beneficial outcomes for both parties.

Maybank developed the Maybank Group Credit Risk Framework to ensure effective credit
risk management to attain: positive customer experience, good quality credits, diversified and
resilient credit portfolio, target-risk returns and capital optimization. Maybank also developed
Group Market Risk Framework to optimize risk returns, consistent market and liquidity risk
management, and governance and risk oversight. Maybank adopted adaptive and flexible
policies and upgraded the risk system. These actions are being taken in order to reduce and
estimate the economic losses that will occur as a result of the pandemic.

FINDINGS ANALYSIS & DISCUSSION

According to the statistic found in the annual report for Maybank, the net operating income
in Malaysia decreased from RM million 22,120 2019 to RM 21,448 million in FY 31
December 2020, which dropped 3.0%. The total profit before taxation and zakat for Maybank
in Malaysia also have a drastic drop of -26.6%, from RM 15,306 million in 2019 to RM
11,230 million in FY 31 December 2020.

For banking sector review and outlook, system loans of Maybank in Malaysia expand at a
slower rate impacted by the economic contraction. The system loans in 2019 are 3.9%, while
in 2020 is 3.4%. From the statistic, household loan growth was resilient from 4.7% in 2019
to 5.0% in 2020, while non-household loan growth slowed from 2.7% in 2019 to 1.0% in
2020.

As for businesses, the cautious sentiment was reflected in tepid working capital loan growth
of 0.5% (2019: 1.1%). Bond issuances declined 19% in 2020, and overall credit (loans and
bonds) growth was a subdued 1.8%. However, the credit cost increased significantly as banks
put through higher pre-emptive provisions amid weaker economic fundamentals. The
industry’s gross impaired loans ratio remained stable at 1.57% as of end-2020 (end-2019:
1.53%).
RECOMMENDATION

Maybank2u MY app is a mobile application, while the Maybank2u is a website that allows
users to conduct online transactions and pay bills. During the Covid-19 pandemic, most
people used online transactions, and this method had already become routine for those who
had been on MCO for a long time. Thus, Maybank2u MY and Maybank2u must be improved
and upgraded, as the number of transactions will increase due to the Covid-19 pandemic. Not
only that, Maybank also can simplify the process of online transactions.

Since Malaysia 'lockdown' is gradually reopening nowadays and all the areas have already
entered the recovering phase, Maybank should pay more attention to the design and
execution of the Standard Operating Processes (S.O.P) to provide a clean and safe
environment for the workers and the customer.

CONCLUSION

In conclusion, the Covid-19 pandemic caused a drastic amount of death in the world and
influenced the global economy. Many companies are forced to change their business strategy
and way of operating. Maybank, as Malaysia's universal bank, is also severely impacted by
the pandemic. However, not only lousy influence on Maybank, there is still have positive
effects. The reputation of Maybank has increased due to the contribution during the Covid-19
pandemic. This pandemic also forced Maybank to change its business process management
to adapt to the pandemic situation. Maybank will be able to handle and cope with a similar
situation in the future with ease as a result of this change.

In this report, Maybank shows that it performs explorative and exploitative processes when
developing the business process. Maybank is also balancing both exploratory and exploitative
processes, demonstrating that the bank is already implementing best practices in order to
enter COVID 19's Endemic phase and better explore emerging opportunities.
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APPENDIX

Figure 2 :Segment information : Analysis by geographical location

 Figure 3: Unemployed person and unemployed rate

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