Performance and goals of RHB Bank Berhad Malaysia

As the Department of IT (2011) states “RHB Bank Berhad is based in Kuala Lumpur, Malaysia. It covers variety of financial aspects of people and organizations such as commercial banking, corporate and investment banking. The merger of Kwong Yik Bank and DCB Bank on 1997 resulted to RHB bank, RHB Bank is a part of RHB Capital Berhad financial”.

The Department of (2011) explins that “Today, the bank is the control of the EPF (Employee Provident Fund) after a recent successful bidding. RHB offers different services such as Commercial Banking, Corporate and International Banking services, and currently has more than 200 branch network across the country. To centralize its based hub, a multi-million complex along Jalan Tun Razak, Kuala Lumpur is now becomes the main headquarter”.

As the Department of IT (2011) believes “RHB Bank specialises in consumer banking and other entities like Islamic Bank, Delta finance to its name. Main focus of RHB bank is on industrial and commercial lending in Singapore, despite it being a fully qualified bank”.

RHB Group is currently the fourth largest integrated financial service group in Malaysia. Its core businesses can be divided into seven Strategic Business Groups:

Retail Banking

Business Banking

Group Transaction Banking

Corporate & Investment Banking

Islamic Banking

Global Financing Banking

Group Treasury

These businesses are offered through the main subsidiaries, RHB Bank Bhd and RHB Investment Bank Bhd, which are fully owned by RHB Capital and RHB Insurance Bhd which is 79.5% owned by RHB Capital.

RHB Islamic Banking Unit, RHB ISLAMIC Bank Bhd, is wholly owned by RHB Bank, while our asset management and unit trust businesses are held under RHB Investment Management Sdn Bhd, a wholly owned subsidiary of RHB Investment Bank.

Swot analysis:

Strengths:

RHB bank is 4th largest bank in Malaysia. It has more than 200 branches and thousands of employees make this bank one of the largest and most successful financial institutes in Malaysia. This shows that there is slight growth in bank.

Offer a comprehensive range of financial product and services

RHB bank provides variety of services for individuals and organizations. So, it can attract more customer and also

Strong cash flow

Cash flow of 507,078,000 USD at December 2009.

Strong financial performance.

There are proven records for the last 7 years which shows great performance of this organization.

Ranked in top 30 Malaysia brands 2008.

Ranked 17 among 30 best companies in Malaysia worth: 187 million USD

Weaknesses:

Lack of advertisement and promotions.

Comparing to other major banks such as HSBC and May bank it has less activities in these areas.

Weak online banking image.

RHB not performing strongly in the online banking field specially in user friendliness of their applications.

Moderate rank in banking industry value.

Opportunities:

Growing demand for Islamic banking

Islamic banking has seen huge demand in last few years which is a great chance for RHB group to develop in this sector and as Malaysia is considered as a leader in Islamic banking therefore they can expand their services in other Islamic countries as well.

Increase usage of online banking

Moderate users and people tend to do more of their transactions and banking activities online where as several services can be provided for companies and organizations via online system. With respect to that there is a good market for developing online applications where should be attracting, secure and user friendly.

Expansion in ASEAN region.

By opportunities which have been provided between ASEAN countries and the amount of export and import among these countries RHB can play a big role in facilitating financial transactions for these transports.

Advancement of technology

There are new technologies come to the market every day. RHB bank has this chance to acquire new technologies and provide better services which will result to gain more customers

Threats:

Online banking security.

The security of online banking transaction should be considered very seriously as one tiny problem may destroy banks reputation and also treats of computer hackers is a very serious issue.

Competition among Malaysia major banks.

The strategies and policies taken by other competitors should be monitored and studied closely and carefully and fast and effective actions should be considered.

Economic crises in the world

This crisis has affected every financial institute all over the world and RHB is not an exception, therefore appropriate acts should be taken to minimize the lost in every way.

Porter five forces analysis:

More than two decades ago, Michael Porter suggested some driving forces which could analyse the attractiveness of any industry as well as its competitive positioning. Porter invented this model and this was published in his book in 1980. Whether the business is service oriented or physical goods, there are always competitive forces in any perfect competitive business environment.

Threats of new entry:

Figure 2: minimum amount of capital

As above table shows the capital need that Malaysian central bank requires for new banks and with respect to the facts that confirm how complicated this business is, it is not very likely to see new entries every day. The point was entering foreign banks to Malaysia which concerns local banks to rebuild their strategies.

Commercial Bank

7 Fully Qualified Foreign Banks

Affin Bank Berhad

Alliance Bank Berhad

AmBankBerhad

CIMB BankBerhad

EON BankBerhad

Hong Leong BankBerhad

Malayan Banking Berhad (Maybank)

Public Bank Berhad

RHB BankBerhad

Muamalat BankBerhad

Citibank

HSBC Bank Malaysia

Oversea-Chinese Banking Corporation(OCBC Bank)

The Standard CharteredBank (StanChart)

The Bank of Nova Scotia(Scotiabank)

The Royal Bank of Scotland(RBS)-Former ABN Amro

United Overseas Bank(UOB)

Bangkok Bank Berhad

Bank of China Malaysia Berhad

Bank of America Malaysia Berhad

Industrial and Commercial Bank of China Berhad

Threats of substitutes:

With respect to advancement of technology and foreign banks which are operating in Malaysia the degree of competiveness will definitely be raised every day as each bank tries to come with new products and services to gain more customers so these threats will consider high.

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Bargaining Power of Suppliers:

The core business of the banking industry is service which mainly focuses on safety of wealth. The suppliers do provide some tangibles like chequebooks, furniture and etc. The impact of this in business is not significant since they are not really like the raw material. Therefore this is a favourable force in this industry.

Bargaining power of customers:

RHB considers as one of biggest and busiest banks in Malaysia and more or less provides all the services which its competitors also do. So as the degree of differentiation in its product is also high and in some cases the obligations for services are lower that other banks the bargaining power of customers considered low.

Competitive rivalry:

In the traditional economic model, competition among rival banks drives profits to zero. However, competition has never been perfect and firms are sophisticated passive price takers. Banks strive for a competitive advantage over their rivals. The degree of rivalry among firms varies across industries, and strategic analysts are interested in these fluctuations. These differences give some firms a competitive advantage while to others a disadvantage.

When a rival acts in a manner that elicits a counter-response by other firms, rivalry will change. The intensity of rivalry is referred to as being intense, moderate, or weak, based on the firms’ degree of aggressiveness in attempting to gain an advantage.

In pursuing an advantage over its rivals, a firm (in this case a bank) can choose from several competitive moves:

• Changing in price: change prices to gain a temporary advantage.

• More product differentiation: more features, innovations in the manufacturing process and in the product itself. The banks can reposition themselves from the ‘old way’ the customers have been known them.

• Distribution creativity: by vertical integration and using a distribution channel that is novel to the industry.

• Exploiting relationships with suppliers.

It is clear that market stability and changes in supply and demand affect rivalry. Cyclical demand tends to create cutthroat competition.

Current analysis of RHB bank:

RHB bank is a Malaysia based investment company which principally offers commercial and corporate banking services. Its range of services includes banking, leasing, insurance and etc. As of December 31, 2009, RHB network has expanded to network of around 241 branches in Malaysia; 7 branches in Singapore; a branch in Brunei and Thailand and the headquartered is at Kuala Lumpur in Malaysia.

So with respect of the above explanation and the pervious analysis RHB performing successfully but more work and effort should be putted on online banking in future.

Area of improvement and possible approaches:

While it is obvious that the core legacy environment needed to be replaced to meet current IT requirements, RHB also wanted to build the best possible infrastructure for its future business needs.

There are no simple replacement strategies therefore the current environment can be a bit complex.

Approach

Assessed current issues with the core platform, investment and operating aspects, and organizational implications

Determined future requirements for the next 10 years for example and arrange them into a set of capabilities that the system should provide to ensure success.

Undertook evaluation against key strategic capabilities and technical architectural considerations

IT department:

Information technology Department manages the scientific plans and mechanism as well as all that is related to information systems in the Bank which includes following-up the maintenance, upgrading of the systems. In addition to that, this department is responsible to supervising the upgrading of all the systems for the administrative and financial works as well as communication networks.

Applications Development:

This section will prepare development plans for the information systems and studying other requirements of the Bank. It also develops databases and systems. The Section is also responsible for conducting technical studies and finding the criteria for the systems which the Bank interested to utilize.

Network & Security:

Network and Security Section of the IT department supervises the communication lines network and internet services and arranges their follows up the repair of faults in the network and set up a security system to protect the networks.

Operations & Technical Support:

The Section undertakes the responsibility of supervising the backup process of data from the various databases. It also follows-up the maintenance contracts technical-wise (and coordinates with the Bank’s authorities.

SWOT analysis of IT department:

Opportunities:

Advancement of technology provides new opportunities for IT department in order to come out with new application and services.

By increasing the security and other counter measures they can attract more customers to their online applications.

Threats:

Time is very important in competition specially when it comes to IT field and products.

Online thieves and hackers can be considered another threat for IT department.

Strength:

Having one of the most qualifying IT personnel in their team.

Updating their online system and improve it constantly.

Weaknesses:

Its online banking that is not user friendly neither as popular among Malaysian people as its competitors.

Having less branches comparing to other local banks such as CIMB and May bank.

According to these result and other information gathered, it seems that although RHB has put so much man power and budget on their IT and online applications, still they didn’t completely look at it from the customer perspective. Therefore its strongly advisable to them to reconsider and redesign their online banking in the manner which attract more users and therefore more customers as the best way of marketing is word of mouth. According to other research may bank and cimb are the significant samples for online banking which RHB currently competing with.

Area of improvement:

As far as I understand they don’t need much consideration on security issues as according to their CIO they are already very advanced in the subject. The point they have to consider is attractive design for their website and other online applications as well as it should be easy to use as much as possible. It is very important for any online application and specifically in Malaysia it will attract people.

Risk:

1. Human error:

This risk has existed and we will face this error in future. There are some ways to reduce the rate such as trainings, but it will always be there.

2. System failure:

The happening rate of this error has been reduced thanks to many facts such as technology advancement but precautions should still be made.

3. Cyber attacks:

These attacks will be faced by any financial institute during time. Rising security measures, using new methods a consistent monitoring will result to reduce the possibility of this problem to occur.

In addition to these issues the IT department has a very sophisticated plan for their crises management in order to keep data safe and consistent. These problems hopefully are not likely to happen, but they have to take measures as they dealing with lots of people and huge amount of data which no one can think what to do if this data some hoe lost.

Conclusion:

Rhb vision is to be among the top three financial institutions in ASEAN by the year 2020. In order t o achieve this goal they have a long way to go. One of their most vital assets in this road would be Information technology and IT related services which they could provide for their customers. The point here to remember is that IT applications can be very complex and miss leading due the security aspects; therefore simplification is vital for these applications to success.

Beside that there are other points that should be improved along the way such as CUSTOMER FOCUS, TEAMWORK, RESPECT, INNOVATION, and QUALITY SERVICE.