Interview with Mike Wood CIO, Raiffeison International With its constantly expanding network in Central and Eastern Europe (CEE), Raiffeisen International Bank-Holding AG has developed into one of the region’s leading banking groups. The company is a fully consolidated subsidiary of Raiffeisen Zentralbank Österreich AG (RZB), the central institution of the Raiffeisen Banking Group, Austria’s largest banking group. Since 1986, Raiffeisen International has consistently entered growth markets and expanded its regional and local presence both through organic growth as well as mergers and acquisitions. Between 2000 and 2005, Raiffeisen International acquired banks in Bosnia and Herzegovina, Romania, Slovenia, Kosovo, Belarus, Albania and Ukraine. In January 2006, it acquired Russia’s Impexbank and in July of that year it purchased Czech eBanka. As of 30 September 2008, Raiffeisen International managed subsidiary banks, leasing companies and a number of other financial service providers in 15 markets of the region. It has nearly 64,000 employees serving around 14.6 million customers in more than 3,150 business outlets. In 2008, Raiffeisen International and RZB were jointly awarded “Best Bank in CEE” by leading industry publications - The Banker, Euromoney and Global Finance. FinacleConnect’s research and contributing editor spoke with Raiffeisen International’s Chief Information Officer, Mike Wood, to discuss the main issues affecting the banking group and its strategy going forward. Mr. Wood has 30 years experience in IT and finance in the international environment. Prior to Raiffeisen International, he has held senior IT and business roles at ANZ Banking Group and GE Consumer Finance. How has the credit crunch impacted the banking industry in Central and Eastern Europe (CEE)? The credit crisis has certainly affected the CEE banking industry, although some countries have been more impacted than others. The main impact, however, is from a business point of view, not from IT investment. There is no reduction in IT investments as banks continue to look for efficiencies. We believe that only banks that continue to invest will survive. What are the key technology trends impacting the CEE banking industry? Banks are focusing on management of liquidity and understanding of risk from an IT point of view. While Basel II has been a key focus in the past few years, regulatory requirements for risk management will surely increase in light of the credit crisis. Having a standardized core banking system is therefore essential to ensure that we effectively meet risk management requirements and effectively ride the credit crunch. What role does the core banking system play in ensuring effective risk management? A standardized core banking platform can ensure consistency of information across various technology systems at the bank. Importantly, it helps ensure quality of data. For a bank like ours that operates across 15 countries, having a core banking system like Finacle can help provide a single view of risk information. What are Raiffeisen International’s main business and technological expectations from its core banking solution? We were looking for a scalable, cost effective solution. The Russian market for instance has many millions of accounts. We also wanted a truly universal banking solution. Raiffeisen International was initially a corporate bank and started its retail operations in 1999, expanding it substantially over the following years. Our intention is to roll out our core banking solution across markets, such as Russia and the Czech Republic, where we have immediate retail banking requirements. Importantly, we were looking for a vendor with the size, ability and credibility to meet our aggressive rollout plans. A Service Oriented Architecture (SOA) was also an important requirement. At a macro level we have a SOA organization, with shared service centers for payments, card acquiring and so on. We also have disparate IT systems across the different banks in the group that we do not wish to throw away. We seek to drive the SOA approach across the group. What are the main IT challenges facing Raiffeisen International? The first challenge is ensuring consistency across the banking group. Because of growth through acquisitions over the past nine years, we are saddled with a wide variety of IT systems across the group. Some of these are quite modern while others are dated. There is no homogeneity in terms of the technology landscape which is critical, especially keeping risk management in view. The second challenge is availability of IT resources. There is a huge shortage of IT resources to execute our core banking transformation plans. Raiffeisen International has traditionally operated autonomously within each country. It is almost like having 15 different banks, each with different IT architecture, standards, processes and governance systems. But now we are moving from an autonomous structure to a centrally governed model. It is going to be a complete paradigm change for us. The challenge is to ensure this transformation without strangling business growth. Our core technology is extremely critical to this business transformation. We needed a partner who can think big, understand the bigger picture, but act small. This will also drive some of the centralized governance and standards that we need to implement. Any final thoughts you would like to share with us? We do not underestimate the challenges lying ahead. It is a very difficult financial climate we are operating in. And we operate with banks in 15 countries which by itself is a challenge. Implementing the core engine across our disparate setup too will be a challenge. But I know we will succeed.
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