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In an interview with PwC, Shikha Sharma, managing director and CEO of Axis Bank, talks about the opportunities, threats and challenges facing the bank. Sharma was one of the 1,330 business leaders who participated in PwC's 16th Annual Global CEO Survey. Edited excerpts:
How do you feel about the current state of the world economy? Where do you see it heading over the next one to three years?
As bankers we are always optimists. Currently, growth is slow in Europe and although the US is doing a bit better, the rate of growth there is slow as well, at around two per cent. I think emerging markets will continue to see much higher rates of growth, particularly India, where we expect the three-year average to be between seven and eight per cent. So, even though growth this year could be 5.5 per cent, we think it's going to climb back up.
Are you setting any strategic goal other than growth for your bank?
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In the short term, how confident are you about revenue growth?
We are reasonably confident about growth levels for the bank. Prior to 2009, Axis was growing at a compound growth rate of more than 40 per cent. With the size that we are now, that kind of growth is not feasible. But to achieve 20 per cent-plus growth for the next three years is possible. And given that we're privileged to be in India, which is still seeing much higher rates of growth than a lot of the globe, we think that should be achievable.
Where do you see that growth coming from? What factors will bring that growth about?
For us, the growth obviously comes from serving different customer needs: from the large corporations with their working capital and investment needs, through the banking services required by small and medium enterprises, down to the retail consumer, both in the urban and rural markets.
What are the top economic or political threats to the bank's growth prospects?
Banking's fortunes are closely linked to what's happening in the economy, so growth or lack of it is a factor that impacts the bank directly. Regulatory change is another thing that impacts the bank directly, because we are a highly regulated industry. Inflation rates are also on the agenda, as they impact interest rates and costs for us. So there are lots of factors which will have an impact on our strategy and we obviously have to develop and adapt it as we go along.
How would you rate the level of external threats to the bank's strategic objectives now when compared to previous years?
The level of external threats has increased with every passing decade. And as the pace of change has increased, organisations like ours have to be a lot more flexible than we might have been in the past.
How well would your bank cope with adverse economic, technological or regulatory scenarios?
We ensure that we are prepared for potential adverse scenarios by making sure that we are well capitalised, that we are watching our risk processes and that we have a fairly diversified portfolio in terms of the risks that can come and hit us. And that immunises us a bit from some of these threats.
We have to have the resilience to work through even if growth slips for a while. And that resilience is provided by a well-capitalised and fairly diversified, high-quality, secure portfolio. Managing liquidity well is also important in the banking context. Regulatory change, however, impacts everybody equally. So, we just have to learn to adapt to that.
How would you rate your bank's ability to adapt to changes or disruptive events now, as compared to the past?
One of the things that we've attempted to do is to reduce response times, enabling us to adapt and change rapidly if circumstances require it. We have got better at that.
What changes are you making to enable your bank to adapt quickly or effectively to external changes?
We are doing two things to help us adapt quickly to external change. The first is communicating a lot more with the team: if growing numbers of people understand more parts of the bank that helps change happen more easily. Because when change happens it doesn't impact just one slice of the bank, it impacts the whole organisation. And if people understand each other, then implementing that change becomes easier.
The second thing we like to do is really work with partners. So, we don't try and do everything ourselves. This dissipates the impact of the change and you have to absorb a little less. And if you work with high-quality partners, they help you manage some of that change. So those are the two things that we are currently focused on.
Do you feel the influence of the bank's stakeholders - employees, customers, government, regulators, users of social media - has changed? And which of these groups has grown more in influence?
The influence of all these stakeholders has increased. I think regulators have become a lot more alert and active in a fast changing environment where some issues have cropped up. And a lot more knowledge is being shared among consumers. This means that consumer experience spreads much faster today than it might have done in an era of less connection. The same thing applies to employees: they live in a connected world and communicate through numerous networks. So the word about change spreads much faster. And, of course, you are constantly under media scrutiny. There are many channels that you have to worry about.
Are you changing the way you're connecting with these stakeholders?
Connecting with stakeholders is fundamentally about communicating openly and sharing information. So, one of the big changes that I have seen over my years in the financial services sector, is that today there's a lot more openness about the way data is shared in an organisation. I think that helps the organisation to adapt, it helps to bring change and it enables us to garner the knowledge of many more people rather than just the select few who had access to that data in the past.
In response to stakeholders, have you increased your focus on areas where your bank can have a wider impact on the communities in which you operate?
As the bank gets larger, I think it becomes even more important for us to be conscious about the impact we have on the community and what the community thinks about us. As part of our active programme of working with communities, we have set up the Axis Foundation, and contribute one per cent of the bank's profits to it. Instead of trying to work in many different areas, what we have chosen to do over the last couple of years is to focus primarily on helping to give people access to livelihoods. If we can bring economic prosperity to the poorer sections of society, then that's good for both the economy and the community.
Who do you admire as a leader? Can you share an example from literature or history?
I think from India it would always be Gandhiji, because he showed true leadership by inspiring people into peaceful resistance. More recently, there have been many corporate leaders from India who have brought about truly transformational change through their mission, their passion and their commitment to making it happen. An obvious example would be Ratan Tata.
