UOB chief risk officer Chan Kok Seong discusses the abundance of risks in banking, the transformative potential of AI, and his personal leadership style.

INFocus Series

INFocus provides exclusive insights and trends from experts and leaders across the Asia Pacific region, exploring the forces, opportunities, and challenges shaping its future.

Go to series

Sean Kennedy

Hi, I'm Sean Kennedy. I'm a partner at Oliver Wyman, and I lead our capabilities across Asia Pacific region.

Chan Kok Seong

Hi, Chan Kok Seong here, I am the chief risk officer of UOB group.

Sean

So Kok Seong, when you consider sort of the risk management in the age of economic disruption, what are the big macro risks that are on your mind, especially when you think about, like the pace of digital disruption and the shift in geopolitics. But what's the one thing that's really concerning you.

Kok Seong

At this point in time, actually the most worrying thing for me is the impact of quantitative tightening after so many years of quantitative easing on the real economy around the world. The impact on the credit condition and the commercial real estate market is something that is not shown yet. The ill effect of it is yet to be seen. This is something that we have to monitor very closely over time to ensure that our portfolio remains healthy.

Sean

Well, so, Kok Seong, in light of that sort of challenging macro environment, the bank’s produced some pretty good financial results recently. And also picked up four markets with the Citibank acquisition. There's kind of a lot to navigate. How do you steward the bank through that change?

Kok Seong

The recent acquisition of Citibank consumer portfolio in the four regional ASEAN markets is very much in line with our long-term strategy to build UOB as the Premier bank in the ASEAN region. In fact, we have defined our purpose as building the future of ASEAN. Being Singapore born and Singapore-centric is an advantage but at the same time recognizing the limitations of the size of Singapore.

Kok Seong

But we need to go beyond our comfort zone, to go to overseas market where we are not the local champion, and to go overseas, we need to select our battle field very well. We have selected ASEAN because Singapore is part of the ASEAN economy and ASEAN is a very promising future because we believe in the growth of Asia for the next century, outstripping the growth of the West. So therefore, acquiring that portfolio in this ASEAN market really help consolidate our position in ASEAN, in the sense that it double our customer base, for example, from 2.5 million to 5 million people in the right customer segment.

Kok Seong

So regardless of the business cycle that I worry about, in the context of the broader strategy, it is something that we are very confident in doing.

And it is an acquisition that build and consolidate our franchise, and will make us stronger in the long term. Although we may face short term challenges, in the long run, we are very, very confident that it will consolidate our franchise to build a more solid balance sheet.

Sean 

It's a very exciting and ambitious agenda. But what are the two or three things that keep you up at night.

Kok Seong

Well, as the chief risk officer, we always have to worry about all this traditional risk area in particular, liquidity risk is a major concern, given current development of what happened in the SVB case. In fact, the concern is now go down to intraday liquidity risk, beside daily liquidity. So it's something that we need to really (be) concerned about because the digital economy and digital banking actually heighten significantly the risk of contagion instantaneously.

But to be really as what we call a solid bank that can face all this liquidity challenge is to have a very sound long term business plan that build stable funding across our franchise wherever we do business and create trust and confidence in your business model.

That will be the real core capability to show to the market that you have ability to ride through any liquidity concern. Beyond that, I mean, there are new challenges that emerge every day about cyber attacks, about scam.

These are new things that is emerging that keep us awake because there's always a new typology of attack on our customers and people being scammed.

Sean 

So when you look into the news today, you don't have to look very far to see some of the changes that are happening with climate. The bank plays a big role in that. And the targets around 2030, 2050 are not that far away. So what's your view for UOB? Is it a threat or you think it's more of an opportunity?

Kok Seong

We see this both a threat as well as opportunity. If you ask me, in fact, we see more opportunity than threat, because a threat is facing everybody, because this is a existential threat to all our society, but the opportunity is for us with the right mindset and skill set, you can exploit the opportunities. And we do see the opportunities in aligning the society to transition finance because we believe that to so-call achieve the net-zero target by 2050, it is counterproductive to try to be idealistic, to turn everybody ‘green’ overnight.

The only realistic way is to reinvest profit from existing activities, which is carbon emitting, into more renewable activities or sustainable activities. This reinvestment will take time because you cannot destroy existing productive capacity for the sake of turning green, without considering the investment already sunk in. You have to exploit whatever the productive activity has been invested, and then reinvest all the profit into renewable activities so that at the end of the day you achieve a net-zero target.

This is conceptually what I mean by transition finance; how to facilitate this to make sure that at the end of the day, life and livelihood is protected, it is not only lives, but we have also the vibrant economy at the end of 2050. So that is the ideal.

Sean 

So you've always been a bit of a leader when it comes to innovation. In fact, most of the work that you've done with Oliver Wyman has been around that space. What's your view of the risk function of the future?

Kok Seong

My view of risk function and innovation is the fact that I believe that risks must always leverage on new technology in order to stay ahead of the curve. Risk management in banking is all about making sure that we understand the business dynamic, to make the right balance between risk and return is always a trade-off and therefore, I believe innovation is something that the banking industry have to embrace.

The most talked about topic today is artificial intelligence, and I do believe that artificial intelligence will transform banking in many, many ways - the way we deliver banking services. But a core function of banking, of course, will not change, as the intermediary of public saving for redeployment in the economy, for productive lending in the real economy. That function will not be changed by AI.

But AI will transform the way we do it in terms of even the way we service our customers will be transformed. And from a risk management perspective, we definitely see the application of AI in every aspect of risk management whether it’s liquidity, whether it’s credit, whether it’s market risk or even operational risks, there are applications; the way we tease out data, for example, the way we analyze issues will be transformed significantly.

Sean 

Kok Seong, you're a leader that leads with a high degree of integrity. And it's something that I've told you I admire before. What's your philosophy around that and what advice might you have for other leaders in this sort of risk management field?

Kok Seong

Honestly, if you ask me, my leadership style is actually guided by two very simple, basic principles. Principle number one is the belief that all of us would do well if we have a higher purpose in life, and if we have a higher purpose, you will find meaning in your work, and if you find meaning, you'll be effective and passionate about it.

So higher purpose is very important to me, and that is where we need to ensure that all our staff align and understand what is the purpose of the organzsation that you’re working for.

Principle number two, I believe that everybody have strengths and weaknesses, so there's nobody who are strong in everything and therefore we just have to make sure that we are able to harness the strengths of everyone while mitigating their weaknesses in the way we allocate our work burden, for example.

So sum it up between these two principle is to make sure that we have alignment of purpose and marshal our troops, to make sure that we organize our people to maximize their strength while mitigating their weaknesses in our work.

And we would have a very effective organization.

Sean

Kok Seong, thank you. That was a nice wide-ranging discussion in a very short period of time. We covered everything from the macro kind of risks that are on top of mind for you, to the ambitious agenda around UOB, but particularly a couple of your big passions around innovation and also sort of those two principles that you lead by.

Thank you very much for your time and I look forward to working with you in the future.

Kok Seong

Thank you, Sean. It's my pleasure.

UOB chief risk officer Chan Kok Seong discusses the abundance of risks in banking, the transformative potential of AI, and his personal leadership style.

INFocus Series

INFocus provides exclusive insights and trends from experts and leaders across the Asia Pacific region, exploring the forces, opportunities, and challenges shaping its future.

Go to series

Sean Kennedy

Hi, I'm Sean Kennedy. I'm a partner at Oliver Wyman, and I lead our capabilities across Asia Pacific region.

Chan Kok Seong

Hi, Chan Kok Seong here, I am the chief risk officer of UOB group.

Sean

So Kok Seong, when you consider sort of the risk management in the age of economic disruption, what are the big macro risks that are on your mind, especially when you think about, like the pace of digital disruption and the shift in geopolitics. But what's the one thing that's really concerning you.

Kok Seong

At this point in time, actually the most worrying thing for me is the impact of quantitative tightening after so many years of quantitative easing on the real economy around the world. The impact on the credit condition and the commercial real estate market is something that is not shown yet. The ill effect of it is yet to be seen. This is something that we have to monitor very closely over time to ensure that our portfolio remains healthy.

Sean

Well, so, Kok Seong, in light of that sort of challenging macro environment, the bank’s produced some pretty good financial results recently. And also picked up four markets with the Citibank acquisition. There's kind of a lot to navigate. How do you steward the bank through that change?

Kok Seong

The recent acquisition of Citibank consumer portfolio in the four regional ASEAN markets is very much in line with our long-term strategy to build UOB as the Premier bank in the ASEAN region. In fact, we have defined our purpose as building the future of ASEAN. Being Singapore born and Singapore-centric is an advantage but at the same time recognizing the limitations of the size of Singapore.

Kok Seong

But we need to go beyond our comfort zone, to go to overseas market where we are not the local champion, and to go overseas, we need to select our battle field very well. We have selected ASEAN because Singapore is part of the ASEAN economy and ASEAN is a very promising future because we believe in the growth of Asia for the next century, outstripping the growth of the West. So therefore, acquiring that portfolio in this ASEAN market really help consolidate our position in ASEAN, in the sense that it double our customer base, for example, from 2.5 million to 5 million people in the right customer segment.

Kok Seong

So regardless of the business cycle that I worry about, in the context of the broader strategy, it is something that we are very confident in doing.

And it is an acquisition that build and consolidate our franchise, and will make us stronger in the long term. Although we may face short term challenges, in the long run, we are very, very confident that it will consolidate our franchise to build a more solid balance sheet.

Sean 

It's a very exciting and ambitious agenda. But what are the two or three things that keep you up at night.

Kok Seong

Well, as the chief risk officer, we always have to worry about all this traditional risk area in particular, liquidity risk is a major concern, given current development of what happened in the SVB case. In fact, the concern is now go down to intraday liquidity risk, beside daily liquidity. So it's something that we need to really (be) concerned about because the digital economy and digital banking actually heighten significantly the risk of contagion instantaneously.

But to be really as what we call a solid bank that can face all this liquidity challenge is to have a very sound long term business plan that build stable funding across our franchise wherever we do business and create trust and confidence in your business model.

That will be the real core capability to show to the market that you have ability to ride through any liquidity concern. Beyond that, I mean, there are new challenges that emerge every day about cyber attacks, about scam.

These are new things that is emerging that keep us awake because there's always a new typology of attack on our customers and people being scammed.

Sean 

So when you look into the news today, you don't have to look very far to see some of the changes that are happening with climate. The bank plays a big role in that. And the targets around 2030, 2050 are not that far away. So what's your view for UOB? Is it a threat or you think it's more of an opportunity?

Kok Seong

We see this both a threat as well as opportunity. If you ask me, in fact, we see more opportunity than threat, because a threat is facing everybody, because this is a existential threat to all our society, but the opportunity is for us with the right mindset and skill set, you can exploit the opportunities. And we do see the opportunities in aligning the society to transition finance because we believe that to so-call achieve the net-zero target by 2050, it is counterproductive to try to be idealistic, to turn everybody ‘green’ overnight.

The only realistic way is to reinvest profit from existing activities, which is carbon emitting, into more renewable activities or sustainable activities. This reinvestment will take time because you cannot destroy existing productive capacity for the sake of turning green, without considering the investment already sunk in. You have to exploit whatever the productive activity has been invested, and then reinvest all the profit into renewable activities so that at the end of the day you achieve a net-zero target.

This is conceptually what I mean by transition finance; how to facilitate this to make sure that at the end of the day, life and livelihood is protected, it is not only lives, but we have also the vibrant economy at the end of 2050. So that is the ideal.

Sean 

So you've always been a bit of a leader when it comes to innovation. In fact, most of the work that you've done with Oliver Wyman has been around that space. What's your view of the risk function of the future?

Kok Seong

My view of risk function and innovation is the fact that I believe that risks must always leverage on new technology in order to stay ahead of the curve. Risk management in banking is all about making sure that we understand the business dynamic, to make the right balance between risk and return is always a trade-off and therefore, I believe innovation is something that the banking industry have to embrace.

The most talked about topic today is artificial intelligence, and I do believe that artificial intelligence will transform banking in many, many ways - the way we deliver banking services. But a core function of banking, of course, will not change, as the intermediary of public saving for redeployment in the economy, for productive lending in the real economy. That function will not be changed by AI.

But AI will transform the way we do it in terms of even the way we service our customers will be transformed. And from a risk management perspective, we definitely see the application of AI in every aspect of risk management whether it’s liquidity, whether it’s credit, whether it’s market risk or even operational risks, there are applications; the way we tease out data, for example, the way we analyze issues will be transformed significantly.

Sean 

Kok Seong, you're a leader that leads with a high degree of integrity. And it's something that I've told you I admire before. What's your philosophy around that and what advice might you have for other leaders in this sort of risk management field?

Kok Seong

Honestly, if you ask me, my leadership style is actually guided by two very simple, basic principles. Principle number one is the belief that all of us would do well if we have a higher purpose in life, and if we have a higher purpose, you will find meaning in your work, and if you find meaning, you'll be effective and passionate about it.

So higher purpose is very important to me, and that is where we need to ensure that all our staff align and understand what is the purpose of the organzsation that you’re working for.

Principle number two, I believe that everybody have strengths and weaknesses, so there's nobody who are strong in everything and therefore we just have to make sure that we are able to harness the strengths of everyone while mitigating their weaknesses in the way we allocate our work burden, for example.

So sum it up between these two principle is to make sure that we have alignment of purpose and marshal our troops, to make sure that we organize our people to maximize their strength while mitigating their weaknesses in our work.

And we would have a very effective organization.

Sean

Kok Seong, thank you. That was a nice wide-ranging discussion in a very short period of time. We covered everything from the macro kind of risks that are on top of mind for you, to the ambitious agenda around UOB, but particularly a couple of your big passions around innovation and also sort of those two principles that you lead by.

Thank you very much for your time and I look forward to working with you in the future.

Kok Seong

Thank you, Sean. It's my pleasure.