Job Design — A step towards efficiency in capital adequacy & supervisory excellence

Basel Committee described supervisory process “…the supervisory process of the framework is intended not only to ensure that banks have adequate capital to support  all the risks in their business, but also to encourage banks to develop and use better risk management technique in monitoring and managing their risks. The Bank’s internal control structure is essential to the capital assessment process. The board should regularly verify whether its system of internal control is adequate to ensure well ordered and prudent conduct of business”. 

The transition for Basel compliance requires a bank to improve functioning in various segments of its operation. The quantification in terms of capital assessment reflects only a part of the assessment. In order to achieve desired level of capital adequacy a bank should gear up its systems and procedures so that the target set by the bank in respect of capital becomes truly achievable. Considering the volume of operation, large number of branches and large variety of services involved, a strong internal control and rationalization of the work flow can aid the process of achievement. A proper job design is an essential prerequisite for strengthening the structure of operation. Proper delineation of duties at the operational level , in conformity with the corporate objectives , could facilitate ground level risk sensitization and would ultimately be  manifested at the aggregate level. 

Technological development has largely contributed in standardizing the branch level work system. The work stations and tasks assigned are now more defined. Such identification is not enough to inculcate the desired risk management culture at the branch level. As per the extant guidelines Risk Management department at corporate office is separated from the mainstream sanction and monitoring, so as to ensure independence of the risk management function of a bank. The risk management committees are empowered with the discretion to formulate the policy , create a structure at the apex level, and board of the bank has been responsible for overseeing implementation of the risk management system. The issue is whether such role delineation is also functional at the operational level. 

In broad terms the work structure of a bank can be segregated in to the following: 

1. Liabilities segment which includes deposits maintained with the bank.
2. Bills, remittances and related functions which generate noninterest revenue
3. Cash, clearing, locker which are services and are a part of general operation.
4. Letter of credit , Letter of guarantee,  DPG, Margin on LC/BG etc  related  jobs
5. Credit sanction and disbursement including relationship management.
6. Credit administration, follow up , management of impaired assets.  
7. MIS, Staff & establishment, audit and related jobs.
8. System administration.
9. Foreign exchange operations.

Implementation of Basel guidelines in capital adequacy requires the branches /centers to lay emphasis on the quality of the portfolio , collateral types and also the external rating in determining the risk weights to be assigned.  As part of the granularity principle, retail lending has been segregated because of  low risk, lower capital investment  and reasonable revenue earning from the portfolio. In case of other lending  higher  external rating, availability of collateral and guarantee available from government etc attract lower risk weight. The lower levels of risk weights are subject to compliance of certain conditions which require intrinsic examination of the portfolio as well as close monitoring to attain specific objectives, on  an ongoing basis. The branch / center has to be vigilant about the transactions as well as value of security on an ongoing basis, which requires carefully designed job allocation. Individual responsibility should be assigned  after specifying  duties duly recorded,  to ensure that all  compliances  become a part of the job design and facilitate  achievement of qualitative standard that the bank intends to achieve over  period of time. 

Designing the work Content

The primary task would be to identify the area which deserves priority and the ones where disposal is not an immediate requirement. While preparing the job profile, the existing job allocation etc should be kept out of the purview. The focus should be on the corporate objectives and the measures to achieve the corporate goal. In a typical branch the care should be  given to customer service which also includes the KYC norms while maintaining the relationship with the clients. The surveillance at the entry point should not be diluted at any cost, but the relationships should not be compromised. Simultaneously the level of service to the clients should be maintained at the highest level to attract retail customers. While assigning the jobs, the combinations should be considered carefully so as to avoid contradictions at the work place. Delivery of service and management of risk should be created in a manner that the work process  becomes spontaneous and acceptable to both staff as well as the clients. While clubbing various functions attention should be given to customer movement within the branch premises. The lay out should be such that the customer is attended in one location without being asked to move around in different locations for submission of information and availing services. 

The branch operations include delivery of services in connection with aforesaid functions. The works require scrutiny &  approvals at different levels which require close coordination in the back office of a branch. A job design has to foresee all these requirements within the office and assign the functions carefully at various desks. For example, a customer submits a request for issue of LC in front office of a branch. The front desk examines the requirement and accepts the request once it conforms to the guidelines and available limit. The request goes to the respective relationship manager who examines all compliances and sanctions and recommend for  issue of the same. On receipt of approval the required margin has to be raised. Normally borrower maintains fixed deposit from where margin is to be earmarked. The respective department has to examine the total exposure and mark lien in the FDR for the total exposure. Thereafter it goes to the credit desk where the report regarding beneficiary of the LC is to be obtained. If the report is not available with the branch ,identified agencies which  are to be engaged for obtaining the credit report. A well drawn job deign can capture each stage and assign responsibilities in such a manner that the ultimate customer receives proper service after complying with all terms of sanction. The authority of the concerned officer including the work flow should be clearly mentioned in the office order so that there is no ambiguity and respective team members realize their respective role. 

Let us examine a case where the borrower wants to avail an export credit. On receipt of the request the relationship manager scrutinizes the request and ascertain whether the borrower  is  entitled to avail the facility as per terms of sanction. Whether the country is risk positive , whether the sanction is eligible as per ECGC guidelines, whether  the order is backed by LC/firm order, whether running account packing credit is admissible, whether there is adequate drawing power, whether the stock charged has been inspected and required drawing power is available, whether the stock is insured and the insurance is duly charged with the bank, whether there was stock audit and  whether the deficiencies pointed out in legal/stock audit etc has  been rectified, whether the borrower is regular in servicing interest and installments, whether any payment of LC is due  etc. After ascertaining the complete status the disbursement is permitted. Naturally the risk management system  should be built in the process , so that the priorities are considered by the system. The country risk, the borrower rating , guarantors status, and also the risk weight of the facility should be kept in view while allowing the facility. A carefully structured job design can ensure desired level of functioning so that the branch can contribute in achievement of corporate objectives. 

The front level person is responsible for delivery of service and in case the job involves the front office personnel to take care of both front and back office the service will suffer. For efficiency in branch operation, the job design should envisage the targeted level and the measures to achieve the same. The job allocation may not be uniform in all the branches and will not be perpetual. The job design should undergo modifications based on shift in business pattern and volume and thereby change in business priorities. While designing the job content the number of people available the business mix and priorities should be considered. It is essential that the persons working in different desks and the supervisors are consulted prior to finalizing the job design.