CHANGE-READY FINANCE LEADERSHIP FOR A NEW WORLD

With his title as chief finance and value management officer, and an evolving strategy at Standard Bank Group, it’s no wonder Arno Daehnke won the 2022 CFO of the Year Award! Caylynne Fourie caught up with him to find out how much work really went into making the group – and the CFO role – future-ready.

On 16 November 2022, Arno Daehnke was crowned the CFO of the Year at the glamorous annual CFO Awards ceremony. The honour recognised Arno for his outstanding leadership and performance in driving growth and profitability at Standard Bank. However, Arno accredits his success to the people delivering an “amazing” finance function for the group.

“While I am humbled and privileged to have won this award, it’s really a recognition of the 1,500 people who have worked so hard to change so much in a very complex and ambiguous environment,” he says. “It is because of them that we can continue to stay abreast of the business and regulatory requirements and continue to deliver value to the group overall.”

He explains, while he is proud of the work he has done in finance, the real bragging rights come from growing the group’s stakeholder value – growing clients’ opportunity to improve their lives, working with regulators to do ethical business, supporting governments, and ensuring a sustainable planet. “The title doesn’t do anything, your actions do.”

Arno’s finance team has been focused on being much more than just the number crunchers. “Historically finance has just been about putting the numbers together every month and recording the P&L in a rigorous manner while maintaining appropriate levels of financial control. But of course, it’s so much more than that,” he says.

Increasingly, the finance industry is seeing its professionals focus more on strategy, resource allocation, as well as enabling change and digital transformation.

“We’re preserving and growing value across so many spectrums,” Arno adds.

It’s because of these changing responsibilities that Standard Bank has given their finance leaders, including Arno, the titles of chief finance and value management officers (CFVO). “As CFVO, you need to do three things: ensure the business can manage and thrive in an uncertain environment; retain, attract and empower talent and scarce skills; and manage ESG matters – which are especially important on the African continent.”

Thriving in an uncertain environment

In 2020, Standard Bank wrote off R20 billion of bad loans due to the Covid-19 pandemic, and for the first time since listing in the 70s it didn’t pay a dividend. As a result, Arno and the rest of the management team took the opportunity to pivot the business so that it is better placed to deal with shocks like the pandemic.

“As the biggest financial institution in Africa, we have to continue to reinvent ourselves to remain relevant to our clients and all our stakeholders. We realised the world will never be the same, and if we don’t pivot now, we will be lagging behind,” Arno says. “So, we thought about our value drivers and how we are future-proofing those.”

For Standard Bank, being future-fit means being able to compete in the fourth industrial revolution, which has been catalysed by data, digital platforms, cloud computing and machine learning. He explains that banks have a wealth of information about their clients that the sector hasn’t been good at monetising because of fragmentation. “As a result, we’ve undertaken a deep push into data the last two years, using machine learning and tools to anticipate what a client needs and when.”

Using this data, Arno and CEO Sim Tshabalala realised that there was an opportunity in this for Standard Bank and went to work on the company’s future-ready transformation, which would see it become an ecosystem and platform-type organisation. At the 2022 CFO Awards, Arno received the Strategy Execution Award for his contribution in executing the company’s new model.

“Historically, the bank has operated using a linear value chain model, where it owned the entire value chain for manufacturing, maintaining, servicing and distributing its products to the clients. The new business model is a networked environment, which is why companies like Amazon and Google are so successful,” Arno explains. “With a platform and ecosystem environment, you don’t have to manage and own the entire value chain. You have multiple participants that help you augment the value chain.”

Standard Bank identified 10 ecosystems, five they would participate in, and five that they would orchestrate, including agriculture, trade, home services, energy, mobility, and health.

An example of this is that the bank used to provide the mortgage products for homeowners. “If you wanted to buy a house, you had to come into the bank yourself and we gave you a loan that you had to repay over 20 years. Now, in an ecosystem model, we can manage the entire home ownership experience for you,” he adds.

Standard Bank is starting to do this through its new LookSee platform, which gives clients access to ancillary services and information related to home ownership. “Right now, a great example of how this has proved beneficial for clients in South Africa is that they are able to manage their independent power supply, including the installation and maintenance of solar panels and inverters,” Arno says. “We have vetted the suppliers and we fund the technology so you can manage the very big upfront costs that come with these installations.”

Standard Bank can also connect small businesses with other big corporates to facilitate growth opportunities through this ecosystem model. “A real example is that we have helped various spaza shop traders connect to Coca-Cola so they can sell more out of their stores. We ensure that the merchandise is delivered and funded and we help manage that relationship.”

On the back of this ecosystem model, the bank announced a partnership strategy and has been inundated with people approaching them for new opportunities. “Pick n Pay is a good example of a partner who wants to be able to offer financial products in their stores, but they don’t want a banking licence. We also have critical partnerships with Microsoft and Amazon Web Services [AWS].” he explains.

The Liberty transaction is another point of pride for Arno, who led the R17 billion transaction. “It was an immensely complicated deal, historically managed through a complex bancassurance agreement, and we couldn’t continue owning the majority but living separately,” he says. “We are now the third biggest asset manager in Africa, and it has really completed our client offering as a financial services provider.”

Arno explains that through these partnerships and ecosystems, and the many more that are to come, the bank has created a more profitable and more sustainable business model.

Attracting, retaining and empowering talent

Retaining and attracting skills is what keeps Arno awake at the moment, as he says that it’s one of the most important parts of his job as a CFVO. “Ultimately, value gets delivered through the knowledge people bring to the organisation and the passion and energy they have. If you don’t have that, you won’t be able to deliver change.”

The Covid-19 pandemic allowed people to focus more on the things they love, including where and how they go to work, which has changed employer/employee relationships forever. “People want to work for organisations that share their passions, are progressive and forward-looking, and are making a difference in the world we live in today,” he says. “They want to know that they are part of something bigger.”

Arno explains that, in order to enable the human component of your organisation and unleash the creativity of the people, leaders need to empower their teams in agile ways.

“Our teams need the right tools to deliver on the new business models we’ve put in place, including cloud computing, machine learning and tech capabilities.”

With big transformation comes big uncertainty, however, and it’s up to leaders to help their people navigate the culture shift that comes with it. “As a leader, inspiring and empowering people is incredibly important.”

Arno also sits on Standard Bank’s group social and ethics committee, which is where all the important conversations around transformation take place. “Three years ago, empathy and mental health were much less important topics than they are now. Covid-19 has taught people how to care for each other again and how to manage stress in order to remain resilient,” he says.

Arno has implemented various mental health resilience building interventions with his finance team, including taking the time to check in on and listen to everyone at the start of a meeting – something they never did before the pandemic.

He explains that the bank recognises that everyone has been through a lot in the last two years, and provides a special counselling service with a professional psychiatrist, free of charge. “It’s entirely confidential, and it doesn’t have to be restricted to work-related issues.”

Arno’s leadership style, like the bank’s, is an empowering and empathetic one. “I fundamentally believe that everyone has immense value to bring, and it is my job to unlock that. That’s what true leadership is.”

He explains that he tries to bring the best out of everyone around him, and likes to be seen as approachable, open to new ideas, supportive and empathetic towards people.

“I am back full-time in the office because I want to see people,” he admits, adding that collaboration is immensely important for him, along with continuous learning and development.

Arno believes that it’s a leader’s job to support their teams through training and career opportunities. “It’s important to allow people to have different growth opportunities so they can follow their passions. Just because you studied to be an accountant, doesn’t mean you’re restricted to only being that. You have to continue to upskill yourself in order to remain relevant and to understand the environment you’re doing business in,” he says.

Arno refers to how he started his engineering career as a seismologist, and then decided to go into banking 10 years later. “It was a tough wake up call. You think you can transfer some of the mathematical skills, but it’s actually quite a big leap.”

Now he’s been in the banking industry for 20 years, and he couldn’t be happier! “As you continue to reinvent yourself, you have to have the courage to just leap into something you are passionate about, even if it means going back to university and learning new things.”

Managing ESG-related matters

With an increased focus on sustainability, the world is looking towards big banks to lead the charge in making a difference. “We’ve implemented a new policy to be net carbon neutral in all our financing activities by 2050. That means, if we’ve extended an auto loan, we have to offset the impact of its emissions in some other way, or stop financing that car by 2050,” Arno says. Despite the pressure, for Standard Bank it’s important that this transition is just.

Arno explains that the African continent contributes only three to four percent of greenhouse gases globally, and is one of the most energy poor continents in the world. The challenge is to increase access to energy across the continent to drive growth. “It’s easy for the Scandinavians to generate up to 90 percent of its power through sustainable fuels and green energy, and for them to stop supporting non-sustainable, non-green energy production, for example. But in Africa, the reality is a bit more nuanced where, for example, funding a brown energy project may be a net positive for growth and employment in the medium term.”

The amount of brown energy (oil and gas related) Standard Bank currently finances is less than five percent of its portfolio. “We are participating in the financing of the Mozambique gas fields, for example, which requires trade-off considerations,” Arno says. “These gas fields transform the Mozambique economy and will uplift so many people who have previously struggled economically.”

Because of this, trade-off decisions have to be made on a case by case basis, he adds, depending on how the bank is going to continue to participate in the economic upliftment of the continent, while doing it in an as-green-as-possible way.

“We now need to think very carefully about how we finance it without damaging the economies,” Arno adds. “If you don’t finance some of these activities, you could damage the economy by taking away power.”

Moving into Africa

Standard Bank has operated in some African countries north of South Africa for more than 100 years, generating more than 35 percent of the bank’s revenue. Some of its biggest successes are countries like Uganda, where it has a large share of the market, Nigeria, where it’s the leading corporate and investment bank in the country, and Angola, where it has a very high ROE.

Arno explains that the finance function at the bank has a matrix model that works exceptionally well when it comes to reporting their African activities. “We have a domain reporting line, which comes directly to me via the country’s CFVO. This is where the expertise and the centre of excellence is. We also have a day-to-day reporting line, which is between the local CFVO business partner and the CEO.”

There is an active treasury component in each of the countries’ finance teams. “There has to be! The balance sheets are volatile, more than in South Africa. You need to be nimble in managing foreign and local currency balance sheets. We have central oversight from the group on this, around liquidity, FX, interest rate, hedging strategies, dividend flows.”

It is for his contribution in some of these successes that Arno was also awarded the Moving into Africa Award at the 2022 CFO Awards.

“There’s been a lot of reform in Africa, and we find often the more complex and nuanced the environment is, the more it suits our business,” Arno says, explaining that it’s because of Standard Bank’s on-the-ground presence and subsequent expertise in these countries that they are able to understand their clients and market flows better.

“We understand how Africa is connected to the rest of the world, what the trade flows across Africa look like, the challenges they are facing, as well as the technology and digital penetration in each country,” he adds. “We have a unique proposition, and that’s our core competitive advantage in those markets.”

Standard Bank is looking to expand its investment in Africa even further, with both organic and acquisitive growth.

Parting wisdom

One of the things keeping Arno up at night is how much the bank needs to invest in future-ready initiatives versus what is currently working. “It’s one of the most careful considerations you have as a CFVO, and one of the biggest responsibilities,” he explains.

Because of this, he has come up with the mantra “defend and grow”, which means defending the bank’s current franchise against competitors, but also growing into this new ecosystem business they’ve been working on.

We have an innovation tournament, where you have thousands of ideas competing, but only the best ideas move onto the next round. We then choose the top three or five brilliant ideas and drive those forward.

Arno explains that, in all this complexity of transforming the organisation in such a fast-moving world, what has helped most is distilling everything down to the basics. “Part of our jobs as leaders is to take a complex environment, simplify it and distribute it into the core basic needs of our people and our clients.”

He adds that you also have to be crystal clear on the direction you’re going in, who’s accountable and who delivers. “With 55,000 people across 40 countries, when you embark on a transformation like this, you really have to be very clear on what needs to be focused on and by who,” Arno concludes. l