Internship Report
Internship Report
Internship Report
BUSINESS IMMERSION
By:
Karina Permata Sari
NIM: 29115447
ii
ACKNOWLEDGEMENT
First and foremost, I would like to praise Allah SWT, for his guidance and blessing
until the end of my business immersion at PT. Bank XM (Persero) Tbk and finishing
this report as one of the requirements to finish the MBA program at Bandung Institute
of Technology (ITB).
Secondly, I would to express my gratitude for my beloved family for their endless
support. My dad and mom who always giving advices whenever I feel down and my
brothers who always cheer me up.
Thirdly, my greatest appreciation for Mrs. Sisi Rahmina, Mr. Yonie Prasetiawan, Ms.
Uswatun Hasanah, and Ms. Gabriella Viorena for being the best mentors in PT. Bank
XM (Persero) Tbk who always encourages me to be a better person in the workplace
and patiently taught me new things, which I couldnt get in class.
I am grateful to Mr. Yudo Anggoro as my thesis advisor in SBM ITB Jakarta who
guiding me throughout this last semester.
The last but not least, I thank my GM2-MBA friends who have been the greatest
companion for the whole semesters, JFS who always been there through my ups and
downs, and Yeah Mahasiswa friends for the infinite support.
iii
TABLE OF CONTENT
iv
LIST OF TABLES
Table 1. Variables Description .................................................................................... 22
Table 2. Descriptive Statistics...................................................................................... 23
Table 3. Correlation Matrix ......................................................................................... 23
Table 4. Model Summary ............................................................................................ 25
Table 5. ANOVA-ROA as a Dependent Variable ....................................................... 26
Table 6. ANOVA-ROE as a Dependent Variable ....................................................... 27
Table 7. Coefficients for Predictors of Performance ................................................... 28
Table 8. Implementation Plan Timeline....................................................................... 34
LIST OF FIGURES
Figure 1 Asean CG Scorecard of Bank XM .................................................................. 4
Figure 2. Results of CGPI Assessment of Bank XM from 2007 - 2015 ........................ 5
Figure 3. Organization Structure of Bank XM ............................................................ 11
Figure 4. Compliance Group Organization Structure .................................................. 12
Figure 5. Conceptual Framework ................................................................................ 21
LIST OF APPENDICES
Appendix 1: Financial Information of Bank XM ........................................................ 40
Appendix 2: The F-Distribution Table ........................................................................ 41
Appendix 3: The t-Distribution Table.......................................................................... 42
v
EXECUTIVE SUMMARY
Bank XM is the largest bank in Indonesia in term of assets, loans and deposits. Bank
XMis the result of the merger made by Indonesian Government from four older
government-owned banks that had failed in 1998. Those four banks were Bank B, Bank
D, Bank E, and Bank P. Bank XM realizes that through the implementation of Good
Corporate Governance (GCG), the company will be able to realize every goal to be
achieved and contribute in building the nation sustainably. Therefore, Bank XM put
GCG as the main foundation in conducting business and to maintain the Company's
existence in facing challenges and business competition.
Thus, the main purpose of the study is to identify the relationship between corporate
governance and company performance of Bank XM from financial year 2007-2016.
The governance variables and performance variables are tested under Pearson
Correlation and Multiple Linear Regression model to identify any relationships. The
three variables related to Corporate Governance are included in this study (Board size,
board composition and Audit Committee) while performance of the firms is measured
by return on assets (ROA) and return on equity (ROE).
The result from the analysis will be used to formulate proposed business solution. The
impact of the proposed solution will lead Bank XM in achieving their goals. The
proposed solution contains three strategies, which are: Deepen Client Relationship
(Wholesale Segment), Accelerate in Growth Segment, and Integrate the Group. Since
those three strategies has aligned with sustainable governance principles, it could help
Bank XM in achieving their vision and mission of becoming the leading financial
institution in ASEAN by 2020. The implementation of those strategies is conducted for
long-term period, which is from 2017 -2020
vi
CHAPTER I
INTRODUCTION
2
Regulation and the Regulation of the Financial Services Authority. In addition, to
keep up with the latest developments from the best practices of various references
such as the GCG General Guidelines by the National Committee on Governance
Policy, the Indonesian Banking GCG Guidelines, the OECD Principles, the
ASEAN Corporate Governance Scorecard and taking into account the best business
ethics and practices.
In accordance with Corporate Plan (2015-2020), Bank XM is committed
to be the leading bank in the implementation of GCG in ASEAN. In addition, Bank
XM has implemented Integrated Governance to create added value for the ongoing
financial conglomeration, which includes the implementation of integrated
compliance function, the implementation of integrated internal audit function, the
implementation of integrated risk management, while taking into account the
business characteristics and regulations which applicable to each subsidiary
company.
In order to continue the process of improving the implementation of
governance and becoming the leading bank in the implementation of GCG, Bank
XM has aligned the practice of governance in line with the standards of ASEAN
Corporate Governance (CG Scorecard). In addition to referring to the best practices
and standards of corporate governance at the national level, Bank XM also aspires
to ASEAN governance standards. Bank XM became one of the ASEAN Corporate
Governance (CG) Scorecard ranking participants organized by the Indonesian
Institute for Corporate Directorship (IICD). The ASEAN CG Scorecard is an
initiative of the ASEAN Capital Market Forum (ACMF) to conduct GCG
implementation assessments referring to the principles of GCG developed by the
Organization for Economic Cooperation and Development (OECD). By following
the ASEAN CG Scorecard, Bank XM will receive valuation and feedback on
governance practices in:
1. Shareholder Rights / Equity of Shareholders
2. Equitable Treatment of Shareholders
3. Role of Stakeholders Roles
4. Disclosure and Transparency
5. Responsibilities of the Board of Commissioners and Board of Directors
3
Bank XM has been following the ASEAN CG Scorecard ranking
annually. Bank XM is committed to continuously improve the results of the
ASEAN CG Scorecard
assessment to become the
top 50 best companies in
the results of the ASEAN
CG Scorecard assessment.
Since the first time
following the assessment,
the assessment of Bank
XM continues to increase.
Figure 1 ASEAN CG Scorecard of Bank XM
Bank XM has conducted a
self-assessment of the implementation of the implementation of ASEAN CG
Scorecard in 2016, the breakthrough by Bank XM is to compile and upload the
results of the implementation of ASEAN CG Scorecard in the website so that it can
be seen by all stakeholders. The results of the self-assessment Bank XM scored
104.63. The increasing value of ASEAN CG Scorecard shows that Bank XM will
continue to strive to maintain its existence as one of the largest companies in
Indonesia, which runs its business in accordance with applicable business ethics.
Aside from ASEAN CG, Bank XM also consistently follows rating CGPI
survey every year. CGPI is a research and rating program of quality management
of corporate governance followed by public companies (issuers), state-owned
enterprises, trains and other private companies. Bank XM has received CGPI
assessment for 12 (twelve) consecutive years since 2003. The result of the CGPI
Assessment of Bank XM in 2015 got the score of 92.88 with the highest predicate
as "The Most Trusted Company". The result is the highest GCG assessment. CGPI
assessment results for 9 consecutive years are as follows:
4
Figure 2 Results of CGPI Assessment of Bank XM from 2007-2015
5
Apart from the general introduction in Chapter 1, the report presents
business analysis which consist of theoretical framework, methodology, and
Findings and Analysis in Chapter 2. Chapter 3 shows the business solution which
consist of proposed solution, practical implication, and implementation plan.
Chapter 4 presents the conclusion and lesson that author learned from the internship
program.
6
Bank in Indonesia, and embarked on specific initiatives that enable us to grow and
achieve dominant market share of revenue in their focus segments. In addition,
Bank XM aims to be a Regional Champion Bank - a public-listed bank that would
be measured by market capitalization and ranked high amongst other blue-chip
public-listed banks in South East Asia.
Outperform the Market: During this period, the emphasis was on expanding
the Bank's business to ensure significant growth in all segments and a level of
profitability that exceeded the market average.
7
Net profit soared from Rp 0.6 trillion (equivalent to USD 61. 3 million) in
2005 to Rp 9.2 trillion (equivalent to USD 1.02 billion) in 2010
In line with the transformation of their business, Bank XM also went through a
cultural transformation based on a reformulation and reinvigoration of our key
values. Bank XM significantly improved their customer service quality levels.
For 5 consecutive years (2007, 2008, 2009, 2010 and 2011), Bank XM has been
named as a service leader amongst domestic banks based on a Marketing
Research Indonesia (MRI) survey. In addition, the Bank's achievements in
instituting good corporate governance have also been widely recognized. Bank
XM's consistently improving performance has elicited a positive response from
investors, as shown by a significant increase in the Bank's share price from Rp
1,110 on November 16, 2005 to Rp 6,300 as at September 30, 2011 - which
constitutes a rise of 33.6% a year on average (CAGR). Within a period of less
than six years, Bank XM's market capitalization soared seven-fold from only
Rp 21.8 trillion (equivalent to USD 2.16 billion) to Rp 146.9 trillion (equivalent
to USD 16.6 billion).
8
Retail Deposits & Payments
Bank XM is determined to become the bank of choice for consumers in the retail
deposit market by providing a unique and superior banking experience.
Retail Financing
Bank XMs goal is to become the No. 1 or 2 bank in the retail financing segment
by leading in the mortgage, personal loan, and credit card markets, and by
becoming a major player in the micro banking segment. Besides focusing on
these three strategic areas, they are also strengthening our organizational
structure and infrastructure (branch, IT, operations, risk management) to
provide more integrated service solutions. To successfully achieve our goals,
we will leverage on the critical support of our human resources, technology,
prudential risk management, and good corporate governance.
9
Bank XM is also supported by their subsidiaries which contribute
significant income of approximately 12% to the total consolidated net profit of the
Bank. Today, Bank XM has the largest ATM network with 10,000 units
throughout Indonesia. Bank XM has earned the distinction of being a most trusted
company in Indonesia for corporate governance for 5 consecutive years. They are
ready to become an anchor bank in Indonesia as Bank XM has fulfilled the criteria
set by Bank Indonesia, and propelled ahead by their vision to be Indonesia's Most
Admired and Progressive Financial Institution.
10
1.1.6. Organization Structure of Bank XM
The organization chart of Bank XM can be seen on the Figure 1 below:
13
brokerages, insurance companies and clearing as well as custodian agencies,
subject to the applicable laws and regulations.
Make temporary investments so as to overcome financing or credit failures based
on sharia principles, subject to such investments being subsequently withdrawn
and to the applicable laws and regulations.
Act as the founder and manager of pension funds in accordance with the
prevailing regulations governing pension fund industry.
Purchase collateral, either all or in part, through auctions or by other means in
the case the debtor did not meet its to Bank XM, with provision of collateral
purchased the obligatory cashing as soon as possible.
1.2.1. Wholesale
In this area, the Company is constantly working to build business relationships that
are mutually beneficial with customers, to strengthen the company's position as the
best Corporate Bank in Indonesia, the core competence of the company since the
beginning.
1.2.2. Retail
Accelerated growth in this area are focused on segment and products that the level
of risk and their penetration is relatively low. In this segment of consumer and micro
banking, would be developed as a new core competency of the company in the
future.
14
directly reports to the Director in charge of Compliance functions. Compliance Unit
at Head Office does not take over the responsibility of each Head of Work Unit at
the Bank for the implementation of compliance in each unit. Compliance Unit at
Head Office have to fulfill several criteria in implementing compliance function, as
follows:
a. Independent.
b. Mastering in Bank Indonesia and other regulations.
c. Do not carry other function in addition to Compliance Function.
d. High level of commitment to implement and develop compliance culture
Duties and responsibilities of the Compliance Unit at the Central Office in relation
to the implementation of the compliance function are as follows:
1) Making the steps in order to support the creation of a Culture of Compliance in
all bank business activities at every level of the organization.
2) Performing the identification, measurement, monitoring, and control of the
Compliance Risk with reference to Bank Indonesia regulation concerning Risk
Management Implementation for Commercial Banks.
3) Assessing and evaluating the effectiveness, adequacy and suitability of policies,
regulations, system and procedures that are owned by the Bank with the
legislation in force.
4) Conducting a review and/or recommend updating and refinement of policies,
regulations, systems and procedures that are owned by the Bank to comply with
Bank Indonesia regulations and legislation in force.
5) Taking measures to ensure that policies, regulations, systems and procedures, as
well as the business activities of the Bank in accordance with Bank Indonesia
and the legislation in force.
During the internship period, the author performed several tasks under Regulatory
Management Team, which are related to banking regulations in Indonesia. Those
tasks are:
1. Creating RISMA of Banking Regulations
Basically, RISMA stands for Regulatory Information Services and Monitoring
Activity. This activity require author to make a comparison between the new
banking regulations and the old one. This is in order to giving the updates to the
15
related banking regulation. By creating RISMA, this would help Compliance
Group to ensure other Groups/Divisions/Subsidiaries of Bank XM stay under
banking regulations while conducting their activity when theres a change in
related banking regulations. Bank XM have their own portal system where the
RISMA of the banking regulations will be uploaded in order to make other
Groups/Divisions/Subsidiaries could access it easily.
2. Making Resume of Banking Regulations
Besides creating the RISMA, author also making resume of banking regulations.
By making the summary of the related new banking regulations, this would help
other Groups/Divisions/Subsidiaries of Bank XM easy to understand core of
related banking regulations without actually read the whole regulation. Bank XM
have their own portal system where the resume of the banking regulations will
be uploaded in order to make other Groups/Divisions/Subsidiaries could access
it easily.
3. Research analysis of Banking Regulations
Another task that the author performed also conducting the research analysis of
banking regulations. The research analysis related to the foreign bank,
operational banking regulations and banking industry in related country since
Bank XM planned to open the representative branch office there and they have
to understand banking regulations of the related country and their industry in
foreign bank perspective.
16
To give a briefing on student to be a potential, competent, and professional in
entering the field of work.
c) Skills development
To improve the authors skill regarding with analytical thinking and soft skill
when facing the real business case
To enhance the authors skill regarding with communication skill and learn
how to deal with the real business challenge
d) For Personal Development
To develop authors characteristics especially her strong points and overcome
the weaknesses.
To be a more responsible person, reliable, and honest with the real situation.
e) For Bank XM
To establish a mutual beneficial cooperation with higher education
institutions, which in this case is Bandung Institute of Technology.
To provide opportunities for students to gain practical experience in the field
of Compliance Group.
As a means to give consideration in determining the criteria of the labor
required by the related party, which is in terms of human resources produced
by higher education institutions.
17
CHAPTER II
BUSINESS ANALYSIS
18
relationship between firm performance and board composition is mixed. Baysinger
and Butler (1985) found that firms with higher numbers of outside directors on the
board had a greater return on equity than the board with inside directors. Ezzamel
and Watson (1993) also found that outside directors were positively associated with
profitability among a sample of UK firms. Hermalin and Weisbach (1991) and
Bhagat and Black (2002) find no correlation between the degree of board
independence and four measures of firm performance, 20 European Journal of
Economics, Finance and Administrative Sciences - Issue 14 (2008) controlling for
a variety of other governance variables, including ownership characteristics, firm
and board size and industry. They find that poorly performing firms were more
likely to increase the independence of their board.
The outside directors are in a position to exert an intensive influence on the
management because they are independent financially and is of different self-
interest than the inside directors hence are in a position to protect the interest of the
shareholders than the inside directors (Fama, 1980). On the other hand, studies by
Klein (1998), Bhagat et al (1997), and Hermalin et al (1991) experienced a high
proportion of independent directors does not predict a better future accounting
performance.
The Cadbury committee (Cadbury 1992) also recommends that the ideal size
of the board should be between eight and ten members and that there had to be one
executive director for every non-executive director. Hermalin and Weisbach (1991)
find no association between the proportion of outside directors and Tobins Q and
Bhagat and Black (2002) find no linkage between the proportion of outside directors
and Tobins Q, return on assets, asset turnover and stock returns.
Velnampy (2013), analyzing publicly traded Sri Lanka manufacturing
companies find that determinants of corporate governance are not correlated to the
performance measures of the organization. Regression model showed that corporate
governance doesnt affect companies ROE and ROA. This result was supported by
Achchuthan (2013) that, there is no significant mean different between the firm
performance among corporate governance as board leadership structure, board
committees practices, board meetings and proportion of non-executive directors.
Zhaoyang Guo and Udaya Kumara Kgab (2012), state that, (i) board size and
proportion of non- executive directors in the board shows a marginal negative
relationship with firm value, (ii) proportion of non-executive directors in a board
19
and financial performance of firm shows negative relation contrary to the findings
of previous studies. The firm size and director shareholdings have a significant
impact on firm performance of listed firms in Sri Lanka.
Kumi Heenetigala and Anona Fern Armstrong (2011), Suggest a positive
relationship between governance practices (separate leadership, board composition,
board committee and firm performance) based on return on equity, and board
composition, board committees and performance measured by Tobins Q. These
relationships indicate that firms have implemented corporate governance strategies,
which have resulted in higher profitability and share price performance.
Thus, this report aims to improve the literature on the corporate governance -
company performance linkage by providing an analysis of Bank XM financial
reports for 10 years (2007-2016) and analyzing board of directors attributes.
2.2. Methodology
2.2.1. Research Method
This report will be using the quantitative descriptive research approach. There are
tons of difference definitions that try to define the quantitative research, but below
is some of the descriptions for quantitative research from several academic
professionals:
Cohen (1980) describe the quantitative research as defining a descriptive
statement about what "is" the case in the "real world" rather than "ought" to be
the case. The empirical statements usually expressed in the numerical terms.
Maki (2004) says that Quantitative is a research method that uses numbers for
interpreting data (Maki, 2004) and is distinguished by the emphasis on numbers,
measurement, experimental design, and statistical analysis" (Palomba & Banta
1999).
AECT (2002) Describe descriptive research can be utilizing for two types of
research, qualitative, and quantitative. The term descriptive research refers to the
type of research question, design, and data analysis that will be applied to a given
topic. Descriptive statistics tell what is, while inferential statistics try to
determine cause and effect.
20
2.2.2. Data Collection
The data and information required for this research were collected from Bank XM
websites, annual reports, and the GCG Reports from internal data from CGB
(Corporate Governance and Business Ethics) Department in Compliance Group.
Evidence required to test the hypotheses in this study is based on annual reports and
published statistics. Therefore, data derived for this study is from secondary
resources. The summary of financial information could be seen on Appendix 1.
ROE
Board Size
Corporate Company
Board Independence
Governance Performance
Audit Committee Size
ROA
21
2.3.2. Analysis
SPSS (Statistical Package for Social Science) was used to analyze the data to test
the hypothesis. The suitable tools were used to test the hypothesis and find the
reliability. Following techniques are used to validate the findings and to get best
solution. Correlation analysis is used to identify the strength or weakness of
relationship between corporate governance practices on firm performance.
Regression analysis is used to identify how corporate governance practices effect
on firm performance and as well as other factors extends. Described below are the
variables used to operationalize the constructs. They include the corporate
governance variables (board size, board composition, and audit committees) and
company performance based on ROE and ROA.
Table 1 Variables Description
Independent Variable
Board Size (8) Number of directors on the board
Corporate
Board Composition Proportion of outside directors sitting
Governance
(10) on the board
Characteristics
Size of Audit Number of members of audit
Committee (4) committee
The following conceptual model was formulated through the extensive literature.
The equation will be estimated in the form of:
= 0 + 1 1 + 2 2 + 3 3 +
Where:
= Intercept and ut = error term
Yt = Return on Equity (ROE) and Return on Assets (ROA)
X1t = Board Size for Bank XM at time t = 2007 - 2016
X2t = Board Composition for Bank XM at time t = 2007 - 2016
X3t = Size of audit committee for Bank XM at time t = 2007 2016
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2.3.2.1. Descriptive Statistics
Table 2 Descriptive Statistics
Table 2 above shows the descriptive statistics of all the variables used in this study.
Descriptive statistics were carried out to obtain sample characteristics. The above
descriptive statistics shows the number of directors in the board have a small range
from 10 to 12. The mean of the size of the board is 11, with a standard deviation of
0.47140. This is in par with many studies undertaken previously. The Cadbury
Committee report (1992) also recommends the size of the board to be between 8
and 10 members. It can be noted from Table 2 that the proportion of the number of
non-executive directors sitting on the board is about 7.2. This indicates that from
the board size approximately 70% of them are non-executive directors. Considering
the composition of the audit committee, the number of members floats from 4 to 6
directors.
23
Sig. (2-tailed) .474 .122 .115 .064
N 10 10 10 10 10
ROA Pearson Correlation .138 .173 .530 1 .973**
Sig. (2-tailed) .704 .633 .115 .000
N 10 10 10 10 10
ROE Pearson Correlation .211 .100 .604 .973** 1
Sig. (2-tailed) .559 .783 .064 .000
N 10 10 10 10 10
**. Correlation is significant at the 0.01 level (2-tailed).
The results of the correlation analysis in table 3 showed that the strength
relationship between ROA and the determinants of corporate governance (board
size and board composition) is considered very low. This is due to the very low
correlation score between ROA and Board Size and Board Composition which are
0.138 and 0.173. But the strength relationship between ROA and the Audit
Committee is in moderate level since the correlation itself is 0.53. Although the
strength correlation between ROA and the corporate governance is most likely
considered low, but since the correlation score is positive which means that theres
positive relationship between corporate governance and ROA. The p values
between ROA and corporate governance determinants (Board Size, Board
Composition, and Audit Size) are higher than 0.05. This showed that theres a
significant relationship between ROA with those determinants of corporate
governance. Since the correlation coefficient of ROA and corporate governance is
positive and significant, we can say that the ROA have the significantly positive
relationship with corporate governance even though its considered weak.
Next in ROE, the strength relationship between ROE and Board Composition also
considered very low since the correlation score is 0.1. Theres a slight increase of
the strength relationship between ROE and Board Size, even though it still
considered low due to the low correlation score which is 0.211. But the strength
relationship between ROE and Audit Committee is considered high since the score
is 0.604. Even though the strength correlation between ROE and the corporate
governance is most likely considered moderate, due to the positive score of
correlation, we can say that there is positive relationship between corporate
governance and ROE. Same like ROA, the p values between ROE and the corporate
governance determinants (Board Size, Board Composition, and Audit Committee)
24
are higher than 0.05. This showed that theres a significant relationship between
ROE with those determinants of corporate governance. Since the correlation
coefficient of ROE and corporate governance is positive and significant, we can say
that the ROE has the significantly positive relationship with corporate governance
even though its considered moderate. So, H1 is accepted since both ROA and ROE
have the positive relationship with corporate governance.
From Table 4 above we can determine the multiple correlation analysis result. This
analysis is used to determine the relationship between two or more independent
variables (X1, X2, ... Xn) to the dependent variable (Y) simultaneously. This
coefficient shows the relationship between independent variables (X1, X2, ...... Xn)
to the dependent variable (Y). R value ranges from 0 to 1, the value is closer to 1
means the relationship is going stronger, otherwise the value is nearing 0 then the
relationship is getting weaker. Based on the table 4 above, its obtained the value
of R which is 0.549. This indicates that theres a moderate relationship between
ROA towards Corporate Governance. For ROE, its obtained the value of R which
is 0.66. This means that theres a strong relationship between ROE and Corporate
Governance. So, we can say that the relationship between ROA and ROE towards
the corporate governance tends to be moderate and strong.
25
the percentage of contribution of independent variables (X1, X2, ...... Xn)
simultaneously to the dependent variable (Y). This coefficient shows how much
variation percentage of independent variable used in model which able to explain
variation of dependent variable. If R2 = 0, it indicates that theres no percentage of
contribution which given b independent variable to dependent variable. Or it also
indicates that the variation of independent variable used in the model does not
explain any variation of dependent variable. On the other hand, if R2 = 1, then the
percentage of contribution given by the independent variable to the dependent
variable is perfect, or the variation of the independent variable used in the model
explains 100% variation of the dependent variable. Based on table 4 above, its
obtained the R2 of ROA is 0.301 and the R2 of ROE is 0.436. This shows that the
percentage of contribution of independent variable (Board Size, Board
Composition, and Audit Committee) to dependent variables (ROA and ROE) equal
to 30.1% and 43.6%. Or variations of the independent variables used in the model
are able to explain 30.1% and 43.6% of the variation of the dependent variables.
While the rest of 69.9% and 56.4% influenced or explained by other variables that
are not included in this research model.
26
The F-value of ROA is 0.863. With the significance level of 0.05, the critical value
for F table with 3 and 6 degrees of freedom is 4.7571. Since the F-value is less than
the F table (0.863 < 4.7571), we can say that theres no significant relationship
between ROA and Corporate Governance.
Meanwhile, from the table 6 above, we can see the F-test result with ROE as a
dependent variable towards corporate governance determinants. The F-value of
ROE is 1.545. The critical value of F table with 3 and 6 degrees of freedom is
4.7571. With the F table higher than F-value (1.545 < 4.7571), it indicates that
theres no significant relationship between ROE. Since the result from F-test for
both ROA and ROE are less than the F table, we can say that the relationship
between corporate governance and company performance is not statistically
significant.
27
Table 7 Coefficients for Predictors of Performance
Standardized
Unstandardized Coefficients
Model Coefficients t Sig.
B Std. Error Beta
Dependent
ROA ROE ROA ROE ROA ROE ROA ROE ROA ROE
Variable
(Constant) 3.299 29.333 6.672 52.467 .494 .559 .639 .596
BOD -.112 -1.177 .526 4.140 -.088 -.106 -.213 -.284 .838 .786
1
BCOM -.148 -2.373 .356 2.802 -.195 -.357 -.415 -.847 .693 .429
Audit .426 4.660 .302 2.375 .655 .818 1.412 1.962 .208 .097
From the table 7 above, we can see from the t-test result that the t-value of Board
Size (BOD) is -0.213 which is less than the t table for both ROA (-0.213 < 2.44691)
and (-0.284 < 2.44691). The same result goes for Board Composition (BCOM) for
both ROA (-0.415 < 2.44691) and ROE (-0.847 < 2.44691). And the result goes the
same for Audit Committees for both ROA (1.412 < 2.44691) and ROE (1.962 <
2.44691). This indicates that the independent variables partially have no significant
effect on the dependent variables, which means that the corporate governance
partially have insignificant relationship with company performance. This also
supported by the result of the output result of significant value. for ROA as
dependent variable, both BOD and BCOM significant value are 0.639 and 0.838
which are higher than 0.05. The same output result of ROE as dependent variable
also goes for the BOD (0.596) and BCOM (0.786) which both are higher than 0.05.
But both significant value of audit committees for both ROA (0.208) and ROE
(0.097) are less than 0.05. This indicates that the audit committees have partially
significant relationship with company performance.
28
CHAPTER III
BUSINESS SOLUTION
29
is not only limited to credit products, but also other financial products that can
support an increasingly complex customer business. Some strategic initiatives to
be implemented include:
a) Integration of financial products which includes products that focus on
liquidity or credit, payment & cash management solutions, treasury
solutions, capital markets, and products related to retail banking;
b) Platform improvements ranging from back end to front end to improve the
quality of Bank XM's financial products in customers perspective.
Sector-Led Solutions
The development of wholesale business could be conducted by strengthening
Relationship Manager (RM) who has expertise in priority sectors. The initiatives
which needs to be developed regarding with the Sector-Led Solutions are:
a) Developing RM who has expertise or specialist in each priority sector, so that
the RM could provide an optimal added value to customers of Bank XM
b) RM can be a neutral product with a major focus of RM as a client-related
party, which not only interested in selling a particular product, but also cross-
selling and providing end-to-end solutions of value chain and customer
ecosystem.
30
c) Expanding business network in overseas market and developing cross-border
products.
Individual Segment
X's 2020 aspiration in the individual segment is to become a leader in the retail
individual segment with key indicators such as individual retail market share, e-
payment transaction growth, Credit Card positioning, KPR, Vehicle Financing
and payroll loan. Some of the strategic initiatives undertaken among others are:
a) Increasing market share particularly in priority customer segments and
Generation Y.
b) Conducting the establishment of motor vehicle-focused subsidiaries (2W),
innovation & optimization of credit card portfolio, enhancement of synergy
31
of X Group to take new segment in KPR, and personal loan product
development;
c) Having retail payment ecosystem by strengthening merchant business and
business model innovation with multi-platform business;
d) Developing Bank at Work solution through bundling of retail product
packages to wholesale and retail customers, as well as developing social
media elements and personal finance manager tools.
Customer-Centric Operations
The purpose of this strategy is to provide services and products that can meet
customer needs and satisfaction (customer-centric operation), so that it could
provide an optimal value-added to customers. Bank XM will differentiate
customers specifically in the retail segment (SME, Individual and Micro) and
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focus on the priority sector of the economy for the wholesale segment as well as
prioritize customers to provide services and coverage that satisfy customers.
33
Table 8 Implementation Plan Timeline
Strategy Year
Priorities Remarks
Aspects 2017 2018 2019 2020
Integrated
Continuous
Wholesale
monitoring
Transaction
Deepen required
Bank (IWTB)
Client
Continuous
Relationship Sector-Led
monitoring
(Wholesale Solutions
required
Segment)
Continuous
Cross Border
monitoring
Coverage
required
Continuous
Micro Segment monitoring
required
Accelerate in Continuous
Individual
Growth monitoring
Segment
Segment required
Continuous
SME Segment monitoring
required
Integrate Continuous
Branch-Led monitoring
Distribution required
Customer- Continuous
centric monitoring
Operations required
Integrate the Product-Neutral,
Group Sales-Focused Continuous
Performance monitoring
Management required
System
Integrated Continuous
Platforms and monitoring
System required
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CHAPTER IV
LESSON LEARNED
Every company has different approach when conducting a project to achieve the desired
objectives. The approach used has benefits as well as disadvantages for the company
itself that affect the task outcomes at the end. As a compliance intern, during the
completion of the tasks, there are many valuable lessons that can be taken.
Compliance Principles
The author learned that generally the Bank Compliance Policy contains guidelines for
all employees in the running of Culture of Compliance include: Public Policy,
Organization, Authority and Responsibility, Compliance Risk Management, Reporting,
Monitoring and principles of compliance. The principles of compliance of the Bank are
as follows:
The Bank always obey the laws and regulations and apply the precautionary
principle in implementing all the activities (mandatory).
The Board of Commissioners and Board of Directors to be an example (role model)
that is based on honesty and integrity so that the implementation of a culture of
compliance Bank (starts from the top).
The whole range of the Bank shall be fully responsible for implementing compliance
within each activity respectively.
Particularly, the author learned that compliance function implementation not limited to
prevention of violation on regulations, but also to the spirit as the base of mind. It is
important to put the Bank reputation as financial services institution.
35
achieved by taking into account the limits of risk that may occur. RAS compliance risk
is determined by the Risk Management Committee (RMC) through the process of
alignment between the two perspectives, namely top-down perspective of
Commissioners and the Board of Directors and the bottom-up based on the input and
synchronization with the business units and work units. In the future, RAS will be
regularly reviewed in accordance with the needs of banks and business developments
as well as regulatory changes.
36
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APPENDIX
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Appendix 2: The F-Distribution Table
41
Appendix 3: The t-Distribution Table
42
Appendix 4. Co-Workers at PT Bank XM (Persero) Tbk
43