The R ole of P ublic R elations in the F inancial S ector

1. The Role of Public Relations in the Financial Sector Kemal Kozarić, Ph.D. The Governor of the Central Bank of BH

2. Introduction • one financial system can operate independently and survive the crisis without the consequences in another system; • It is never too much coordination and communication between the institutions and between public institutions and the public; • Transparency, the skills of communication and presentation in crisis, the public relations, become the necessity and main issue for keeping the customers ; • The institutions which had developed function of public relations and clearly defined mission, vision and targets, have passed easier through the period of turbulence, and it resulted in the fact that their stakeholders kept, in some cases even increased, confidence in this institutions. 2

3. The Central Bank • The Central Bank, together with financial intermediators and clients, forms the pillar of the financial system, so the maximum engagement of all is needed in order to maintain the financial discipline. • There are four basic parameters that regulates the role of a central bank: • Independence • Credibility • Responsibility • Confidence in the central bank • The corporate reputation of the central bank has key value for the financial system. 3

4. The credibility and responsibility of a central bank • Independence: • Personal • Institutional • Financial • Credibility: • A central bank enjoys the credibility if the public believes that it will do what it has announced • Responsibility: • The responsibility of a central bank is reflected in conducting the monetary policy in the way that it will ensure the monetary and financial stability, the low inflation, confidence in the local currency • An important factor is confidence in the institution • “The confidence is hard to gain, and very easy to lose” 4

5. The credibility and responsibility of a central bank • The way we communicate in moments of crisis can mean the difference between the success and potential danger to the institution. • During the crisis all stakeholders (employees, suppliers, investors, clients, media, legislators...) will want a far bigger amount of information than in normal circumstances. • Proper management of the crisis clearly indicates the real causes of the crisis and provides a quick and successful resolution of problems. • The situations in which the crisis is completely put “under control” even before all stakeholders are aware of it are rare and usually requires a crisis communication. 5

6. Four key factors for successful crisis communication • Those who work on crisis communication must have all relevant information about the event; • Those who work on crisis communication must be prepared in advance for crisis situations and must have a crisis communication plan ready; • It has to be known: who is doing what – the teams for crisis communication must be prepared and created long before the outbreak of the crisis. • One should be proactive – to create the news, rather than waiting to become a news. Otherwise it will be very difficult to control the crisis. 6

7. The elements of a successful crisis communication plan • Crisis „headquarter“ • Plan for internal communication in a crisis situation • Spokesman • Preparation of scenario and simulation of crisis • Determination of the target public • Definition of the key messages by public • Determine the most effective methods of communicating • Urgency and precision of communication – three key questions are: • What has happened? • What do we take over? • What are we going to take over? • The analysis of the effects of crisis communication 7

8. The communication „readiness” before the outbreak of the crisis • Large growth of sector by all parameters • High level of corporate reputation (the fastest growing sector, the most desirable employer) • Marketing communication – PR more as a form, rather than as an essential function • Communication with key stakeholders (clients) • Crisis communication planning ignored, more accurately, even the possibility of the outbreak of the crisis ignored • The development of function of the public relations in commercial banking is still observed from a level of “support services” to marketing services • The central banks, opposite to commercial ones, almost completely rely on public relations as a pillar of the process of informing 8

9. Types of public for central bank to communicate with • The external public • Media; • Government; • Financial markets; • Academic community; • Citizens. • The internal public • Bank management; • Employees. 9

10. The „tools” for the Section for PR in the CBBH • Timely provision of information and/or adequate sources at the requests of journalists; • The press conferences – held as needed; • The bank’s website – recently redesigned to provide more easier and better access for its users to the information on the bank; • Publications; • Regular – bank’s quarterly newsletter • Periodical – publications/brochures issued as needed, usually to provide the explanation of some new functions of the Bank (brochure on the reform of payments systems, brochure about the KM banknotes, etc.); • The seminars for journalists – held as needed, usually before bank’s major projects, to provide the information to the interested media representatives, that will facilitate the monitoring of future events. 10

11. “The journalists pool” as the key to good communication • The quality communication is achieved between the Bank and journalist in terms of informing and exchange of information. The journalists who regularly follow up the work of the bank are better informed about the developments and they will easier interpret the information coming out of the Bank. • The communication is faster. The direct message/mail/fax to journalist who regularly monitor the banking or the economy is far more effective and faster way of transferring the message to the right address. • Maintaining of the quality “journalists pool” is not an easy work in Bosnia and Herzegovina 11

12. In the world Collapse of the New York Stock Exchange The panic USA - Europe Quick interventions of governments - guarantees for savings deposits Investment banks endangered, Uncertainty In BH Panic Bad experience from the era of former Yugoslavia KM 81 million of deposits withdrawn in 10 days Lack of response from the executive government Lack of response from the representatives of BH banks The media - speculations The information gap The target of the attacks: the banking sector of BH The financial crisis

13. The strategy of the CBBH in crisis communication management • The CBBH – proactive attitude • The objective: to manage the crisis and prevent the panic • In the first 48 hours – an initial meeting within the CBBH • First addressing to BH public: “Our banking system is liquid and domestic banks have no problems” • TV stations reported on the crisis • Washington – session of the World Bank and the IMF • October 11, 2008 NTV Hayat (“Centralni dnevnik” show) • the Governor addressing directly to the BH public for the first time • Until then the first and only measure to calm the panic in the banking 13

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15. The media theme: the financial crisis • October 2008 – 241 headlines; November 2008 – 92 headlines (only printed media and internet portals, without broadcasting media); focus of the headlines shifts from the banking sector to the economy. • The officials of the Central Bank of Bosnia and Herzegovina were doing job as spokesmen for the institution providing the statements for media in different forms – by phone, TV crews coming in the bank premises to take statements, making the statement outside the premises, then a number of presentations at various meetings to different interest groups. 15

16. The media theme: the financial crisis • Good coverage on the Internet – Search on request Kemal + Kozarić + Financijska + Kriza for the period from October 2008 to April 2009: • Google – 67 positive results; • Bing – 84 positive results (the time can not be confined); • Yahoo - 84 positive results (the time can not be confined).

17. The media theme: the financial crisis The analysis of media headlines for October 2009 (one year after the beginning of the crisis) - 17 different media: 10 daily newspapers, 3 periodical press and 4 internet portals

18. The media theme: the financial crisis

19. The media theme: the financial crisis

20. The media theme: the financial crisis Value orientation of headlines

21. The crisis communication Media relations The needs of the public during the crisis After the crisis (learned) Recommendations • The target of public relations – an increasing of • the CBBH resistance in the crisis situation • The financial crisis in 2008 – the biggest challenge • for the CBBH • The unpredictable situation • The most important PR resource – the information • The communication – investment opportunity • Proactive approach in communicating with the public • The confidence is hard to gain, and easy to lose! • Building of reputation – team work • Immediately assume responsibility and take over the control

22. The crisis communication Media relations The needs of the public during the crisis After the crisis (learned) Recommendations • Two-way communication • Main source of the CBBH reputation is the Governor (70%) • Openness and transparency • Ethical and social responsibility • Focus on media (mirror – CBBH : media) • Rich media list (30-50 addresses) • Briefings for journalists (competent collocutor) • Press clipping (archive)

23. The crisis communication Media relations The needs of the public during the crisis After the crisis (learned) Recommendations • Internal public (“ambassadors”) – intranet and meetings • Advertising (in order of importance) : TV, daily newspapers, Internet, Radio and magazines • External communications : press conferences, press releases and reports • Speed of response to requests • - Answer the questions: who, what, when, where, why and how • Communication channels (in order of importance) : interviews, press releases, meetings, bulletins, website, blogs, special events

24. The crisis communication Media relations The needs of the public during the crisis After the crisis (learned) Recommendations • The crisis – an opportunity to show real abilities • Being unprepared for the quick action can threaten even the most successful sector • The shaken confidence slowly returns • The CBBH continues to monitor events and media reports • Commercial banks undergoing the difficult times • The most difficult phase overcomed • Consequences being present

25. The crisis communication Media relations The needs of the public during the crisis After the crisis (learned) Recommendations • Analyze the overcoming crisis (preparation for the future crisis) • Prepare a plan of crisis communication in the future • Conduct SWOT analysis • Continued education of the public relation staff and other employees who come into contact with the public • Special education of journalists – to create the best possible “journalist pool” • Education of the public (citizens) on the activities of commercial banks and the CBBH – educational campaigns, round tables, workshops, etc. • Cooperation of the public relations staff from commercial banks and the CBBH – exchange of experiences and ideas for the future crisis

26. Lessons learned • The banks were not doing enough with the clients in terms of educating and learning them about their commitments and rights – a key reason for clients to create a feeling of mistrust and fraud; • Self-centered, instead partnership approach in times of crisis have produced a feeling of alienation with clients ; • Insufficiently transparent relationship with the media further complicated matters; • Very late presentation of the products “customized” to the crisis, such as “ How to plan a household budget”, “Full guarantee on deposits, rescheduling of loans”, etc. – the reaction must be quicker. 26

27. Conclusion • The education of clients before, during and after entry in a debtor-creditor relationship will become the rule, not an option; • Transparency in informing clients about the market situation and any changes related to the conditions; • Personalized approach to every client – through a credit adviser or personal banker is the approach expected in the future; • The banks will have to work on developing more effective public communication strategy, especially in the field of crisis communication. It is evident that the approach in which the marketing departments have a privileged status in relation to the public relations sections will have to disappear, because it proved as ineffective as a way of communication. 27

28. Thank you for your attentionhttp://www.cbbh.ba 28 28