Well, our final report to the client has been successfully submitted, the iMBA students have come and gone (with suitcases of merchandise acquired from the Wrentham Outlets), and life has finally started to slow down. Time for a belated 2-in-1 blog special!
Post-project reflections: Risk management is no small task
When we first arrived at the Beijing Microfinance Center of Harbin Bank, we thought we were simply coming in to help the team build a simple credit rating model for assessing clients. However, when we arrived and saw that the Harbin Bank microfinance team wasn’t composed of 500 people, but rather, 5, we realized that our task was much bigger than we had ever imagined…
Our project ran into a few hurdles from the start. The “database” that the client provided had less than 200 observations, with many gaps in data. Most of the data were not even labeled; we didn’t know what a “1” or a “2” meant in data categories such as “loan amount.” As we worked on the model and found ourselves making more and more assumptions, we started to see that the value we were going to provide to Harbin Bank was not going to be in a fully developed model, but rather, a thought framework to help Harbin Bank think about the whole risk management process from top to bottom. Risk management is no small task, and it begins with strategic planning, developed through excessive data gathering, and implemented correctly through modeling and training loan officers. Of course we couldn’t do all of this in two weeks, but we wanted to generate value to Harbin Bank by giving them an appropriate thought process for thinking through all of these critical issues.
At the end of the two weeks, all of the China Lab teams in Beijing presented final presentations in a mini case competition at Tsinghua University before their clients, guest judges from the industry, and the Chinese “media friends.” It was an interesting experience to say the least – for one thing, we didn’t know this was happening until we arrived in Beijing. Then there was the media presence and the huge fanfare around the dozen closing speeches we had. It really felt like a whole production, and even though we didn’t win “best presentation” award (congrats to Michael and Laila on winning!), I’m proud that we were able to present well despite the project’s challenges. One of the guest judges, a managing partner at PWC, applauded our work and acknowledged that calculating risk is difficult – even for the large banks. The final presentation reinforced for me what four students could bring to the table with a bit of hard work and perseverance. That and the 50 page report we delivered to Harbin Bank will hopefully get the ball rolling in the right direction.
What I learned from China Lab: Leadership in the midst of adversity
At the last China Lab seminar, Professor Huang asked the class what we had learned from China Lab. Definitely, what I learned wasn’t how to build a better model, or even how to complete a project and a final presentation without a clear project objective. What I gained was an interesting perspective into the world of SOEs in China, and a deeper understanding of the value of being able to influence change from the bottom (and conversely, the frustration of being unable to influence change).
Our main client contact had a great idea about building a framework to predict risk assessment. Unfortunately, his superior didn’t provide the resources to support this idea, and didn’t even fly down from Harbin to Beijing to meet with us even once during our time there. When we asked for assess to internal personnel for interviews, the superior in Harbin did not grant access because that would’ve meant going to his boss. So as a result, our team just stayed in our cubes for two weeks without having any real interaction with the company.
Despite this, our team built a great model that the main client contact embraced. When he shared the model with his peers though, we saw firsthand how he was alone in his excitement. Because our cubes were right next to his, we could hear the heated debates he had with his colleagues about utilizing a model for risk assessment. This leaves me wondering if our work was in vain…
I’m currently taking a class at Sloan called “Managing in Adversity.” In this course, we study cases of adversity and the CEO of that company comes in and shares lessons learned from the situation. When I reflect about China Lab, I wonder what were the lessons learned. I think there were many learned here: SOEs might not be as open to change as expected. Affecting change in organizations is difficult, especially from an outsider’s position. Without senior management support, change needs to be driven from the bottom with value creation. And frankly, I’m amazed by the reluctance to change, even when an idea (such as risk management) is clearly beneficial for the business. Last week in class, the former president of Trader Joe’s summed it best: “Only a baby with a wet diaper likes change.”
One of the skillsets I want to – and absolutely need to – develop as a leader in management is being able to drive true change. Understanding that I need to grow in this area was my biggest takeaway from China Lab, and I highly recommend this lab experience for anyone who wants to learn more about themselves as a leader in a global setting. That, and those who want to have a lot of fun over spring break too!