The Bank's core values drive our business strategies, and they are central to everything we do. They provide us the commitment to create superior and sustainable long-term value for shareholders and broader stakeholder groups - which include customers, employees and their families, business partners and society.
Unless otherwise specified the boundary pertaining to this section on sustainability is limited to the Group's operations in the Kingdom of Saudi Arabia, i.e. Al Rajhi Bank and its wholly-owned subsidiary Al Rajhi Capital (ARC). A significant exception is our discussion on economic performance, where the boundary is the Al Rajhi Group as defined in the consolidated financial statements.
Economic performance
Value addition
The statement of value addition and distribution of the Al Rajhi Group given below shows the flow of capital among different stakeholders. It is thus an indicator of our contribution not only to shareholders but also to the sustainability of a larger economic system.
Statement of Group value addition and distribution
| FYE 2012 | FYE 2011 | |||
| SR million | % | SR million | % | |
Value added |
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| Income from banking services | 13,936.74 | 12,441.66 | ||
| Cost of services | (1,257.29) | (1,110.04) | ||
| Value added by banking services | 12,679.45 | 11,331.63 | ||
| Non-banking income | 46.28 | 60.46 | ||
| Impairment charge for financing and other | (2,319.17) | (1,645.14) | ||
Total value added |
10,406.56 | 100 | 9,746.94 | 100 |
Distribution of value added |
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| To employees as salaries and other benefits | 2,120.12 | 20.37 | 1,960.86 | 20.12 |
| To providers of capital | 4,875.00 | 46.85 | 4,875.00 | 50.02 |
| To government as Zakat | 850.00 | 8.17 | 750.00 | 7.69 |
| For expansion and growth | 2,561.41 | 24.61 | 2,161.08 | 22.17 |
| For community investments | 0.03 | 0 | 0 | 0 |
| Total value distributed | 10,406.56 | 100 | 9,746.94 | 100 |
Development of the SME sector
We fully recognize the diverse nature and the value of the SME sector as they are the very backbone of regional economies. Taking cognisance of the pivotal role the vibrant SME sector plays in the Kingdom in generating employment, driving economic growth, increasing cross border trade and fostering the spirit of entrepreneurship, we have developed a number of Islamic products for financing, trade finance and cash management in accordance with both international standards and Shariah requirements. Our contribution to this sector has resulted in entrepreneur development, direct and indirect employment creation and capital formation in the periphery. The type of economic activities supported includes trade, services and manufacturing.
Risk and its management
Risks are very much part of the banking industry, and they have a direct impact on a bank's financial performance and growth. This in turn has a direct and indirect impact on the economy and society at large, as one currently witnesses the contagion effects of a financial crisis triggered in the US that is now engulfing country after country across the euro area.
Al Rajhi Bank employs a comprehensive and systematic process to identify, analyze and contain the various types of risks it is exposed to. The process essentially involves agreeing on various risk thresholds based on the Bank's risk appetite and then implementing strategies to generate a superior long-term return to shareholders.
Risk management is performed under policies approved by the Board of Directors and in close cooperation with the Bank's operating units. The most important types of risks identified by the Bank are credit risk, liquidity risk, market risk and operational risk. Market risk includes profit rate risk, foreign currency risk and price risk .
A more detailed discussion on financial risk management is given in Note 25 to the consolidated financial statements, while Note 26 and the Operations Review provide an assessment of concentration risk in terms of products and markets.
In addition, the Bank maintains an up to date Disaster Recovery & Business Continuity plan that is periodically subject to dry runs. The Bank also has a fully serviced disaster recovery site. Training sessions for senior management are conducted regularly, including internal communications that are rolled out across the Bank as needed.
Environmental stewardship
As a financial institution, the nature of our operations does not pose a serious threat to the environment, other than the direct and indirect greenhouse gas emissions that arise from purchased inputs. In this respect, we continue to seek ways to minimize negative environmental impacts through three approaches, namely, controlling resource consumption, ensuring responsible investment and supporting environmental initiatives targeting the broader community.
Resource consumption
The consumption of purchased energy and materials with significant environmental impact is largely managed through good housekeeping practices. They include adopting energy efficient technologies and practices to control electricity consumption, minimizing the usage of paper by switching to email and intranet for communications as far as possible, e-based archiving instead of printing, avoiding wasteful use of water, recycling used paper and disposing waste responsibly. We also encourage the use of online services for customers, which not only eliminate paper but also provide other benefits in terms of lower costs to both parties, convenience, and speed.
Responsible investment
The Bank and ARC make direct investments as well as provide financing to customers in the normal course of business. Such investments, particularly those above a specified threshold or those in a defined sector, are inter alia subject to an assessment of the environmental and social impacts before a decision is taken.
Generally, this would mean an assessment of whether the project has been designed to prevent or minimize pollution, and have acceptable measures for waste disposal or recycling, water and energy conservation, climate protection and product responsibility. Social safeguards include aspects such as compliance with labour laws of the Kingdom, provision of worker health and safety, prevention of child labour, non-discrimination at workplace, checks on sexual harassment and minimizing any negative impact on local communities.
Employees
Our human capital is without doubt a major component of our success. Guided by Shariah principles, we remain committed to acquiring, developing and retaining an appropriate talent pool to meet the requirements of our strategic objectives. We encourage diversity and work - life balance. Likewise, we make sure that employee health and safety are treated with importance, while having a zero tolerance policy on child labour and discrimination in any form.
The discussion that follows pertains to Al Rajhi Bank, which constitutes our banking business in Saudi Arabia.
Employment type and diversity
Workforce by gender as at December 31, 2012
| Managerial | Other | Total number of employees | |||||||
| Male | Female | Total | Male | Female | Total | Male | Female | Total | |
| KSA | 505 | 10 | 515 | 7,734 | 788 | 8,522 | 8,239 | 798 | 9,037 |
Workforce by employment grade, type and gender as at December 31, 2012
| Permanent | Contract/casual/part time | Total number of employees | |||||||
| Male | Female | Total | Male | Female | Total | Male | Female | Total | |
| Executives | 33 | 33 | N/A | N/A | 33 | 33 | |||
| Senior Management | 98 | 1 | 99 | N/A | N/A | 98 | 1 | 99 | |
| Middle Management |
374 | 9 | 383 | N/A | N/A | 374 | 9 | 383 | |
| Others | 7,734 | 788 | 8,522 | N/A | N/A | 7,734 | 788 | 8,522 | |
| Total | 8,233 | 798 | 9,037 | 8,233 | 798 | 9,037 | |||
Recruitment
The Bank is fully committed to the Kingdom's policy on hiring Saudi nationals; by end 2012 87.3% of our staff strength were nationals (2011: 87.3%, 2010: 86%). The Bank maintains a steady overall employee turnover rate relative to other Saudi banks. Our participation in local and international career exhibitions, as well as our recruitment website continues to attract good quality potential employees to the Bank.
Employee learning and development
Our interactive e-Learning platform was further developed to facilitate large numbers of staff being trained on mandatory and non-mandatory courses. This has proved to be not only cost effective for the Bank, but also convenient for the trainee in terms of scheduling with other priorities.
In addition, the Bank continues to expose targeted individuals and groups to specific training programmes and workshops to complement e-Learning. Statistics pertaining to such programmes are given below:
Training provided during FYE 2012
| No. of employees | No. of person-hours of training | |||||
| Male | Female | Total | Male | Female | Total | |
| Mandatory | 1,653 | 376 | 2,029 | 79,344 | 18,048 | 97,392 |
| Non-Mandatory | 2,470 | 100 | 2,570 | 39,520 | 1,600 | 41,120 |
| e-Learning | 3,119 | 609 | 3,728 | - | - | - |
| Total | 7,242 | 1,085 | 118,864 | 19,648 | ||
Performance and recognition
Meritocracy is one of the value drivers of the Bank. It is about defining, differentiating and reinforcing excellence and talent in people, both individually and collectively, to enable them to go beyond customer expectations.
Evaluating and rewarding performance
Al Rajhi Bank has adopted the globally recognized "Balanced Scorecard" methodology to set appropriate "Key Performance Indicators - KPIs" for each employee and to efficiently monitor progress against agreed KPIs. The Bank has implemented an online system (Performance Appraisal & Career Enhancement - PACE) in order to assist with this exercise. The PACE system consists of the following stages:
Performance Planning Stage:
At the beginning of the year, each employee discusses and agrees with the line manager KPIs which are Specific, Measurable, Achievable, Relevant, and with a Time frame. All KPIs are linked with the Departments and Bank's overall Goals and Targets.
Mid-Year Review Stage:
This exercise is carried out to ensure that employees are progressing well against the agreed deliverables and any areas for further improvement or change of direction will be identified and addressed by mid-year.
Final Review Stage:
Each employee will meet with the line manager to assess and discuss the achievements and challenges faced during the year, against the agreed KPIs. Each employee will be evaluated against the Bank's rating scale as follows:
4 - Outstanding, 3 - Exceed expectations, 2 - Meet expectations, 1- Additional Development required and 0 - Unsatisfactory
Al Rajhi Bank believes in a "Reward for Performance linked with market" philosophy and both Fixed and Variable pay awards for employees will be linked to their individual performance, the department's/bank's overall performance and the market pay conditions.
Al Rajhi Bank schemes and plans for Salary Review, Performance Bonus and Sales Incentives, reward employees based on performance.
Wellness and safety
As measures to further enhance employee motivation and productivity we provide clean and attractive work environments with due attention paid to lighting and ventilation. Provision of safety and security, particularly for those at vulnerable points, are given paramount importance. We support wellness initiatives such as access to medical benefits and insurance, counselling, awareness programmes on health and fitness and the like while fostering social ties and relationships among Bank staff. The Bank follows the Labour Law on health and safety at work.
Employee benefits plans
As a responsible employer the Bank operates several benefit schemes for its employees. These benefits are benchmarked to the market and reviewed on a periodic basis.
Social responsibility
Contributing towards a better tomorrow by caring for our local communities is a value that drives the Bank's corporate social responsibility (CSR) agenda. The emphasis is on understanding the needs of our local communities and providing them support collectively through well-planned projects and programmes which do not single out individuals.
We maintain transparent policies on financing CSR activities which take into account aspects such as the credentials of the beneficiary entity, joint implementation, time bound targets with articulated outcomes and impacts, sustainability and empowerment of women.
Sponsoring social events
The Bank sponsored a number of social and economic events during the year, including:
- The Al Riyadh economic forum
- The psychological forum in Taif
Training programmes for youths
As an ongoing commitment for developing youths to enter the professions, the Bank supports summer training courses for students from secondary schools and universities. During 2012, a total of 27 male and 114 female students were trained on computer skills and English language through the Summer Programme. The Bank also supported educational establishments under the Cooperative Training Programme, which resulted in 150 male and 100 female students being trained in the Bank's various departments.
Encouraging talent amongst women
For the third consecutive year, our Ladies branches organized a painting competition for women to encourage their creativity and showcase their capabilities. It was a tremendous success, attracting over 2,000 participants from the Kingdom of Saudi Arabia, Jordan, Kuwait and Malaysia. Prizes were awarded for outstanding entries.
Development programmes
Using funds excluded by Shariah that were channelled through the clearance account, the Bank supported several development programmes aimed at serving society. They included:
- Construction of a building to support the studies of Islamic bank officers at the King Fahd Petroleum and Minerals University (SR 20 million)
- Financial assistance for a programme addressing infertility held at the King Faisal Specialist Hospital (SR 10 million)
- Construction of a training centre for women at the Prince Salman Social Centre (SR 1 million)
Supporting charity associations
The Bank supports charities and their social work in special ways, such as:
- Facilitating a donation from a Bank customer to a licensed charity through the electronic channels of the Bank by listing the charity's name and account number in the payment system
- Issuing a special "Insan" credit card that permits the Bank's customers to transfer credit card point redemptions and rewards in favour of charity associations
- Providing free use of the Bank's prestigious head office premises for charities to organize festivals and souks
- Creating greater public awareness of charity associations by hosting their messages on the Bank's electronic channels and ATM receipts.
Promoting awareness
The Bank participated in several programmes on defining and discussing social responsibility during the year. Presentations were made in the Kingdom of Bahrain, and in the Universities across Riyadh and Jeddah. The Bank also participates in the social Responsibility Committee of Chamber of Commerce in Riyadh.