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Strategic Management Project (SMP) Proposals/prepared by Rusli EMBA PARA

1. Forex Trading Center (FTC), Fee Base Income improvement throughutilization of competitive advantages of business units (branches)in commercial and retail foreign exchange business.

2. Implementation of new business strategy of Bank Megas branchesas one stop financial services provider.

3. Introduction and Implementation of Financial Planning Services(FPS) as a new banking service of Bank Mega

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SMP Proposal No. 1 :

Forex Trading Center (FTC), Fee Base Income improvement throughutilization of competitive advantages of business units (branches) incommercial and retail foreign exchange business

Part I. Environmental Analysis

1. Banking Industry in IndonesiaAlong with the economic growth, in 2006 banking industry in Indonesia isestimated will grow but in low scale. The growth has seen from someindicators such as the increasing of the public funds and loans.However, as same as with previous years, banking industry growth inIndonesia still predict will face some challenges. Those challenges are loweconomic growth, high inflation rate, tight money policy , impact of increaseof oil price, NPL threat in consequence of high interest rate, increase of costof fund because competition among banks in gathering fund which finallycause decrease of interest margin or profitability. Other challenges are

increase of operational costs, investments and the competition asconsequence of globalization.2. Bank Mega a short evaluationAlthough face many heavy challenges in previous years, Bank Mega stillgrow. During 2005, Bank Mega was succeeding to add new branches andincrease the number of accounts and credit cards significantly.Financially, although the total achievement was average 80% from thetarget but it were growth compare previous year, especially in term ofassets, loan, and funding were increase average 30%.However, in 2005 Bank Mega having bad achievement in term of net profit,it was only 37% from the target and was a negative growth 42% comparewith previous year. This bad attainment was happen because some

consequences such as decrease of margin interest because increase ofcost of fund, increase operational costs, investments, and limitation of feebased income (FBI) resources

Goals and StrategiesIn 2006, Bank Mega has set some financial goals as following:GoalsFinancial Actual 2005 2006 Growth (%)Assets 25.1 35.1 39.7Funding 21.9 30.0 36.4Loan 11.3 18.2 61.5Net Profit 184 604 228FBI 133 304 127.7

FBI Credit 56 92 64.2FBI non credit 77 212 173.6FBI Forex Trx - 33 100

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Some strategies:To attain the goals Bank Mega uses some strategies such as:

Decrease cost of fund and improve better fund composition

Quality credit growth

Improvement on NIM and Profitability Focus on networking by adding number of branches

An extraordinary fee base income (FBI) improvement

Foreign exchange transactions a business opportunityAs mentioned before, decrease of Bank Mega s net profit in 2005 becausedecrease of margin interest, increase of cost of fund and operational costs,investments and very limited in fee base income resources, such as feebase income from foreign exchanges transactions of Bank Mega branches.

Actually, fee base Income from foreign exchange transactions will generatebig profit consider some strengths of Bank Mega, such as:

The Brand of Bank Mega as one of big local foreign exchange bank

Networking, big number of branches (134 branches) and will add to 250

Big number of customers

Having competitive rate/prices, superior dealers and selling peoples

Having good and reliable system, etc

However, currently incomes from foreign exchange transactions of BankMega branches are very low because some weakness factors, such as:

Not focus, because branches still have assumption that ForeignExchange transactions are not a main branches business. Branchesbusinesses are funding, giving loan, and others.

Lack of knowledge and cross selling skill of sales people in branchesabout forex business

Forex incomes are not yet a main income target of the branches. Old paradigm that forex transactions are Head office or Treasury

Division responsibility and its not branches responsibility.Consider the strengths and competitive advantages of Bank Mega,especially the networking of branches and number of customers, the foreignexchange business actually will generate big profit, and Bank Megabranches should create a new breakthrough strategy, and make foreignexchanges transactions as a main business of Bank Mega branches.

Part II. Strategic Action Plan

1. Strategy Formulation / EvaluationFBI Goals and Foreign Exchange Business

As mentioned before, in 2006 Bank Mega has set financial goals and itsstrategies to attain it and one of the strategies is an extraordinary fee basedincome (FBI) improvement.

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In 2006, FBI (non credit) income is targeted IDR 212 Billions (173% growthcompare with previous year), and IDR 33 Billions income is planned fromforeign exchange transactions of Bank Mega branchesFBI goal is an extraordinary goal and needed an extraordinary effort to attain

it consider with bad current performance of foreign exchange transactions ofBank Mega branches for period January June 2006 recorded by RTFC(Real Time Forex Confirmation) which generate total profit only IDR 2.16Billions or 6.55 % from the target. It was very low achievement.To attain the extraordinary FBI goals especially from foreign exchangetransactions income, Bank Mega branches should make foreign exchangetransactions as a main business and utilize its current competitiveadvantages in networks (number of branches) and the potential market incommercial and retail customers.

By using simple approach and with assumption if each of Bank Megabranch is targeted should make profit from forex transactions minimum IDR1.5 Millions/day, so with current 134 branches will generate profit at least

IDR 48.2 Billions/year higher than fee base income goal from forextransactions is targeted IDR 33 Billions. This profit will be higher if thenumber of Bank Mega branches will add until 250 in 2007.

2. Project Action Plana. Project Objective

Title of the project:Forex Trading Center (FTC), Fee Base Income improvement throughutilization of competitive advantages of business units (branches) incommercial and retail foreign exchange business.

Specific project objectives:

An effort to improve corporate profitability through improvement of feebase income from foreign exchange transactions by utilization thenetworks and other competitive advantages of business units (branches)of the Bank Mega.

Forex business is a potential business and branches and its employeesare strategic points of sales. Combine both will generate big profit.

To make branches and its employees as trading centers of forexbusiness (FTC), by provide attractive forex products and services in andout of branches network, especially to commercial and retail customers.

To make forex business as one of main business of branches besidesfunding, lending, and other branches business and will be expected tochange and to eliminate the old paradigm that forex business are headoffice or treasury business.

As business of branches and employees and combine with a clear targetand attractive reward programs, forex trading expected will be stimulate

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and encourages selling skill and entrepreneurship spirit of branches andits employees.

Contribution of Project:

In line with the company strategy to improve an extraordinary fee based

income, the project expected would be generate and improve theprofitability of the company or branches.

It also in line with company strategy to give more authorities to branchesin managing and develops its business and encourages theentrepreneurship spirit.

The project also in line with company strategy to focus on potentialmarket of Bank Mega branches in commercial and retail customers.

Key Result Areas and Performance Measurement

Forex business should be one of main business of branches besidesfunding, lending, and other branches business.

Financially, forex business will increase fee-based income of branchesand ideally, this fee-based income can cover operational costs of

branches. Increase of fee based income will increase the profitability andothers financial indicators of branches such as the balances, accountsand transactions of customers.

None financially, from forex business expected would increase therelationship between Bank Mega and its customers and internallyexpected will increase the entrepreneurships spirit of branchesemployees.

b. Methodology

The project will create and conduct a new concept of forex business forbranches which main idea that forex business are branches businessbesides funding and giving loan and it will generate big profit.

According with company strategy to give wider authorities to branches,the concept will create a clear target and attractive reward programs foreach branch and its employees. It will stimulate and encourages sellingskill and entrepreneurship spirit of branches and its employees.

The concept will create and conduct attractive forex products, services,and branches as trading centers will actively provide those products andservices to their potential commercial and retail customers, such asoverseas property payments, regular transfer, buy-sell currencies,traveling services, currency updates, spot, / forward contracts.

The concept will conduct complement units in form small boots as smalltrading centers to cover forex business in several areas such as airport,ports, industrial areas, etc and forex troops as a Fed Ex couriers toserve and giving quick delivery services all forex transactions with the

counterparts in certain area and others such as currencies hotline, etc. According with construction, introduction, and implementation activities,

the project will use some tools such as surveys (FGD or UAI), education,

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and training activities especially to sales peoples in branches. It also willuse some promotion activities or publications.

c. Project team and Organization

The project will involve some members from several departments of thecompany. The Participant as a project leader and will supported byTreasury Dept, International Dept, Regional and Branch Offices, HumanCapital Dept and others.

d. Major activities and timetableThe project activities will divide for 4 phases, as following:

Preparation phase :Contain some activities to prepare the project such as collect data,survey, and others. The objective is to define outstanding forex business,market potency, companys position/market share,obstacles/barriers/problems/, and opportunities, regulations, etc.

Construct and Introduction phase :

Consist some activities according with construction and introduction theconcept, such as discuss with related divisions, branches, and otherunits. Building and develop networking or counterparts / customers,define the price, regulation and risk, performance, create attractivetarget and reward systems, recording system, promotion and publicationactivities,. It also containing other activities, such as provides educationand trainings; create location of business channels/boots, set up forextroops, etc.

Implementation phaseAs implementation activities of new concept of forex transactionsThe main targets are current branches commercial and retail customersand other potential customers / markets out of branches.

Evaluating and Revision phase

e. Expected ResultsAs mentioned earlier, by using simple approach and with assumption ifeach of Bank Mega branch is targeted should make profit from forextransactions minimum IDR 1.5 Millions/day, so with current 134 brancheswill generate profit at least IDR 48.2 Billions/year. This profit will behigher if the number of Bank Mega branches will add until 250 in 2007.The expected result IDR 48.2 Billions/year is higher than current goals ofthe fee base income from forex transaction is targeted IDR 33Billions/yearThe project will be expected create and stimulate selling skill andentrepreneurship spirit of branches and employees and it will generateprofit to the branches.

f. Resources and Capital Investments

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This project estimated will not using big capital investment except forgathering data and training activities, which have come as a budget ofhuman capital division and promotion or publication activities.

Part III. Implementation and MonitoringThe project expected will propose some changes in branchesorganizational structure such as introduce a special sales person orofficers of forex trading, building small boots/centers; forex troops andalso will change and stimulate the sales and entrepreneurship spirit ofthe branches and its employees.

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SMP Proposal No .2:

Implementation of new business strategy of Bank Megas branches asone stop financial services provider

Part I. Environmental Analysis

1. Banking Industry in IndonesiaAlong with the economic growth, in 2006 banking industry in Indonesia isestimated will grow but in low scale. The growth has seen from someindicators such as the increasing of the public funds and loans.However, as same as with previous years, banking industry growth inIndonesia still predict will face some challenges. Some of those

challenges are low economic growth, high inflation rate, tight moneypolicy, impact of increase of oil price, competition and others.As consequences of liberalization of financial market andglobalization/free trade, greatly increased the competition among banksin Indonesia. The competitions so tighten meanwhile market and margingetting smaller. The competition also pushes banks to provide innovativeand competitive products and services and do not rely on bankingconventional products and services anymore. To be winner, banksshould provides competitive and value added products and givingexcellent and comprehensive financial services to its customers.

2. Bank Mega a short evaluationAlthough face many heavy challenges in previous years, Bank Mega still

grow. During 2005, Bank Mega was succeeding to add new branchesand increase the number of accounts and credit cards significantly.Financially, although the total achievement was average 80% from thetarget but it were growth compare previous year, especially in term ofassets, loan, and funding were increase average 30%. However, in 2005Bank Mega having bad achievement in term of net profit, it was only 37%from the target and was a negative growth 42% compare with previousyear because decrease of margin interest , increase of cost of fund,increase operational costs, investments, and others.Currently, through its network (branches), bank mega serves itscustomers by provides banking products and services such as deposits,loans, others banking services. However, those banking products andservices are still conventional and limited. Branches as sales points

sometimes just focus on special product or service, such as time depositor mortgage. It is reasonable consider with the current objective of bankmega to attain quick growth in term of asset and liabilities.

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Consider the competition and the change of financial need of customers,bank mega, and its branches should change and develop its currentposition as provider of banking products and services to be as providerof financial products and services.

Part II. Strategic Action Plan1. Strategy Formulation / EvaluationGoals and StrategiesIn 2006, Bank Mega has set some financial goals as following:Financial Actual 2005 2006 Growth (%)Assets 25.1 35.1 39.7Funding 21.9 30.0 36.4Loan 11.3 18.2 61.5Net Profit 184 604 228Strategies of the company to attain the goals are:

o Decrease cost of fund and improve better fund composition

o Quality credit growth

o Improvement on NIM and Profitability

o Focus on networking by adding number of branches to be 250 in2007

o Give wider authorities to branches to develop its business

Strategy Formulation

In line with the strategy of company to focus on the networks (branches)and give wider authorities to branches to develop its business, andconsider the competition, needed a new branches strategy formulation torun its business and generate profit.

The new branches strategy based on the concept that branch shouldacts as provider of all financial needs of customers not just a provider ofbanking products and services anymore. This new branches strategy willbe supported and in line with subsidiaries companies businesses ininsurance, education, health, investment and others. These subsidiariescompanies are main business partners of the company and branchesbesides other companies with similar business.

Through its competitive advantages in networking and good synergywith subsidiaries companies, branches will be competitive financial salespoints and can provide complete and synergic of financial products andservices to its customers such as banking, investment, insurance,pension, education, health, property, etc. The new branches strategy willincrease business synergism between company and its subsidiaries.

Products and services:The new business strategy of branches will create and increase synergicfinancial products and services of company and subsidiaries. Branchescan provide more varieties of financial products and services to itscustomers, for examples Medic Deposit a synergic product of timedeposit of Bank Mega with medical treatment package from Asia Medic,

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subsidiaries. Mega Home Invest, a synergic product of home loan ofbank mega with investment product from mega capital (subsidiaries).Mega Assurance a synergic product of saving account of bank mega,mega insurances, mega capital (subsidiaries).In services, for example through Mega Hotline branches can provide itscustomers with real time information of stocks, currencies, and other

financial informations. Consider its competitive advantages innetworking, big numbers of potential customers and providing completeof synergic financial products and services, branches will be acompetitive financial sales points of company and different with othercompetitors.

2. Project Action Plana. Project Objectives:Title of project:Implementation of new business strategy of Bank Megas branches asone stop financial services provider

Specific project objectives:

To introduce and implementing new business strategy of BankMegas branches based on the concept of business function ofbranches as one stop financial services provider.

The new business strategy require branches to provide morevarieties and complete of financial products and services (not only inbanking products and services) to fulfill all financial needs ofcustomers.

To change and upgrade current business strategy of branches whichstill focus only at traditional banking products and services such asdeposits, savings , loans and other regular banking services.

To make branches as competitive sales points of company and itssubsidiaries through providing a complete and synergic of financialproducts and services to its customers such as investments,

insurances, education, health, home, currencies, pension fund, etc. To increase business synergy between company and its subsidiariesProject contributions:

The project will in line with company strategy to utilize and givingmore authorities to branches to manage and develop its business andstimulate the spirit of entrepreneurships.

By implementing new business strategy, branches expected willprovide complete and more varieties of financial products andservices to fulfill financial needs of customers and it will generatebranches profitability.

The project will increase business synergy between company and itssubsidiaries.

Key result areas and performance measurement::

Through implementing the new business strategy of branchesexpected will increase financial performance of branches, such as thegrowth of assets, liabilities, profitability, and other financial indicators.

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Otherwise, by providing comprehensive financial products andservices expected will increase the number and relationship betweenbranches and its customers.

b. Methodology:

The new business strategy of branches based on the concept that

branches are provider of comprehensive of financial products andservices. The functions of branches are to cover and to fulfill allfinancial needs of customers (not only in banking products andservices).

Introduction and implementing the new business strategy of brancheswill use regularly trainings and educations activities especially tobranch managers and their sales persons. These activities will needfinancial skills of practitioners from subsidiaries companies such asfrom Investment Company, insurance company, banking, securities,and others.

c. Project team and Organization

The project will involve some financial practitioners from subsidiaries

companies as team members and the participant as project leader.The project team will supported by divisions of services, branchbanking, regional and branch offices

d. Major activities and TimetableThe project activities will divide several phases such as preparation,construction, and introduction, implementing and evaluating.

Preparation phase consist activities to collect data, surveys, compareand other activities

Construction and introduction phase contain activities to formulate thestrategy, trainings, education, and other activities.

Implementation activities contain activities to implement and apply thenew strategy to branches.

Evaluating and review activities (if needed).

e. Expected results

The project expected will increase financial and non-financialperformance of branches such as the growth of assets, liabilities,profit, the number of products and services, the number of customers.It also expected will increase the relationship between branch and itscustomers.

f. Resources and Capital Investments

The project estimated will not using big capital investment except forgathering data and training activities, which have come as a budget

of human capital division. However, it will spend capital investmentfor promotion or publication activities.

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Part III. Implementation and Monitoring

Implementation the project expected will propose some changes in

branches organizational structure such as introduce some financialadvisors positions with reliable capabilities and completed bycertifications.

Implementation the project expected will change the current paradigmof branches business as provider of banking products and services tobe a provider and competitive financial sales point of financialproducts and services.

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SMP Proposal No. 3 :

Introduction and Implementation of Financial Planning Services (FPS) asa new banking service of Bank Mega

Part I. Environmental Analysis1. Banking Industry in IndonesiaAlong with the economic growth, to the future banking industry inIndonesia is estimated will grow but in low scale. The growth has seenfrom some indicators such as the increasing of the public funds andloans. However, as same as with previous years, banking industrygrowth in Indonesia still predict will face some challenges such as loweconomic growth, high inflation rate, tight money policy, impact ofincrease of oil price, regulations, competition and others.Consequences of liberalization of financial market and globalization/free

trade, greatly increased the competition of banking industry in Indonesia.The competitions will so tighten meanwhile market and margin gettingsmaller. To be survivor and winner of the competition, banks,continuously, should create and provide the best of products andservices to fulfill financial needs of its customers. The products andservices should be different, innovative, and give value added.

2. Bank Mega a short evaluationAlthough face many heavy challenges in previous years, Bank Mega stillgrow. During 2005, Bank Mega was succeeding to add new branchesand increase the number of accounts and credit cards significantly.Financially, although the total achievement was average 80% from thetarget but it were growth compare previous year, especially in term of

assets, loan, and funding were increase average 30%. However, in 2005Bank Mega having bad achievement in term of net profit, it was only 37%from the target and was a negative growth 42% compare with previousyear because decrease of margin interest , increase of cost of fund,increase operational costs, investments, and others.Through its network (branches), bank mega serves its customers byprovides banking products and services such as deposits, loans, othersbanking services. However, those banking products and services arevery common, conventional, and limited. Facing the competition andconsider the companys goals to be one stop provider of financialproducts and services, Bank Mega should create innovative of productsand services. The products and services should different with others andgiving value added to the customers

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Part.II.: Strategic Action Plan

1. Strategy Formulation / EvaluationAs a financial services company, banks should serve its customers byproviding excellent and innovative of banking products and services. Inother side, Banks should understand and consider that the financialneeds of customers always changed and demanding. Ideally, a bank canserves and provides all of financial needs of its customers.Currently, the banking products and services of Bank Mega are verycommon conventional, and limited. In services, considerably, tointroduce and to implement Financial Planning Services (FPS) as aninnovative of banking services and expected will give value added to thecustomers.

Financial Planning Services (FPS)

The main objective of Financial Planning Services (FPS) is to providebest financial solution to the customers in facing of all their financialneeds, not only in banking products and in services.

Consider the competitive advantages of Bank Megas business and itssubsidiaries in other financial businesses (securities, insurances,investments, syariah, custodian, pension fund, education, etc), the FPS,actually, will create a comprehensive financial service as a new serviceof Bank Mega and expected will give a value added and increase therelationship to the customers.

In line with companys strategy to focus on commercial and retail market,the FPS will serve retail customers, mainly to the personal customers.

Financially, by introducing and implementing the FPS, expected willincrease the balances of customers account, especially for low cost

personal accounts such as saving accounts, checking accounts,mortgages, credit cards and others. None financially, by provides acomprehensive financial services, the FPS expected will increase thenumber of accounts of personal customers and will increase therelationship and loyalty of the customers.

2. Project Action Plana. Project Objectives:Title of project:Introduction and Implementation of Financial Planning Services (FPS) asa new banking service of Bank Mega

Specific project objectives:

To introduce and to implement Financial Planning Services (FPS) asa new banking service of Bank Mega through create an innovative offinancial services and give value added to the customers.

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FPS will provide the best financial solution to the customers in facingof all their financial needs, not only in banking products and in

services. FPS will create a comprehensive financial services based on the

synergism and the competitive advantages of Bank Megas businessand its subsidiaries in other financial businesses such as securities,insurances, investments, syariah, custodian, pension fund, education,and others

FPS expected will create Bank Mega to be a Financial Partner andprovide excellent Financial Consultants to its customers.

Through FPS expected will increase the balances of customersaccount, especially for low cost personal accounts such as savingaccounts, checking accounts, mortgages, credit cards, and others.FPS also will increase the numbers of accounts, mainly low costpersonal accounts and will increase the relationship between Bank

Mega and its customers.

Project contributions:

The project in line with companys strategies to attain the companysgoal to be one stop financial services provider

Introduction and implementation of FPS as a new banking serviceexpected will increase the business relationship with customers,especially to potential personal customers.

FPS will add and complement the products and services of BankMega and to be a value added service to customers

FPS is new banking service and different with other competitors andexpected will be competitive advantages of Bank Mega products andservices

Key result areas and performance measurement

FPS will focus on financial services activities, mainly in personalcustomers and low cost accounts such as saving accounts andchecking accounts.

By FPS expected will increase the business relationship betweenBank Mega and its customers, in form of incremental of number ofaccounts number of customers, the balance of low cost accounts andwill reduce the cost of fund of Bank Mega.

b. Methodology:

Introduction and implementing the FPS as a new banking financial

service will use regularly financial trainings and educations activitiesespecially to sales persons such as marketing officers, personalbanking officers, customer service staffs and others. These activities

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will involve financial skills of practitioners from Bank Mega and itssubsidiaries companies such as from securities, investments,insurances, syariah, custodian, pension fund, education, and others.

Consider the regulation, these financial education and trainingactivities will require formal certification from the authorities.

c. Project team and OrganizationThe project will involve some financial practitioners from subsidiariescompanies as team members and the participant as project leader.The project team will supported by divisions of services, branchbanking, regional and branch offices

d. Major activities and TimetableThe project activities will divide several phases such as preparation,construction, and introduction, implementing and evaluating.o Preparation phase consist activities to collect data, surveys,

compare and other activitieso Construction and introduction phase contain activities to formulate

FPS and supported by trainings and education, publication or

promotion activities and others.o Implementation activities contain activities to implement and apply

the FPS as a new service of Bank Mega. First target is PersonalBanking customers and followed all branches customers.

o Evaluating and review activities (if needed).

e. Expected results

The project expected would increase financial and non-financialperformance of Bank Mega such as the increase of number ofcustomers, number of accounts, the balances and expected willincrease the business relationship between Bank Mega and itscustomers.

f. Resources and Capital Investments The project estimated will not using big capital investment except for

gathering data and training activities, which have come as a budgetof human capital division. However, it will spend capital investmentfor promotion or publication activities.

Part III. Implementation and Monitoring

Implementation the project expected will change the current paradigmof Bank Megas sales persons in banking business. Bankingbusinesses not only provide common banking products and servicesanymore, but Banks should provide an innovative and value addedfinancial products and giving an excellent and comprehensivefinancial services to its customers. FPS expected will create Bank

Mega to be a Financial Partner and provide excellent FinancialConsultants to its customers.

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____Note:

According to the companys strategy to give a special attention inimprovement of the fee base income, which expected can cover thecompanys operation cost. I think the first project proposal with title:Forex Trading Center (FTC), Fee Base Income improvementthrough utilization of competitive advantages of business units(branches) in commercial and retail foreign exchange businessis the priority of the Bank Mega and will produce a breakthrough profitto the company.

/prepared by rusli July 2006.

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