Credit Risk Liquidity Risk and Market Risk

2007 Annual Report PT Bank Mandiri Tbk. 139 Corporate Center Compliance and Human Capital We continually develop the competency of our employees, improving their performance and productivity as we build a sustainable competitive advantage for the Bank in our Outperform the Market phase, while maintaining prudential principles and complying with regulations. The Compliance Human Capital CHC Directorate is the main driver in the development of professionals who comply with bank regulations and prioritize prudential principles. The challenge for Human Resource management is to attract, retain and motivate individuals with appropriate competence and the ability to perform well. Along with those efforts, the theme for CHC Directorate is to Outperform the Market through Excellent People Compliant Business as a basis to developing our people. The development of our human capital, along with the refinement of our policies, leads to a more comprehensive implementation of Good Corporate Governance practices, and helps to secure the legal aspects of the Bank. We continue to refine our Human Capital systems and policies in order to improve the overall quality of our Human Resources in support of the business development within each SBU. One recent example has been the delegation of recruitment to each SBU. The purpose of this shift has been to accelerate the turn-around time for hiring new employees, while ensuring the necessary skills and experience of people joining the SBU. Our staffing requirements are fulfilled through a recruitment process with two discrete elements: Regular recruitment and the Pro Hire. The regular recruiting process includes internal recruitment in which advancement from clerk to professional level results from the completion of our Staff Development Program SDP, recruiting fresh graduates from the best universities into our Officers Development Program ODP, and regular promotion programs. Our Pro Hire recruitment process is targeted to external experienced candidates who can immediately make valuable contributions to the Bank. We have also improved our Competency model to become more focused, straightforward and easily applied, while still aligned with the core values and corporate culture of Bank Mandiri. Along with the implementation of this competency model, we have enhanced our performance- and competency-based employee performance evaluation system, known as “Mandiri Easy” Mandiri Employee Appraisal System. This policy provides flexibility in the distribution of performance evaluation results and integration with the benefit system linked to the Bank’s performance. The implementation of this performance management has also been supported by adjusting the evaluation cycle of employee performance in reference to best practices. These adjustments aim to simplify the performance evaluation process, improve the objectivity of the evaluation results, and increase the role of the manager in coaching and counseling each employee. We have also introduced an enhanced remuneration system. The System was previously based on a “single salary system”, which was then adjusted by location-based subsidies to meet the needs of employees in isolated and rural area branches. As an SBU-based organization, Bank Mandiri is keenly aware of the importance of continual Human Resource training and development. Training programs based on specific SBU requirements are continually implemented to build upon our employees’ competencies and qualifications. Our training programs are conducted in many other fields as well, including Performance Culture, Credit and Risk, Sales and Services Culture and Leadership. These training programs are not only exclusively classroom-based, but also include challenging job rotation assignments, outbound and e-learning. Through e-learning, our employees can access training activities at anytime through the internal network of the Bank. We also focused on internalizing a new work culture in 2007, embedding Culture Teams within each unit to support the Central Culture Team, and ensuring that culture implementation takes hold. In addition to these programs, a Culture Fair and Culture Excellence Award were initiated, to recognize the best TIPCE Trust, Integrity, Professionalism, Customer Focus and Excellence implementation among the units. We also sought to reinforce the implementation of Good Corporate Governance GCG principles throughout the organization by conducting a self-assessment review and inviting a 3rd party to provide an independent evaluation. In the Corporate Governance Perception Index 2006 GCP 2006 survey conducted by The Indonesian Institute for Corporate Governance IICG, the Bank was ranked in the category “Very Trusted” Rank 1 with a score of 88.66 and best company in the finance sector. Bank Mandiri was also recognized for these efforts internationally, receiving awards from Asiamoney magazine for The Best Corporate Governance and The Best Disclosure and Transparency for Indonesia. In addition to ensuring the legal aspects of business development, we seek to optimize the resolution of legal issues in bank operations and create a culture of compliance at all levels in order to preserve operations in line with the relevant legislation and regulation. In supporting the SBU organization, we have deployed a legal officer within each SBU and regional office. We are continually upgrading the competence and experience of our Legal Officers through 140 2007 Annual Report PT Bank Mandiri Tbk. Corporate Center Compliance and Human Capital providing legal cases relating to bank operations for review, QA books of banking law, and Law Guide Books, in addition to updating and socialization of the same. The success of these efforts can be seen in the reduction in pending litigation inherited from our legacy Banks. Role as Strategic Business Partner for SBU As we enter our “Outperform the Market” phase of our transformation, the programs of the Compliance and Human Capital Directorate will focus on developing the intellectual capital of each individual, engendering employees who able to excel and to add value to the Bank through their efforts. In addition, we are repositioning our role to become a strategic and business partner to our SBUs in driving business growth, fostering Good Corporate Governance GCG and complying with regulations. We have formulated a number of strategic initiatives to enhance this role. In Human Resource management, we have developed a system to simultaneously incorporate career path management and competency development. This is expected to result in a career path planning that is clearer and more straightforward. In top talent management, we have undertaken specific training and coaching through local and international providers, and also provide for placement into strategic positions for both job enrichment and fast track career progression. These measures are intended to boost our retention of our top performers. The CHC Directorate has been transformed into a resource center in support of each SBU’s requirements for accessing qualified employees. We augment the competency of our employees through education and continuous training in integrated programs of performance culture, credit and risk culture, sales and service culture and leadership. In order to increase their own knowledge and competency, Directors participate as well in national and international seminars, banking forums and other management programs. Our training to engender a Performance Culture entails several programs, including Simplification of Business Processes, Efficiency and Productivity, Performance Management Systems and Innovation on Process and Product. Credit and Risk Culture training emphasizes Credit training, Assessment, a Mobile Coaching Clinic and Risk Management Certification. Sales and Service Culture programs aim to improve service quality through a variety of training modules for front- liners, and also in Sales, Banking Operations, Dealer Simulations and Professional Certification. The process of applying GCG principles will transform Bank Mandiri into a ‘Corporate Value Bank”. A number of efforts are currently under way: i internalization of GCG principles in every decision-making process, business process and relations with all stakeholders ii continuous implementation of Anti Money Laundering AMU, and Know Your Customer KYC programs iii reviewing and upgrading the Bank’s policies on GCG principles and iv monitoring Bank Mandiri’s compliance with the rules and regulations. Finally, we continue to develop monitoring system to strengthen and develop our compliance controls, integrated with Quality Assurance and Compliance QAC. We recognize that strong legal foundations are a vital element in the Bank’s business, and that the understanding of the law can best secure our business activities, and protect the Bank from legal action initiated by customers, debtors and other 3rd parties. Bank Mandiri is determined to foster a mind-set of “law as a second nature”, and we have conducted legal forums to begin this process.