[Edaily Marketin, Reporter JI YEONG-EUI ] NH Investment & Securities, which adopted a dual-CEO system to maximize expertise, now faces the challenge of fostering collaboration between its two divisions to drive company-wide growth. While the plan is to split authority between Investment Banking (IB) & Asset Management and Wealth Management (WM) & Digital to accelerate decision-making, if these two business units—which function like the wheels of a cart—fail to turn in harmony and fall out of sync, even a cart that was running smoothly will inevitably come to a halt.

In particular, core new businesses such as the Integrated Investment Account (IMA) can only yield results if the IB’s asset sourcing and the WM’s fund raising are aligned in the same direction and at the same pace. The success or failure of this dual-CEO system experiment hinges on whether the faster decision-making enabled by decentralized authority can outweigh the coordination costs associated with breaking down interdepartmental barriers.

Even with the switch to a dual-CEO system, it is ultimately a “car with two wheels”

According to the investment banking (IB) industry on the 12th, NH Investment & Securities launched a co-CEO system led by Shin Jae-wook and Bae Kwang-soo last June. Under this system, CEO Shin is in charge of IB, asset management, corporate sales, and company-wide management, while CEO Bae oversees Wealth Management (WM), digital, and research. The aim is to maximize expertise in each business area and clarify responsibilities and authority to accelerate the response to market changes and specialized sectors.

However, it appears that fostering organic cooperation between business units has emerged as a challenge right from the start of the dual-CEO system. This is because formally separating business areas within the organizational structure is necessarily distinct from resolving overlaps that occur in actual sales and investment operations. Even when dealing with a single corporate owner client, while personal asset management falls under the Wealth Management (WM) domain, the Investment Banking (IB) division handles that company’s corporate bond issuances or mergers and acquisitions (M&A) advisory services. Furthermore, when investment products are involved, multiple business units may need to coordinate simultaneously to serve a single client.

IMA—one of the new growth drivers NH Investment & Securities has secured—is also an area that requires breaking down barriers between business units. This is because success depends on the combination of IB capabilities for identifying and structuring high-quality investment assets, the ability to manage those assets, and the capacity to attract retail and institutional funds through WM channels. In essence, the ability to connect across business units determines the company’s overall competitiveness.

It is in this context that NH Investment & Securities established an integrated deal pipeline alongside the launch of its dual-CEO system and expanded the role of the Synergy Innovation Team—under the Strategic Planning Office—to identify synergies among internal business units. Some market observers view this move as a response to the example of KB Securities, which faced criticism for the “limitations of separate operations” after posting lackluster results compared to competitors for some time under a dual-CEO system. This is because the second half of this year is expected to serve as the true test of the dual-CEO system’s performance.

Competition Over Performance Leads to Stagnant Growth… Evaluation and Allocation Systems That Break Down Silos Are Key

Industry observers believe that how the company manages its performance

allocation

and capital allocation systems—rather than the organizational restructuring itself—will be the true test. This is because determining which division should be credited with results when connecting clients or pursuing joint deals through cross-departmental collaboration is a sensitive issue.

In a structure where the contributions of a specific division are not properly recognized, there is a risk that the “silo” phenomenon (barriers and interdepartmental self-interest) will become entrenched. It appears that a system for the reasonable distribution of joint achievements must be established to maximize company-wide synergy while maintaining independent accounting systems for each division. This explains why NH Investment & Securities has identified a joint evaluation system as a key priority alongside the co-CEO system.

Procedures for adjusting priorities in the allocation of capital and investment capacity between IB and WM are also essential. To this end, the company plans to launch a “Strategic Resource Allocation Committee,” co-chaired by the two CEOs, to promote company-wide capital efficiency.

One of the key issues that the two CEOs and committee members are expected to focus on in the Strategic Resource Allocation Committee is the allocation of risk-weighted assets (RWA). In Wealth Management, RWA is utilized as customer credit extends; in Investment Banking, it is utilized as deals requiring the injection of equity capital—such as loans and acquisition financing—expand. Since allocating a large portion of the risk limit to one business reduces the available capacity for the other, the issue of adjusting capital allocation between the two businesses could become a key challenge.

The dual-CEO system has the advantage of significantly improving the speed of market response through the independent decision-making of professional managers. It is also assessed that the clarity of accountability helps maintain a sense of urgency within the organization. However, analysts suggest that future growth will depend on whether the faster decision-making enabled by decentralization can offset the coordination costs that arise during organizational integration. The so-called “coordination costs” that may arise during inter-division consultations and coordination are cited as one of the risk factors. With the number of independent business divisions within securities firms on the rise, if every issue must go through separate committees and consultative bodies, there is a risk that the decision-making process—which was shortened through decentralization—could actually become more cumbersome.