Embracing technology

CXO speaks with Kim Fournais, Co-CEO of Danish trading bank Saxo Bank about its growth and embracing technology from the start.

CXO. Can you explain why you decided to start the bank in the first place?
KF. Well, Saxo wasn’t a bank to begin with; it was a broker, becoming a bank in June 2001. We started in September 1992, so we were a brokerage for nine years. But the basic idea was the same as today: we feel that we could give a better service to the client in terms of price, product and service that weren't around in the marketplace at the level we thought would be possible. We saw a big opportunity there.

Initially when we started it was obviously less on the internet but with the same ambition as today. We changed to a bank because we wanted to expand our business model, but also from a marketing point of view we feel it's more appropriate to be a bank.

CXO. Seeing as you were one of the founders of the bank, you must have watched it undergo many changes. Can you tell us about the most significant changes to date?
KF. When we decided back in 1995 to move on the internet – that was a big decision, one that didn't show concrete positive results until a few years later. We began investing in 1995 and then launched our first platform in April 1998. Obviously becoming a bank in 2001 was a milestone. We've steadily grown and developed the business, but there have been a few significant tipping points in our history.

CXO. How does leadership come into your role as CEO?
KF. Leadership is pretty much everything now, because I am trying to stay away from operational issues. Leadership is about establishing the right team and empowering them, motivating them to do the right thing, ensuring everyone knows exactly where we need to go. It’s also ensuring our people within Saxo Bank understand that we are not going to sit and tell them where to go for the next step every single time. It’s about agreeing on overall goals and targets and making sure that people use their own good ideas and can work independently to get things done. That's the only way we can scale now. We’re currently 1300 employees, obviously very different from the first day I started where I had one employee, right. My job as such has changed quite a bit, but now I think it's entirely about leadership and business strategy, which I consider to be part of leadership.

CXO. So as the bank has grown, things like the value system have become more important. Can you talk me through the bank's value system: rationality, independence, integrity, honesty, justice, productivity and pride?
KF. Of course. We are actually quite inspired by Jack Welsh. We want the people that work in Saxo Bank to share our values and share our goals. Our corporate statement talks about the goals being the most profitable and professional facilitator on global capital markets, and that's the unique thing about our business model being a facilitator. The values are pretty simple, and taken out of a book by Ayn Rand, called Atlas Shrugged.

The first value – the overriding one – is rationality. People in their personal lives and in corporations often become political or spend too much time thinking and hoping rather than focusing on facts and trying to have a rational view. We expect people to bring their brains everyday and use them in a rational fashion. That's the cornerstone and may sound simple, but it's actually a good tool when you apply it.

The next thing is independence. As a company it is important for us to be independent, but we also as individuals would like to be independent. If you depend on someone, you're not a free person and cannot make your own choices. But it's also about being independent in the way you think; applying rationality allows you to make your own decisions and think independently.

The third one is integrity, obviously in its immediate sense but also the intellectual integrity that you make your own decisions; you make your own decisions based on your own rational approach to the things. So when people are being asked about something, you can expect they have their own rational integrity that they bring to the table.

The fourth one is honesty. Honesty is a difficult thing for many people because so many are used to small white lies. In relation to our clients, we want to manage expectations, make sure that people feel that we can be trusted. This is also true with respect to feedback. If you can't have candid feedback, you won't have an organisation that can grow and learn from its mistakes. Honesty is very important.

Then it’s justice. If you make a mistake, you have to correct it in an appropriate way. We also believe in differentiation, for example if you do very well you should get a larger bonus than someone that is doing less well. In the UK or the US this is pretty obvious in most places, but here in Denmark we really had to negotiate to have a this differentiated bonus approach with the Danish Financial Union. We believe that it is just to treat people as they deserve.

Productivity is a key point because if we are not productive, we cannot pay any bills. That's the other parameter we measure people on.

The seventh value is pride, which means if you do the first six, then you're also allowed to be proud about it. Not arrogant, but just good about yourself because you did something great.

Of course, in the Saxo Bank case it doesn’t mean that if you apply these things it will not guarantee you success! But in our view, not applying them will guarantee you failure in the long run. From a personal point of view these values are important, but also from a corporate perspective.

CXO. Are you involved with the HR recruiting process much?
KF. Yes I am. Not for every single person as we employee around 40 people a month! All the senior people I want to see. It's never easy to find super-quality people. But at the same time I think we've managed pretty well. We've grown in head count quite dramatically, and we feel that we employed a lot of great people. That's probably going to get easier right now, because many companies out there that will have to cut down because there's a big crisis going on. The business model we have has meant that we've done well in these turbulent times because we haven't lent out money, we're dependent on different things.

CXO. So you haven't found yourself to be affected in the same way that many other banks have been?
KF. To be quite honest, we've been affected in a very positive manner because there's been a lot of activity in the markets, and when people are shifting their portfolios around and trading a lot, we tend to do more.

CXO. Saxo Bank is unique among investment banks because of its focus on technology solutions. Can you tell us more about the decision to develop the SaxoTrader?
KF. With respect to the SaxoTrader, the vision from the beginning was to provide technology that could empower any global investor or trader with a tool that is as good as – and in some instances better than – what professionals in major banks have been sitting with. We wanted to provide a tool where people, no matter what the market environment, could find interesting markets. The ambition was to give people a full trading platform with all the information needed, both with respect to their own research and analysis as well as input from outside vendors as well as streaming news and charts.

I think we succeeded with that. We won the Best Resale Effects Platform three years in a row from Ethics Week, and we also won Best Resale Effects Platform from Profit and Losstwo years in a row, basically for SaxoTrader. But we don't want to rest on our laurels so we have 350 IT people and we a product development team. We acquired a people as well, that constantly try to develop the future versions of the trading tools we develop.

Beyond SaxoTrader we're also about to launch a web trading tool, and we also have a mobile trader. So no matter where you are – whether it's on your mobile phone, at an internet café or hotel room, whether you're in your office or home ­– you have access to Saxo Bank in an efficient manner.

CXO. Are there other technology investments that you've made as that have had a big impact on the business besides SaxoTrader?
KF. Well, SaxoTrader is just the front end, and the front end is just a small bit of the total system. It’s really a value chain approach, that technologically needs to work from front to back and needs to be automated. Mainly we are a facilitator working with the major banks and exchanges with respect to product and liquidity. We try to package all that: we do risk management, back office, IT hosting, IT development, charge, quotes, news, basically everything that you can see in the SaxoTrader and put in front of an investor or trader.

Just to take one component – one link out of the chain and say, “that’s the most important” – is not how it works. The weakest link determines how strong the chain is.

When we started doing this back in 1995, some people in the front office said, "Guys, what are you doing here? You want to fire us, or just have a machine doing everything?" We said, “Wait and see; that's not going to happen.” And on the contrary, what happene was that employees got more productive, because it’s not very scalable or productive to have an employee sit and do a lot of manual stuff that a machine can do better. When we initially had that discussion we only employed around 40 people and now we’ve grown to over 1000, so the proof is in the pudding.

CXO. I read that 2007 was a year of great strategic reorganisation for the bank. Can you talk me through some of the changed that were implemented?
KF. It started with a big move in 2006 when we almost doubled our head count from 438 to over 800. We opened up in Singapore, London and Beijing. We grew our cost base by 93 percent. All this growth meant that we had a slightly lower result in 2006, which was basically part of our plan. In 2007 we began to see some results, which is good, but we are still investing. In 2007 we grew from 800 to almost 1200 employees, so we still added a lot of heads. We still want to grow our global presence with some offices in strategic relevant places, and we are still doing that but we also want to see profit margin growth.

When a business grows so fast, you are not ahead of the curve initially; you're behind the curve. That really underlines the importance of having a corporate statement and ensuring that the people share goals and values because otherwise your venture won’t work. Structure and processes need to be put in place, as well as system support along the value chain. Growth like this doesn’t come easy, but then again, if it was easy, everyone would do it, right?

Kim Fournais, Co-CEO
Kim Fournais held several senior positions in the financial services and analysis functions of a number of leading Danish financial companies and banks before establishing Midas (now Saxo Bank) in 1992 as a founding shareholder and Managing Director. The full technical infrastructure including SaxoTrader, which is the unique trading system developed by the bank, remains one of the key focus areas for Kim Fournais as well as the overall strategic planning and operations of Saxo Bank.

Together with Lars Seier Christensen, Kim continues to share responsibility for the strategic planning and overall management of Saxo Bank in his role as joint Chief Executive Officer.