Commercial Bank Group comprising Sri Lanka's benchmark private sector
bank, its subsidiaries and associate companies, has reported spectacular
growth in pre- and post-tax profit in the first quarter of 2006.
In a statement the Group reported a post-tax profit of Rs 943.1
million for the first quarter of 2006 as against Rs 348.5 million
reported in the same quarter last year, a growth of Rs 594.6 million
or 170.6 per cent.
Pre-tax profits of the Group for the period rose to Rs 1.404 billion
from Rs 581.3 million, a growth of Rs 822.7 million or 141.5 per
The Group's performance was underpinned by mark to market gains
totalling Rs 667.2 million which arose from transferring part of
the investments made in DFCC Bank and the full investment in Commercial
Leasing Company Limited to the trading portfolio of the Bank. Discounting
the mark to market gains and the special VAT thereon, the post-tax
profit of the Group for the quarter was Rs 387.1 million, an increase
of Rs 38.6 million or 11 per cent compared to the first quarter
of 2005. On the same basis, the pre-tax profit of the Group for
the quarter was Rs 848.1 million, an increase of Rs 266.8 million
or 46 per cent, compared to the first quarter of 2005.
Additionally, exchange profit recorded a substantial growth of Rs
238.2 million to Rs 193.4 million as at March 31, 2006 as against
an exchange loss of Rs 44.8 million reported in the first quarter
of 2005, the Bank said.
At Bank level, the Commercial Bank reported healthy growth in profitability
with pre-tax profits of Rs 1.570 billion for the first quarter of
2006, an increase of Rs 1.022 billion or 186.4 per cent from Rs
548.5 million reported for the first quarter of last year. Discounting
the mark to market gains and the special VAT thereon, the pre-tax
profit of the Bank for the quarter was Rs 1.014 million, an increase
of Rs 466.3 million or 85 per cent compared to the first quarter
Post-tax profit of the Bank amounted to Rs 1.114 billion for the
period under review as against Rs 326 million earned in the corresponding
period in 2005, reflecting a growth of Rs 788.8 million or 241.9
per cent. Discounting the mark to market gains and the special VAT
thereon, the post-tax profit of the Bank for the quarter was Rs
558.8 million, an increase of Rs 232.8 million or 71 per cent, compared
to the first quarter of 2005.
Commenting on Group profitability, Commercial Bank's Senior Deputy
General Manager (Finance and Planning) Ranjith Samaranayake said
that the healthy pre-tax and post-tax profits of the Group was achieved
despite a substantial increase in corporate tax liability of the
Bank by Rs 233.5 million or 104.9 per cent. This was mainly due
to the increase in the corporate tax rate from 30 per cent in 2005
to 35 per cent in 2006 and provision for deferred tax on assets
leased to customers in terms of the revised Sri Lanka Accounting
Standard No. 14.
"In addition to the business growth, judicial fund management
also helped maintain interest margins at reasonable levels despite
the rise in time deposits in the deposits mix of the Bank. This
arose due to the market conditions that prevailed at the time,"
Mr Samaranayake added.
The Sri Lanka Disaster Management Act of 2005 came into force on
May 13 and is the legal instrument that provides for the establishment
of the National Council for Disaster Management: the Disaster Management
Centre; the appointment of Technical Advisory Committees; the preparation
of Disaster Management Plans the Declaration of State of Disaster;
the Award of Compensation, etc.
The interpretation of a "disaster" as contained in Article
25 is "the actual or imminent occurrence of a natural or man-made
event, which endangers or threatens to endanger the safety or health
of any person or group of persons in Sri Lanka, or which destroys
or damages or threatens to destroy or damage any property".
at future insurance against nature’s worst.
include under natural disasters (a) landslides which could also
be man-made or a combination of both, (b) cyclones, (c) floods,
(d) droughts, (e) tsunami as experienced in December 2004 nearly
five months before the Act came into force, (f) earthquakes, (g)
coastal erosion (h) tornados, lightning strikes and severe thunder
Under man-made disasters are included (a) industrial hazard, (b)
air hazard (could be also a natural disaster), (c) a maritime hazard
e.g. oil spills, discharge of toxic waste, etc, (d) fire, (k) epidemic,
(f) explosion, (g) air raids, (h) civil or internal strife, (i)
chemical accidents, (j) radiological emergency, like leakages from
nuclear reactors (nuclear disasters), and, (k) forest fires (could
be natural as well as man-made) urban fires.
The Act provides for the establishment of the National Council for
Disaster Management. It is a body corporate and shall have perpetual
succession with a common seal and may sue and be sued in such name.
The President is the Chairman of the Council with the Prime Minister
as the Vice Chairman.
The main functions of the Council are to formulate a National Policy
and Programme on the management of disasters to provide for (a)
the protection of the community and environment from disasters and
the maintenance and development of disaster affected areas, (b)
the effective use of resources for preparedness, prevention, relief
reconstruction and rehabilitation, (c) the enhancement of public
awareness (d) capacity building, and (e) pre-disaster planning.
The Council is also charged with the function of the preparation,
formulation of the National Disaster Management Plan (NDMP) and
the National Emergency Operation Plan (NEOP) and monitoring the
implementation of such plans based on the national policy stated
Let us now examine the impracticality of implementing the Disaster
The inclusion of both natural and man-made disasters under one Act
creates difficulties of proper implementation and coordination to
achieve its objectives.
There is provision for the Council to have 37 members and the quorum
is 12. The Council shall meet often as may be necessary but at least
once in every three months. This requirement will be impractical
in case of a sudden natural disaster such as tsunami, storm surge
or a cyclone.
A Director-General who is at present not an expert in disaster management
or mitigation with any experience in these disciplines heads the
Disaster Management Centre.
It is not certain whether other directors who are experts in the
various fields of natural and man made disasters have been appointed.
Since the Centre has been assigned tasks, which are divergent in
nature, it is highly impractical for it to handle all the functions
in an effective manner.
The National Science Foundation (NSF) has initiated long-term research
programmes related to scientific study of the December 2004 tsunami
including a case study of the Peraliya disaster spending millions
of rupees. The Peraliya disaster was mainly due to coral mining
activities that destroyed the reef and made the coastline vulnerable
to tsunami waves. The only practical and meaningful research activity
already completed was the preparation of inundation maps by the
GSMB that could be useful in the reconstruction of houses and other
civil structures and the design of new railway line, as well as
the proposed highway along the coastline. It is best to examine
whether the Disaster Management Centre is aware of such research
which is one of its basic functions.
In order to overcome the above difficulties I would propose that
the Act be amended to provide for two Councils to handle natural
and man-made disasters. The Ministers whose relevant functions could
be separated from natural and man-made disasters could constitute
the two Councils. There could be two Centres headed by two Director-Generals
and appropriate Directors and Technical Advisory Committees according
to the various subject areas.
The Council should take immediate action to set up a database by
collecting data on disasters and provide facilities for exchange
of such data among researchers.
At present much emphasis is given to establish early warning systems
specially for warning the people on tsunami using community based,
as well as advanced technology. It is reliably learnt that the politicians
and government officials are regularly traveling abroad on matters
related to establishing early warning systems for tsunamis. It must
be realised that storm surges, floods, landslides and other natural
disasters could be as destructive and occur more regularly as compared
to tsunami which would hit us in about a couple of centuries or
more and this factor should not be ignored.
role in natural disasters
Let us now examine the government's role in natural disasters in
other countries. A good example to follow is Australia. Protecting
the community and property from natural disasters is primarily the
responsibility of the State and the Territory Governments but the
Australian Federal Government assists the States and Territories
by strengthening their response capabilities and providing extra
resources as required.
During a natural disaster the community response is coordinated
by local emergency services. The Federal Government's role in following
a natural disaster is listed below.
1. Department of Transport and Regional Services (DOTARS) –
This organisation administers the Natural Disaster Relief Arrangements
to alleviate the financial burden on state expenditure on relief
and recovery measures. The Department provides funding through Regional
Flood Mitigation, the Bushfire Mitigation and Natural Disaster Mitigation
Programs to reduce the impact of floods storms, bush fires and other
2. Australian Maritime Safety Authority (AMSA) – The AMSA
has the primary role in maritime safety, protection of the marine
environment and maritime and aviation search and rescue operations.
AMSA also manages the National Plan on ship sourced marine pollution.
(3) Bureau of Meteo-
rology – Plays a vital role as the primary provider of weather,
hydrological, climate and oceanographic forecasts and information.
The Bureau is responsible for the issue of warnings on gales, storms,
and other weather conditions likely to endanger life or property
by floods, bush fires, tsunami and extreme climatic events.
4. Centrelink – Plays a key role in government response to
emergencies by supporting the recovery of individuals, families,
and communities through income support and other assistance.
5. Department of Agri-
culture Fisheries and Forestry - Farm help and Rural Financial Counseling
Service Programme developed under Agriculture Advancing Australia
(AAA) for effected primary producers.
6. Emergency Mana-
gement Australia (EMA) – It is the apex body for emergency
management of Australia under the Attorney-General that coordinates
natural disasters that cannot be coped with by states or territories.
7. Department of Defence – Assistance include transport and
logistical support evacuation rescue medical services provision
of emergency accommodation and supplies.
8. Family and Community Services – Supports the recovery of
individuals families and communities through income support payments
Community Relationship and Financial Counseling Programmes.
9. Geoscience Australia – Its role includes maintaining a
network of seismographs throughout Australia as part of an earthquake
alert system. Risk assessments are developed using extensive network
of databases including topographic maps, satellite imagery critical
infrastructure and post disaster information.
costs of natural disasters.
A major drawback in the Sri Lanka Disaster Management Act is the
absence of any provision for the establishment of a mechanism or
framework to ascertain the economic costs of natural disasters although
there is provision for payment of compensation. To this end it is
relevant to mention a report prepared by the Australian Bureau of
Transport Economics (BTE) on this subject. The data for such determination
is from the database maintained by the Emergency Management Australia
(EMA). This database since 1967 has also reliable insurance data
that was very helpful. The Report contains analyses of events where
the total damage had exceeded A$10 million.
The government here should study the above report and adopt an appropriate
framework for calculating the economic costs of natural disasters.
A good example is to work on the 2004 tsunami after determining
the base level in rupees and the assessment of damages will be above
this base level .The classification of losses could be under tangible
and intangible, which could be further sub-divided into direct and
indirect losses. The cost of lost business is often included in
the estimated cost of a disaster. However, in a national disaster
business disruption costs should not be included.
In order to give some guidelines the Australian findings are:
1. Natural disasters (with cost per event over A$10 million) cost
the community A$38.5 billion over the period 1967 to 1999.
2. The annual costs of the disasters between 1967 to 1999 was A$1.14
billion approximately A$85 per person
3. There had been 265 natural disasters costing more than A$10 million
each during the period 1967 to 1999.
(Source: Bureau of Transport Economics Report 103 Government of
The Ministry of Disaster Management in Sri Lanka should obtain the
assistance of the Australian Government under Australian Aid and
initiate action for identifying an appropriate framework to determine
the economic costs of natural disasters by identifying threshold
values. Such disasters could be categorised as floods, landslides,
cyclones, storm surges and tsunami, which will be very rare. Disasters,
which are man-made as given in the Act could also be identified
much easier as compared to natural disasters to ascertain the economic
The role of insurance companies and banks in arriving at economic
costs of disasters should be reviewed. The government should look
at the practicality of insuring property and human lives from disasters
and the modalities involved.
To this end vulnerable areas, especially for natural disasters,
should be identified and categorised as low medium and high-risk
areas for the purpose of providing insurance cover.
Globally, there is greater awareness and sensitivity on the need
for sustainable development than at any time in history.
While organisation after organisation strives to increase shareholder
value the need to do so, in a manner that is both environmentally
and socially acceptable, has given birth to the concept of the “triple
bottom line”. The triple bottom line is creating economic
value whilst sustaining the environment and society in which an
Sustainable development is defined as development that meets the
needs of the present without compromising the ability of future
generations to meet their own needs. (Report of the World Commission
for Environment & Development -the Bruntland report).
In Sri Lanka we have seen many organisations get onto the CSR bandwagon
most often unaware that philanthropy alone is not CSR and embarking
on many initiatives that strive to do good.
Most often the cost of “publicity” outweighs the cost
of the “impact” achieved in making a difference in the
lives they set out to change for the better.
Corporate social responsibility has been defined in the World Business
Council for sustainable development publication “Corporate
social responsibility: making good business sense” January
2000 as: “The continuing commitment by business to behave
ethically and contribute to economic development while improving
the quality of life of the workforce and their families, as well
as of the local community and society at large.”
= CSR is the social and environmental impact of all company decisions
= The conduct of business partners.
= Suppliers, production partners (outsourced manufacturing partners),
vendors, end of life cycle partners.
= Marketing and sales practices.
= Past wrongs and future impacts.
= How decisions are made and communicated.
CSR isn’t just corporate citizenship, philanthropy, volunteerism
or cause marketing.
Many organisations have practiced some form of philanthropy. In
the guise of mainly CSR, many disjointed initiatives of philanthropy
are done to project an image of good corporate citizenship. But
invariably they are not “sustained” in an organisation
when strategic business goals, objectives, strategy and priorities
will always override the “nice to do” with “must
But if organisations embark on a strategic CSR initiative this will
invariably be sustained as it also contributes to achieving the
Strategic CSR in my opinion is when an organisation reviews its
strategic business/organisational goals and identifies an area of
impact amongst its sphere of influence/existing competences and
focuses on a CSR initiative in the communities it operates and the
publics it impacts.
Here are some examples and ideas in healthcare, IT and apparel manufacture,
tourism and finance sectors:
1) An organisation in pharmaceuticals/health can focus its strategic
CSR effort on the identified healthcare needs its current or future
portfolio is focused on meeting, in the communities it operates
and the public it engages with. If antibiotics are the focus category
then “educating” target groups how to use them properly
is a key task when “drug resistance” is a global issue.
In fact Smithkline Beecham International did so in Vietnam joining
hands with the Ministry of Health there in 1996/99 to “educate
the medical profession and pharmacists of the emerging threat of
antibiotic resistance and its effects”… as the ratio
of people developing antibiotic resistance was on the increase”.
This programme whilst impacting the organisations target groups
through this strategic CSR initiative, developed rapport with the
Ministry of Health and continues its programmes having a strategic
impact whilst consolidating its position as a leading antibiotic
2) Organisations in IT have “strategic CSR impacts”
if it educates future generations on the “IT/Internet”
use by setting up centres of excellence.
3) Organistions in apparel manufacture globally have a high percentage
of women employed in the industry, close to 80 percent. In the developed
world the current perception is that most of these women, wherever
they work, work in “sweatshop” conditions and are exploited.
Countries like China and India have been tainted with this image.
MAS Holdings a leading apparel manufacturer in Sri Lanka has had
“exceptional labour practices to support the women”
who have worked for them for over 17 years. In 2003 MAS launched
a Strategic CSR initiative to continue to empower the 20,000 women
who work in there plants titled “Women GO beyond.”
Whilst this programme impacts on the major portion of its employees
(92 percent) in a socially responsible way, it motivates, respects
and empowers them with new skills and competences. This in turn
differentiates MAS from those apparel manufacturers who are perceived
to be exploiting their female staff. The programme won the prestigious
“2005 American Apparel & Footwear Associations –Excellence
in Social responsibility award”
4) Organisations in financial sectors can have “strategic
CSR impact” by educating all strata of society on “how
to better manage their finances”.
5) Organisations in the hotel and travel sectors can have strategic
CSR impact by educating those living in the designated and globally
identified heritage sites of the need to care for the environment
and even take ownership for its care and protection by encouraging
clusters of people living in the vicinity by encouraging them to
organise themselves to proactively look after the immediate environment
they live in.
Branding for differentiation – building product, service or
corporate brands is a strategy pursued by many organisations to
build competitive advantage to command superior margins. Therefore
in a world where sustainable development and CSR occupy centre stage
where “differentiation for competitive advantage” is
a key pre-requisite for business success, Strategic CSR is the way
In the New Brand World, successful brands set themselves apart not
just by how they perform but how they create, deliver and communicate
them and interact with the world around them.