Win-Win management with Partner Companies

“We grow together as a partner of corporate development.”

Principle: Shinhan Financial Group follows the spirit of mutualism and altruism, which believes that you can achieve development only when the health and safety of the corporate ecosystem is improved by thinking of partner companies as our partners in corporate development.

Objective: By implementing the detailed tasks in accordance with the four basic principles for shared development, Shinhan Financial Group will strive to maintain better relationships with partner companies as our partners in developing Shinhan’s competitiveness and values and growing together.

PERFORMANCE

Basic Principle of Shared Development

We implement shared development with our partner companies.

Shinhan Financial Group is implementing the shared development plan for partner companies based on the group’s management philosophy of ‘Compassionate Finance’. As the demand for corporate social responsibilities increase as time passes, SFG has expanded its management philosophy of ‘Compassionate Finance’ to partner companies, including shared development, protection of neighborhood commercial areas and strengthening financial consumer protection. To achieve this, we investigated the actual state of business relations with partner companies focusing on each affiliate’s IT and general affairs areas. Based on the results, we established the improvement directions and detailed plans for shared development and implemented them in stages. SFG established 4 basic principles for shared development with partner companies. Under these principles, we identified 23 detailed implementation tasks, including drawing up standard manuals and contracts and exempting performance bonds for principle, and reflected them in our daily operations.

principle	Details
Compliance with the basic principles for shared development	Prohibiting discrimination on conditions that are not directly linked with the ability to perform duties Except for cases where special technologies are needed or essential for the contract and risk hedging, Ewe minimized giving differential evaluation and limiting the prequalification due to external reasons, such as the size of facilities and manpower.
Ensuring adequate prices	Recognizing a fair compensation is needed for purchasing costs We changed the awareness that a fair compensation is needed for the services and products you are provided with instead of simply cutting back on costs. We put efforts to protect the financial stability of partner companies.
Removing irrationality in business relations	Improving the established common practices of transactions and enhancing the speed of checking and paying prices We removed the irrationality of business relations by improving the accompanying terms and conditions of business, which were unilaterally demanded by the purchaser at an advantageous position, and minimizing the delay of checking and paying prices.
Implementing CSR of shared development	Implementing CSR activities and strengthening partnership for partner companies Along with the CSR for partner companies, we supported the development of partner companies until they acquired the competitiveness by improving the continuous close relations and shared development, such as combining CSR activities.

Implementing Win-Win Management

We identify and implement tasks for shared development.

The major affiliates of Shinhan Financial Group came up with plans for shared development by principle based on the 4 basic principles for shared development with partner companies. Therefore, we identified and implemented tasks that can provide actual benefits by recognizing our partner companies as a partner for success and development in line with the Compassionate Finance implemented at the group level.

We did not make any discrimination based on outward appearances.

Shinhan bank strived to make a transparent and fair contracting process by improving the method of selecting partner companies so that they are not discriminated based on the size or outward appearance of the company. After making it mandatory to notify the bidders about the standard for selection when announcing the bidding, we are required to provide the relevant partner companies detailed explanation. Also, in order to secure the objectivity and fairness of the business and provide equal opportunities to more partner companies, we set up a website for publicly announcing information related to the IT business on the bank’s homepage, while also giving additional points to companies with outstanding technologies and companies that fulfill social responsibilities by reflecting it in the guideline for contract.

Shinhan Card amended the regulations on purchasing so that fair competition without discriminations on outward appearances can be made during the bidding process. As a result, partner companies of Shinhan Card were able to compete in a fair environment based on quality.

Shinhan Life reflected the major details on shared development for partner companies in the standard contract. In order to minimize bidding restrictions based on the outward appearances, we did not apply the regulations for restricting the bidding in cases where specific technologies or sizes were not asked. Also, except for the size of performance used as the indicator for assessing the professionalism of fulfilling duties, we used the applicable service performance period of the outsourcing company and the transaction period with the existing company.

We ensure fair compensation instead of focusing on costs.

In order to ensure a fair compensation, Shinhan Bank changed the principle for deciding on the winning bidder to use the method of restrictive minimum prices. Also, we changed the contract guideline to expand the subjects of private contracts to improve work efficiency. In the case of purchasing general goods, we expanded the subjects from 30 million to 50 million KRW for private contracts, while changing the standards for the fluctuating market prices and the scopes of construction so that they are reflected in the contract guideline to calculate and give appropriate payment.

Shinhan Card established a systematic device to protect partner companies from losses that might arise from intensified price competition and environmental changes. Depending on the work characteristic, we work on identifying the actual difficulties of partner companies to ensure adequate profits within the reasonable scope through private contracts instead of using the minimum bidding method.

In order to ensure adequate prices for partner companies participating in the bidding, Shinhan Investment established a standard order sheet and wrote down that ‘partner companies are a partner of Win-Win management’ in the standard contract. Also, in case of additional costs arising during the business process, we included a provision to provide the additional payment, which was applied and carried out in a total of 13 contracts in the year 2012 alone.

We remove the irrationality of business relations.

Shinhan Bank exempts the submission of guaranty insurance policy that is the contract deposit for outstanding partner companies to expand the subjects being exempted from various contract deposits. It reduced the period for checking the payment of prices and ensured quick inspection. The comprehensive resource management system currently being used has been continuously upgraded so that users exempt stamp fees through electronic contracts, while various billing documents were replaced with electronic documents and also pay electronically without having to visit the bank on small amounts.

In order to improve the established common practices of transactions where burdens are placed on partner companies, Shinhan Card quickly handled the checking and paying of prices and exempted various performance bonds that were customarily received. Also, we made efforts to minimize the burden on partner companies in even the smallest areas by allowing electronic documents of proposals and compensating for sample costs.

Shinhan Investment amended the related regulations and adjusted the standard contract forms for IT purchasing and outsourced workers in accordance with the group’s revised regulation for IT purchase standards. Also, we are making continuous efforts to remove the irrationality of business relations for partner companies by allowing divisional payment and exempting guarantee insurance. In order to reduce the burden of expenses on partner companies,

Shinhan Life has taken measures to provide 100% payment for sample goods after the delivery of official goods for marketing activities have been completed. Meanwhile, we try to hold as many joint events with partner companies as possible and pay for the joint event separately. Also, we specified in the contract about compensations on damages in case of not fulfilling the contract to reduce the burden of expenses for joining the guarantee insurance. Jeju Bank expanded the subjects of private contracts to be more than KRW 10 million, while exempting the submission of deposits and insurance policies as part of preferential treatment for partners that are social enterprises, socially responsible enterprises, social welfare facilities and organizations, companies that facilitate employment of the disabled, outstanding partner companies, companies that have outstanding technologies and certified green enterprises.

We support the sustainability management activities of partner companies.

Shinhan Bank continuously holds business meetings with employees of partner companies and monitors the current status to identify the soundness of partner companies. In the case of IT partner companies, we examine their credit ratings through the KIS credit scoring system, while examining potential risks of large partner companies in advance and monitor them. We continuously conducted monitoring to adopt 8 of the categories identified for internal control and self-assessment (RCSA*) for shared development with partner companies. Also, in terms of establishing the evaluation categories, including the survey on satisfaction level of partner companies, we plan to establish a plan for implementing shared development for IT partner companies in 2013. The implementation plan includes giving awards thanking employees of outstanding partner companies, doing volunteer works together with partner companies, going mountain climbing, holding financial seminars and opening the New Year’s Eve party.

Shinhan Card monitored the negative sides of sustainability management for partner companies and conducted surveys of self-diagnosis on actions against the employees of partner companies. Through this, we monitored and examined whether or not the partner companies fulfilled social responsibilities.

Shinhan Life continuously listened to suggestions and monitored the satisfaction levels through mutual exchanges at regular meetings with partner companies. Also, we improved the evaluation standards for partner companies to give additional points to companies with outstanding technologies and companies that fulfilled social responsibilities. Meanwhile, we conducted surveys on the satisfaction levels of partner companies regarding social contribution activities and sustainability management to achieve continuous development by giving feed backs on the results.

* RCSA (Risk Control Self Assessment) : a self-assessment system for controlling operational risks that is implemented by Shinhan Bank

Future Implementation Plan for Shared Development

In addition to the financial industry, Shinhan Financial Group has business relations with companies engaging in a variety of industries and we do not think of those companies as subjects of making profits. This is because we cannot make further development without thinking about the coexistence and shared development with partner companies. Therefore, Shinhan Financial Group follows the spirit of mutualism and altruism, which believes that you can achieve development only when the health and safety of the corporate ecosystem is improved by thinking of partner companies as our partners in corporate development.

Action plan for shared development by major group company

Action plan for shared development by major group company
Group Company	Details
Shinhan Bank	Implement the beautiful love of sharing (volunteer work) together with partner companies Hold events to boost morale and communicate with partner companies Invitational financial seminars for partner companies: invitational working-level seminars on finance, tax and investment techniques Hold the New Year’s Eve Party for partner companies Exempt contract deposit for outstanding partner companies and pay in installments before final inspection Improve the differential evaluation based on outward appearances and expand an add point system for socially responsible enterprises
Shinhan Card	Reflect the aim to minimize grades based on exterior factors in the manuals for overseeing purchasing Reflect the provision on divisional payment in the IT purchasing contracts * Applied in the case where the day for completing the inspection has exceeded more than 1 month from the deadline of final inspection Reflect the provision on exempting various performance bonds
Shinhan Investment	Establish plans for outstanding partner companies Expect to establish plans by consulting at the group level about the definition and benefits of outstanding partner companies (exemption on submitting various performance bond, etc.)
Shinhan Life	Improve the evaluation system for agencies consigned with the duty of insurance investigation Establish the standard for giving additional points to companies with outstanding technologies and companies that fulfilled social responsibilities Establish the standard form and management process for purchasing order sheet Exempt guarantee insurances for outstanding partner companies and existing transactions Compensate on proposal and sample costs for drawing up the business proposal report