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Entrepreneurs serving the needs of entrepreneurs: an interview with Annika Falkengren

Entrepreneurs serving the needs of entrepreneurs: an interview with Annika Falkengren

Article published in Dagens Industri Weekend, 8 July 2022

Annika Falkengren has long operated in the top echelons of business. After 12 years as CEO and President of SEB, she stepped down in 2017 and became a Partner at Lombard Odier.

Following 30 years at SEB, during which she was repeatedly named not only Sweden’s but one of the world’s most powerful businesswomen, she could have had any job or board position she wanted.

Some people are careful to get things right. Others focus on doing things right. At SEB Annika Falkengren preferred to do both. She still does.

The opportunity to become a partner in Lombard Odier came up at the end of 2016. “If you’re running a listed company, you have to decide pretty quickly. I had never thought about leaving and felt I wasn’t finished with the operational side. But becoming CEO somewhere else wasn’t very appealing,” she says, in her first interview after stepping down five years ago.

On 16 January 2017, Annika Falkengren announced that she would leave the company in the summer. Two weeks later, she delivered her eleventh and final SEB financial statement.

 

From President to Partner

“At Lombard Odier, I get to work in-depth on long-term wealth and asset management, and help successful entrepreneurs solve various issues. Being able to work closely with clients suits me very well,” she continues, speaking from Lombard Odier’s prestigious Geneva office.

The privately owned bank was founded in 1796, making it the oldest bank in the region. The bank has a very good reputation in Switzerland, with 2,650 employees in more than 25 countries and assets under management of more than SEK 3,800 billion. This is almost 1,400 billion more than SEB’s assets under management on 31 March this year.

Lombard Odier has had 106 partners to date. As of 1 July 2017, Annika Falkengren is one of the bank’s seven partners. She is the only woman and the first Swede.

“Since there are only seven of us owning and managing the bank, we are entrepreneurs serving the needs of other entrepreneurs. That’s one of the things I like most,” she says.

Since there are only seven of us owning and managing the bank, we are entrepreneurs serving the needs of other entrepreneurs

Sharing the responsibility

Another advantage is the equal structure, that everyone’s voice carries equal weight. “We each own the same amount of the business and share all the burdens and decisions. That means you’re not alone at the top as you are when you’re CEO. On the other hand, you can have an idea, but if the others don’t agree, it won’t happen, no matter how good you think your idea is.”

Annika Falkengren sings the praises of diversity and believes strongly in teamwork.

“Having different people around you is perhaps the most important thing of all. Those who point out your weaknesses and challenge you are invaluable.”

According to Annika Falkengren, she works more operationally now than as a stock market CEO. Among other things, she is responsible for Lombard Odier’s Asian market, and has led work on the bank’s new, climate-smart headquarters next to Lake Geneva.

Having different people around you is perhaps the most important thing of all. Those who point out your weaknesses and challenge you are invaluable

“We are an extremely flat organisation. The hierarchy consists of two layers, which means that sometimes you are the expert. The seven of us can discuss an investment, come to a decision and implement it one hour later.”

Annika Falkengren is clearly relieved to avoid the formality of the stock exchange.

“There are of course pros and cons to being listed, but only communicating twice a year – because we want to – undeniably gives us more time for other things.”

 

You started working in one of SEB’s Stockholm offices in 1981...

“5212. The office number at Odengatan 28 was 5212.”

 

...became a trainee in 1987 and CEO in 2005. You’ve had a great time all these years, why did you quit?

“I’ve seen a lot of managers sit for too long. After many years as a leader, it’s easy to get a little comfortable, especially when things are going well. I wanted to be in charge of my own destiny, not to be asked if it’s time to think about stepping down, or how long to go on. No one, not even journalists, have asked me such questions and I’m pleased about that.”

 

Why?

“Because it can also be seen as proof that I was really in the moment, focussed and appreciating what I was doing. To be able to hand over to the next CEO in an orderly fashion is rare. It created a sense of calm in the bank – among employees, clients and shareholders.”

 

Annika Falkengren is not the anxious type. She has, however, been concerned about one thing for a long time:

“Entrepreneurship. I’ve always taken care of things, pushed them forward and been pretty good at leading others. SEB sponsors Young Entrepreneurship in high school, and as the bank’s CEO I gave many school lectures on entrepreneurship. I have a lot of respect for entrepreneurship, but have never dared to start something from scratch myself.”

 

You’re not so good at reinventing the wheel, but all the better at figuring out how to use the wheel in new ways?

“Yes, I think I was a good entrepreneur at SEB. At Lombard Odier we are small enough to have to work as entrepreneurs ourselves, otherwise we won’t survive. That’s also what makes the job as a partner – handing over the bank in a better condition than when you started – so fun and different, and something through which I can develop for years to come. So I landed pretty quickly on a single question: why not?”

Working to hand over the bank to your successor in a better condition than when you started is one of the things that makes the job as Partner so fun and different

The two words encapsulate both reason and emotion. Banking should be pretty simple. You just need to make sure that the lending rate is higher than the deposit rate, right?

“Yes, in its simplest form and according to the textbook, it is. But if you only have the interest rate differential, the bank doesn’t grow that much. Modern banking is much more complex with a range of risks that you have to keep under control.”

From the moment banks were allowed to lend more than they held in deposits, the business could scale up hundreds or thousands of times. When people needed help with payments and other services, banks brought in additional funds, which put even more money into circulation. This is why a few large credit losses can start a domino effect and ultimately lead to a financial crisis.

So what will the banks of the future look like? Annika Falkengren has doubts about the full-service bank business model.

“In the past, a bank needed to have everything – deposits, loans, payroll accounts, savings, card processing, currency exchange, advice – for the customer to be satisfied. Today, digitalisation and transparency distribute information and knowledge to clients, giving them more choice: do it digitally yourself, or buy the service.”

“I think people rarely switch banks altogether. However, it seems to be becoming more common to add different providers for different services – payroll, mortgage, savings and so on, which puts pressure on full-service banks. At the same time, universal banks are the lubricant of the national economy and play an important role in business growth.”

 

Getting bigger through acquisitions or mergers is no longer an easy option, according to the banking giant.

“You get clients and staff who haven’t chosen you, so you start with two negatives, I would say.”

 

She is also wary of cross-border banks:

“Different countries mean different regulations and regulatory requirements. Operating in multiple jurisdictions, with different financial regulators, makes it difficult to scale up. Personally, I think banks will have to specialise much more in the future, and become the best at what they offer.”

 

Companies that don’t question their business model, regardless of the sector, will not be around for long, according to Annika Falkengren. And that brings us to sustainability.

“Climate change is the biggest challenge in human history and, if done right, investments facilitating the transition to a more sustainable economy can deliver by far the biggest return for both investors and the planet.”

 

The concept of ESG – environment, social responsibility and corporate governance – has emerged as a measure of how companies’ activities contribute to sustainable development.

Sustainability is complex and not easy to get right. The terms are defined differently and traditional ESG measures only look backwards, for example what a company’s carbon footprint looked like at a certain point in time, and say nothing about the sustainability of the business model in the medium or long term.”

Climate change is the biggest challenge in human history and, if done right, investments facilitating the transition to a more sustainable economy can deliver by far the biggest return for both investors and the planet

Instead, Lombard Odier has chosen to use science.

For example, the bank has developed its own science-based investment framework and reporting standards in partnership with Oxford University, where it funded the world’s first endowed professorship in sustainable finance. Lombard Odier also has a team of more than 30 scientists who review all portfolio companies, talk to owners and management and boil the data down into a sustainability assessment.

“What many people don’t realise or want to accept is that some companies that are currently big polluters, but have the capacity to change their business model, can be interesting for us who invest in the climate transition.”

To just go into new green companies, like H2 Green Steel or solar panel suppliers, is to make things easy for yourself, says Annika Falkengren.

“Helping brown, high-carbon companies go green is harder, costs more and takes longer, but their transformation makes a big difference to the climate.”

Companies that are currently big polluters, but have the capacity to change their business model, can be interesting for us who invest in the climate transition

In spring 2019, Lombard Odier became the world’s first B Corp-certified global asset management bank. B Corp is a global association of nearly 5,000 companies in 79 countries focussed on sustainable business practices.

“The certification means a lot to both existing and potential clients and employees,” says Annika Falkengren.

 

What is the most important attribute to become a successful leader in the future?

“To like people. Being genuinely interested in the drive and development of different kinds of people is a skill in itself. You also have to live as you learn. Then I think you need a vision and a purpose – where are we going, why and how? It’s no longer you who has the upper hand and chooses the talent, it’s the talent that chooses you.”

The most important attribute of a successful leader is being genuinely interested in the drive and development of different kinds of people. You also have to live as you learn

 

So what do you think will happen to the Stockholm stock market in the coming year?

“I see no reason why share prices should increase in the next six months. The war in Ukraine is likely to be prolonged, perhaps for several years, and weigh on growth in the eurozone. China opens and closes as new variants emerge. Both factors exacerbate energy, resource and food shortages. At the same time, the US is experiencing a demand boom. Many in the US have saved during the pandemic and have the means to consume, while many Europeans have no savings to rely on.”

 

The trend depends on how much and how quickly central banks raise interest rates?

“Yes. Our main scenario is that the US policy rate peaks at 3.5-3.75%, which is expected to lead to a mild recession in the US in 2023. However, the risk is that the US Federal Reserve will have to raise rates to 4-5% to tame inflation, which would lead to a more severe recession.”

 

Annika Falkengren also trades stocks privately.

“The thing is, though, that I’ve invested most of my savings into the partnership at Lombard Odier. I have the bank’s average portfolio and could have more shares than that, but that’s not the case right now.” She won’t go into how much or what stocks are involved.

 

So why are you doing this interview now – five years after leaving SEB and moving to Switzerland?

Annika Falkengren claps her hands and her eyes twinkle in a smile:

“Why not?”

“For me, my whole life, not just my career, is about curiosity and learning. Now I’ve landed, I feel that what I’ve learned might be something to share with others.”

Important information

This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.

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