Sustainable Success Stories: PrivatBank Ukraine
Since the approval given on the 8th of March, 2022, by the National Bank of Ukraine, PrivatBank, Ukraine’s largest commercial bank, took only 30 days to complete a Cloud migration of its whole operation – an unparalleled feat accomplished in world-record time to ensure the continuity of the irreplaceable services to its clients and to protect the bank’s operation from the possibility of its local data centres coming under Russian attack.
Amrop spoke to the bank’s VP IT & Operations Mariusz K. Kaczmarek and Independent Supervisory Board Member Roman Sulzhyk about the astonishing IT accomplishment, the steps taken to maintain strategically sound corporate governance during a time of war, and their collaboration with Amrop Ukraine, which assisted PrivatBank in hiring its IT leadership team.
Introduction by Viesturs Liegis, Managing Partner of Amrop Ukraine.
Viesturs Liegis, the Managing Partner of Amrop Ukraine:
The nationalization of PrivatBank, where the government of Ukraine took 100% ownership, took place in December 2016. Initially the bank was run by the crisis management team, but on summer 2017 the council initiated a tender to find an executive search company which could assist PrivatBank in recruiting a new Chief Executive Officer and Chief Finance Officer. Amrop Ukraine won the tender and successfully completed these first two projects, after which we were invited to run a project for PrivatBank again in 2019 – this time the bank was looking for Chief Operating Officer, a role for which Mariusz K. Kaczmarek was recruited. In 2020 it was Mr. Kaczmarek, who had decided to form a new IT leadership team, and Amrop had the opportunity to be involved again: we assisted with the recruitment of the Chief Information Officer, Chief Digital Officer, Head of Cybersecurity, Head IT Architect and Head of IT Operations.
Mariusz K. Kaczmarek, the VP IT & Operations:
The need to protect the bank’s operations in case data centres are destroyed by Russian bombing.
The bank as a financial institution is using a banking system, which every imaginable monetary transaction goes through. So, on February 24 when Russians invaded Ukraine, we were put in a situation, where our data centres, which are located in two Ukrainian cities, are exposed to risk of being destroyed by bombs. If both data centres were attacked simultaneously, we would no longer be able to service, and in our case, it would mean that our 24 million clients, which is 60% of the population of Ukraine, would be cut off from the banking services. The bank has 20 thousand employees, our ATMs and payment terminals constitute 60% of those existing in the Ukrainian market, and there are 49 bank branches, and we simply had to come up with a way to protect all that.
The idea of migrating the bank’s operations to the cloud was, of course, not new, but previously it had not been possible from a regulatory perspective. However, at the beginning of the war, the National Bank of Ukraine issued a permission for banks to store the back-up of their data in the cloud in encrypted format. That was, of course, a major step forward, but, again, if our data centres were destroyed, it would take us months to restore the banking services elsewhere, so that we could restart the operation, so we placed a request with the National Bank to allow us to migrate into the data centres based in foreign countries, including Cloud Solutions, and we received the green light on the 8th of March.
Migrating the banking services to Cloud
We started the migration with the critical services and continued with the additional services, which are to do with regulations, reporting to the National Bank and other regulatory bodies, restoring the connection with SWIFT, Visa Inc. and Mastercard Inc. The migration was accomplished in what I believe is world record time – the critical services, which would guarantee us the basic servicing of our clients, branches, and payments, were migrated in the cloud in approximately 30 days, while the remaining services took us another three weeks to migrate.
So, as a result, we migrated 75% or our IT solutions, which are needed to run our banking business daily – that’s 4000 different servers, 4 petabytes of data, including clients’ data, transactions, and history, all our logs. I can say, without any hesitation, that it is a completely abnormal and extraordinary project, which I am immensely proud of. We hadn’t worked with the Cloud before, so our people were learning by doing. Of course, we were accepting third-party assistance where possible, but, for the most part, it was 500 of our IT staff, which were scheduling, migrating, configuring, testing, and starting the operations from the Cloud Solutions.
Optimizing, facilitated by understanding the true IT costs
The primary focus of the migration was, of course, to secure the bank’s operations, so the country could supply the physical currency, as well as ensure the electronic internal and cross-border transactions for our clients. But very soon we realized that the migration also naturally includes optimization and rethinking of our architecture, and that we can gain much more by staying in the cloud for longer. The regulator allowed banks of Ukraine to stay in Cloud Solutions for the period of the war and for another two years after that. And the benefit of the Cloud is that we’re renting the infrastructure when we need it, and, while it costs money, we use it for our business purposes safely and securely.
Tragically, this realization had to be triggered by the war, but the process of migration shed light to the fact that financial institutions in my experience have not been very good at understanding what their real IT cost is – there has simply been no opportunity to compute it all properly. But placing 75% of the IT operations in the ideal data centre that Cloud is, means that when you get the bill the next day, you know exactly how much things cost, as well as how much storage a particular system is using, how much memory, how much CPU power and so on. And suddenly the guys are shocked saying – we didn’t know we were so expensive! And this process allows you to see that, for example, the very critical system like Privat24 – the mobile application which is used by 15 million Ukrainians for their daily banking, costs pennies, while the system which is responsible for delivering the data to Privat24 costs 7 times more than that. The specialist responsible for this system took only two weeks to cut its costs by ¾. So, by rethinking what is needed, by reorganizing our approach, by reducing the complexity, which we had created in our physical data centres, we were able to optimize and cut costs immensely.
It takes extraordinary effort, but it also gives us a huge opportunity for future improvement – to better manage and focus on our services, time of delivery and our clients’ needs, as well as using optimal approach to the system’s architecture and infrastructure. Of course, it would never happen without our desperately committed, dedicated guys, who were working abnormal hours for 60 or so days – they sacrificed a lot, but this is one of the best teams I’ve ever worked with. Now we can work on optimizing the further usage, because we have a much better understanding of the costs behind it all.
Recruiting a new IT leadership team in collaboration with Amrop Ukraine
PrivatBank’s IT team is immense – IT solutions, systems, development, and support is handled by approximately 1200 people. Across the last 30 years the bank grew extensively – lots of systems and solutions were created, as well as lots of careers. There were a lot of specialists in senior positions who had never worked for other organizations, and they were fairly set in their ways – a certain way to act, think, operate.
I took the IT over two years ago, and very soon initiated a series of trainings and other types of education to have them start thinking about other approaches and different solutions – that there could be other ways of doing things. The change that we were after was to become faster, cheaper, and more innovative, and in the end, we decided to recruit a number of senior IT positions from external candidate pool, and I approached Amrop Ukraine inviting them to help us with this need. We wanted to bring these new competencies to the IT teams which we already had, so that the new hires can bring the wind of change and initiate innovation, using the experience they’ve acquired at other financial institutions. We wanted to show the team that things can be done differently too.
We hired a new Chief Information Officer, Chief Digital Officer, Head of Cybersecurity, Head IT Architect and Head of IT Operations. We empowered them and it created a different momentum, a different atmosphere, and when the dramatic change – the migration to Cloud had to begin, the team members who had been with PrivatBank previously, were saying “It will never happen!”, whereas the new team members were saying “Let’s try!”. The new hires, led by the Chief Information Officer Andrzej Dominiak, were the central drivers of change, and they helped the very intelligent and capable members of the IT team to understand that, just because it has never been done before, doesn’t mean it won’t work. And this is also Amrop’s contribution to our success.
When it comes to the collaboration with an executive search firm, I had very clear expectations, which Amrop was able to understand. The way I see it, it’s not just about what I want and what the company can deliver, but also about staying in the dialogue, about maintaining the continuous feedback loop. It was also an interesting process for me, because people at Amrop really listen – and it is not always the case that the executive search company is interested in listening to clients’ needs.
Independent Supervisory Board Member Roman Sulzhyk:
Maintaining strategically sound corporate governance during a time of war
A massive assault is currently taking place in Ukraine right now on corporate governance, on supervisory boards, and on management boards, and what has enabled PrivatBank’s success in this unenviable situation, is a combination of three things: the team, the leadership, and the strategy.
In 2021 a project to upgrade the IT team was initiated by the VP IT & Operations Mariusz Kaczmarek. Hundreds of people from both inside and outside of the company were interviewed and recruited with the help of Amrop Ukraine. The fact that this team was put together by Mr. Kaczmarek shortly after he assumed the role of VP IT & Operations was absolutely essential to the bank’s success in completing the Cloud migration project and demonstrates his outstanding leadership skills.
Mr. Kaczmarek is a very structured and organized leader – the type of person who is always very hands on and aware of what the team is doing. The flawless project governance is one of the things he’s bringing not only to the IT structural unit, but to the whole organization. He’s a very strong executive and in these challenging times that we’re facing it’s allowed him to shine and do his best.
The strategic approach, which we assumed prior to the war, also worked for our benefit. In IT you can either lean towards innovation, where you develop and advance fast, but can have certain problems too, or towards stability, where you don’t necessarily innovate as much, but the organization becomes more stable as a whole. PrivatBank has always been the most innovative bank in Ukraine, but in 2021 the board and the management team took a strategic decision to focus on stability.
We commissioned a review in cybersecurity in 2020, which produced an extensive list of recommendations, and throughout the 2021 we focussed on completing these suggestions with the IT management team. We continued to innovate too, but we created a clearer structure around it, and improved the stability by working through all the cybersecurity issues. And, as we were working on those issues, the IT team became more familiar with the banking system, and it also had people come up with various improvements to the architecture and applications. We, as the top management, gave people the room to work on it, and removed the business pressure – we put it on the backburner and prioritized IT stability and security.
As a result of this strategic decision and following actions, when Russia’s cyberattacks started at the beginning of the war and they attacked PrivatBank on an unprecedented scale, PrivatBank held. And the fact that the IT team had worked together on the improvements to the system the whole year leading up to the war, also facilitated the tremendous achievement that was moving the whole banking system to the Cloud on a record time and under the huge pressure that the war has put on all of us.