Vincenzo was born in Naples in 1974. From 1997 to 2001,he worked in Italian banks.He has been in Russia since 2001. He has been Deputy Chairman of the Board and Director of the Business Development Department of KMB-Bank (European Bank of Reconstruction and Development), Director of the Corporate Business Department and Advisor to the Chairman of the Board of Directors of Intez-Bank, top manager, Director of Targeted Crediting of Small and Medium Business, Senior Vice President, Chairman of the Credit Committee and Member of the Strategy and Management Committee of MDM-Bank, and President of Rosenergobank.In 2007, Vincenzo Trani founded his own group of companies, and in 2009 also the investment company Concern General Invest. Today, this company, with about 100 employees, is the only investment company in the Russian market with 100% Italian capital. The total of capital attracted from investors under the management of the group’s companies is expected to exceed 400,000,000 euros by the end of 2012.
Where to begin?
“I came to Russia six times in 1999 and 2000”, says Vincenzo. “I considered the proposals of various banks and discussed terms before I agreed to take the post of manager of the Samara branch of KMB-bank, which belonged to the European Bank of Reconstruction and Development”.
His introduction to the banking system was unusual. Every Tuesday a session of the Overdue Debt Committee was held in the office. It discussed companies which had not repaid credits. At a meeting like that, everyone talks very rapidly, and the Italian hardly understood a word. It went on this way for two or three weeks, and then Vincenzo decided that for a start, he would concentrate on the names of the companies under discussion. Everyone had a list of them. And he soon noticed that after discussing, for example, the fifth or sixth debtor, for some reason they all suddenly skipped on to the tenth.
“When I asked, what about the seventh, eighth and ninth companies, I was told they’d already discussed them. What? I’d been listening, and there hadn’t been any such discussion! I started looking into it, and it turned out that these debtors had links with people working at the bank: a really serious swindle was going on. We conducted an internal investigation, and many of the staff were sacked. I believe one of them was later sent to prison. Anyway, all the money was recovered. I realised then that here you have to keep your ears open and be careful what you say”.
However profitable a project may be, it should be thoroughly analysed. Otherwise you may fall victim to swindlers.
In Vincenzo’s opinion, working as a salaried manager in Russian companies is the best way a foreigner can start a career in Russia. It enables him to study the particular features of the country and the specifics of conducting business.
“Strange as it may seem, the main lesson for me is not in rules and regulations, but in relations with people”, he says. “For example, as head of the branch in Samara, I had to go to the Central Bank of Russia and meet their people. But this meant I had to undergo an FSB check, which took about three weeks. However, the bank could not stop working for all this time. And it proved that it was much simpler to meet the necessary specialists in a café than to be received by them in their workplace”.
Trani noticed that there are very specific aspects to working in a collective group in Russia. In European banks, the employees hardly ever compete against each other. Many of them stay in the same post for decades, and a rise in their salary depends on the top people, whom they never see. In Russia, on the contrary, there is fierce competition between the employees. The rise of one is often to the detriment of others. And a rise in salary for a specific employee depends on the boss he works with every day. There’s always a bargaining process going on. Whatever position you hold, success in Russia depends on how you succeed in what arrangements you can make primarily within the company, and only later, outside it.
In European banks, the employees hardly ever compete against each other. In Russia, on the contrary, there is fierce competition.
How much money do you need?
“I always wanted to set up my own company”, Vincenzo continues. “Everything that I did before that can be considered preparation for it. As it turned out, six years after coming to Russia, I was working in MDM-bank, managing the small and medium business department. In that bank, everything is arranged so that each department acts independently. The responsibility for my decisions was mine, the management was not bothered about what I did as long as I got a result. So while I was working for that bank, I felt as if I was managing my own business. At first, no-one in the bank took much notice of my department: surely you can’t make much money from small companies? But when we began to bring in a profit, and quite a considerable one, the attitude changed. I was noticed. And then I understood that I was ready to go it alone”.
leading marketing expert and analyst of Analytic Research Group
The positive general economic background in Russia over the past few years, the growth of business activity and the increase in the population’s incomes have helped to raise interest in the services of investment companies and funds from both private and corporate clients.The leaders in the structure of Russian investments in basic capital by forms of economic activity are transport and communications, the share of which in 2011 was 27.9%. These sectors have regularly been in first place throughout the study period, from 2007 to 2011 (growth of volume of share was 5.7%). In second place: operations with real estate, leasing and provision of service. Here we have 15.4% of investment assets concentrated (in 2011). Third and fourth place are held by mineral mining and processing facilities. Their shares are 14.6% and 13.1% respectively.The choice of foreign investors differs significantly from that of Russian ones. Whereas Russians to a large extent concentrate their funds in such forms of economic activity as transport and communications, and also real estate, leasing and provision of services, foreigners prefer to invest their money in financial activities (46% of investments) and processing facilities (22%).
During his years working in Russia, Vincenzo Trani has managed to arrange several successful deals between Russian and European financial institutions. In particular, the takeover of KMB-Bank by Intez Bank was done under his supervision. This was well rewarded, which gave him his start-up capital.
“How much money do you need to open a financial company in Russia now?” counters Vincenzo Trani with a smile. “A lot! It often happens that clients, after hearing our proposals, say: OK, if it’s such a profitable project, why don’t you put money into it along with us? This is logical, so I have to agree. A lot of money is needed, because the Russian Federal Financial Markets Service sets limits on the minimum amount of the capital of investment companies, which must cover possible risks. If you only have two or three million euros, this is clearly not enough. There are of course other forms of business than the financial field, in which the entry cost is lower, and investment in them might be more profitable. But, you know, everyone chooses what appeals to him, everyone does what he knows how to do”.
Where can you find staff, and how do you manage them?
“From the very beginning, we preferred to select people through employment agencies”, continues Vincenzo Trani . “I brought several key members of the team with me from their previous jobs, but I think the other posts should be filled by people from outside. They may have something new to contribute in terms of experience”.
Vincenzo mainly cooperated with the offices of the Western employment agencies Morgan Hunt and Michael Page. Their names may sound foreign, but those who work there are Russians, who know the market like the back of their hand. Sometimes, for some reason or other, he has had to deal with small agencies. And this experience was not a happy one.
After discussing, for example, the fifth or sixth debtor, for some reason they all suddenly skipped on… to the tenth. A really serious swindle was going on.
“Such firms often fail to observe business ethics”, says Trani . “They’ll find you someone, take the money, and after a short while they’ll persuade him to move to another company”.
He thinks the question of staff is the most difficult one for a foreign businessman. In Europe there can be friendship between a boss and a subordinate, and no-one thinks anything of it. But in Russia, according to Trani , it is a great mistake to become the friend of a subordinate, this can end up very badly. At the same time, here you can permit yourself to make a mistake in signing someone on. In Italy, he jokes, it’s worse than a wife. You can part from a wife, but you can hardly ever get rid of an employee.
Employment laws are not so strict in Russia. There is more freedom in the labour market and this is a big plus. But it has its downside: high turnover of personnel. You have to work out a system for holding onto your people, to make sure that they find it more interesting to work for you than elsewhere. But money can’t solve everything, not by a long way. Someone may receive a salary rise, but two months later he has forgotten about it and the problems return. But if he feels needed, if he sees that the development of the company depends on him, if he understands his own long-term prospects, then all this will be more important to him than money.
Managing Director of Investcafe
Interest in the Russian economy can be judged on the basis of the volume of accumulated foreign investments. For example, towards the middle of 2012, the processing industries were in first place with more than 30%, which in absolute terms totals $102,3 billion. Second came the mining of minerals, 18.6% = $62,4 billion. Operations in real estate, leasing and provision of services came to 10% = $32 billion. Wholesale and retail trade amounted to 18% = $60 billion. Transport and communications accounted for 9.1% = $30 billion. Financial activities, construction and electricity came to 6.5%, 4% and 2.2% respectively.In absolute terms, foreign investments in 20101 totalled $190 billion, of which direct investments were $18.4 billion, portfolios $0.8 billion, and commercial and other credits more than $171 billion. In 2011, direct investments comprised 9.7% of the total sum of foreign investments, but this form of investment is steadily falling. This is the lowest figure over the whole period for which this statistic has been recorded. Commercial and other credits predominate in the structure of foreign investments – they came to almost 90% for 2011. And their share is constantly growing.The Russian market has good prospects of growth, which cannot be said of the developed markets, nor of many developing ones. If we consider investment prospects in Russia broken down by sectors, the consumer and financial sectors are developing the most dynamically. They have grown at twice the rate of the market as a whole in the period since 2005.
The main thing is security
“Starting up on my own involved many difficulties”, recalls Vincenzo. “For example, I had to pass an examination for a certificate from the Federal Financial Markets Service. The examination is in Russian, and you have to answer about 800 questions in an hour and a half. This is a very hard test (Ed. Note: By the way, you could count foreigners in Russia with FFMS certificates on the fingers of one hand!).
One of the most important questions is security. It needs to be thought about all the time, according to Trani. If you have chosen the financial field, you need to find an office in a building with a pass entry system. If you are working with cash, you must bring in a private security firm to protect it. If you operate in non-cash assets or invest in the stock market, you must carefully analyse possible partners, clients and all deals.
However profitable a project may be, Trani thinks it should be thoroughly analysed. Otherwise you may fall victim to common swindlers. In the West, World Check is used to seek information, of which it has a lot, including about criminals. But Russia has nothing like this system, and information has to be checked from several sources. It is difficult for a Western person to spot a Russian swindler. Therefore it is the custom here to take on former members of the law enforcement agencies. Even if you have to pay them a high salary, it’s worth it.
It is also very important to diversify all lines of business. It is worth holding money in a variety of currencies, diversifying the client base, borrowers, sources of information and much else. This also concerns management of personnel. If you load too many important jobs on one person, he may feel he has too much power in the company. So a big job should be broken down into smaller ones and entrusted to different members of staff. In the West, this principle would often be a hindrance, but in Russia, the more you diversify your business, the better.
Are “special relations” with the authorities necessary?
In all these years, Trani has never experienced a single incident, which would have given grounds for talking about illegal actions by the state authorities.
“In spite of the fact that there is so much in the press about ‘special relations’ between business and the authorities, this has nothing to do with us”, he says.
However, Vincenzo agrees that the authorities are very vigilant in ensuring that bank companies observe the law. But it’s the same anywhere in the world. It is a paradox that in Russia, this could be connected specifically to corruption. After all, every breach on the part of business is a potential windfall for the checker.
“I don’t deny that when dishonest officials see breaches in Russian companies, they offer to settle the matter for a bribe”, he says. “But there is a different attitude to foreign firms. There have been errors on our part, they were pointed out to us and we corrected them. But no-one has ever even hinted at a bribe. Everything was dealt with strictly within the law”.
There is a different attitude to foreign firms, so no-one has ever even hinted at a bribe.
Where to invest?
According to Trani, the stock market in Russia is only weakly developed. It is interesting for that very reason. The Russian government is making great efforts to turn Moscow into an international financial centre. If this succeeds, and many foreign investors come to Russia, all those operators who are already in the market today will show tremendous growth. This could be 300-400 per cent in two years. There are very few places on the planet, Vincenzo stresses, where you can achieve such growth. In fact, there are only two: Brazil and Russia. But the crime situation is much worse in Brazil.
“If you don’t want to enter the financial market, I can recommend other forms of business”, says Trani. “For example, a restaurant business in Russia sometimes yields up to 30% income. A construction firm can yield up to 60%. Our clients also earn in different ways”.
Five Pieces of Advice from Vincenzo Trani for Those Who Want to Start a Business in Russia
1. It is very difficult to conduct a business without a Russian partner. A partner can be found through many channels. The simplest is your country’s embassy. It is very important that information about this person should not all come from the same source, but from at least three sources.
2. It is very important to understand the industry in which you intend to operate. It must be correctly assessed from the point of view of the financial indicators. The worst thing is to have false expectations based on false information.
3. It is not worth choosing a place solely on the basis of commercial benefits. Many factors have to be taken into attention, including security, potential, staff, and even the climate.
4. Make use of the support of independent law firms. Independently, primarily from you yourself. They can give a very valuable opinion from outside; they may see something you have missed.
5. Don’t disregard the services of accountancy firms and tax specialists. They will help you to avoid making mistakes which could cost you very dearly.
Vincenzo says that when Italian and other European investors come to him, they are looking for a return at the level of 10-15% and are agreeable to the less risky investments. But Russian investors are making 20-40% profit. Sometimes even up to 50%.
“In any case, our clients earn more than we do”, he stresses. But not just anyone can apply to us. If a client has less than a million euros, we won’t even hold talks with him”.
However, the investment business, according to Trani, is not the most profitable one. It rarely yields more than 15-16% per annum. That is, of course, if you exclude certain non-standard deals, when the yield can be very high.