Report for The Performance Management of Dog’s Habitat

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AN ANALYSIS OF THE RISK MANAGEMENT FRAMEWORK WITHIN THE BANKING SECTOR: “A CASE STUDY OF STANDARD CHARTERED BANK” BY [Insert Your Official Name] A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTERS IN BUSINESS ADMINISTRATION GLOBAL LONDON SCHOOL OF BUSINESS & FINANCE 8TH APRIL 2019 Declaration I (insert you official name) do certify that this project is my own work and it has never been submitted to any institution of higher of learning for award of degree of masters in Business Administration Global. All scholarly sources, from which information has been extracted, are referenced by use of Harvard format style. I further certify that I am fully aware of detailed LSBF guidance and regulations concerning plagiarism and I do agree to comply with them. Student signature: ___________________________ i Date: ------------------------------------- Supervisor Name and Signature Assessor Name and Signature Date Date Acknowledgements I thank the Almighty God for granting me good health at the moment I kick started my academic journey of pursuing masters’ degree at London School of Business & Finance. My due credit goes to my project assessor (Shahnza Hamid) and internal verifier (Christopher John Jasko) whose immense contribution enabled me to finalize my project. I do extend my deepest appreciation to my esteemed comrades from London School of Business & Finance for their positive criticisms throughout entire journey of working on this paper. Without your countless contributions, the current work would not have been successfully accomplished. Thank you and be blessed. ii Abstract The world is changing at a drastic rate due to the effects of globalization. The banking industry has been affected by various risks leading to compromised businesses. Risk management is considered as one of the best strategies of attaining financial prudence within the banking industry. Financial crisis of 2008 showed the necessity and importance of risk management within the banking industry. Risk administration as enhanced by advanced strategies is necessary for a commercial bank to attain a unique competitive edge in the highly competitive industry. Major aim of this study was to analyze risk management framework within iii the banking industry; case study of Standard Chartered Bank. Risk administration practices within the banking industry are categorized into: risks management environment, risks monitoring, risk measurement, internal controls, capital adequacy and investment and strategic guidelines. The study relied on mixed method of research to obtain relevant information and ideas on risk management within the banking industry. A comprehensive review of literature on risk management practices within the banking industry was done. A structured and detailed questionnaire was emailed to target research respondents (selected through purposive sampling) in order to have their views of risk management at Standard Chartered Bank. Secondary data on risk management was extracted from Annual Report 2010 of Standard Chartered Bank. Primary data from the questionnaire was analyzed by use of SPSS and presented using MS Excel charts. From the study, it was concluded that there is positive correlation of risk management practices and financial viability of commercial banks. A number of recommendations were made with view that future research will improve risk management within the banking sector. iv Table of Contents Declaration ..................................................................................................................................................... i Acknowledgements....................................................................................................................................... ii Abstract ........................................................................................................................................................ iii Chapter one .................................................................................................................................................. 1 1. Introduction .......................................................................................................................................... 1 1.1. Background information ................................................................................................................... 1 1.2. Drivers of Risk Management ............................................................................................................. 2 1.3. Industry Background ......................................................................................................................... 6 1.4. Risk management at Standard Chartered Bank ................................................................................ 8 1.5. Risk Governance................................................................................................................................ 8 1.6. Risk Function ..................................................................................................................................... 9 1.7. Risk Appetite ................................................................................................................................... 10 1.8. Stress testing & Scenario Analysis .................................................................................................. 10 1.9. Areas of Risk management at Standard Chartered Bank ............................................................... 11 1.10. Research Aim .............................................................................................................................. 14 1.11. Research Questions .................................................................................................................... 14 1.12. Hypothesis................................................................................................................................... 15 1.13. Research Objectives .................................................................................................................... 15 Chapter Two ................................................................................................................................................ 16 2. Literature Review ................................................................................................................................ 16 2.1. Introduction .................................................................................................................................... 16 2.2. Challenges of Risk Management within the Banking Sector .......................................................... 22 2.3. Theory of Risk Management in Banks............................................................................................. 24 Modern portfolio theory ............................................................................................................................. 24 Moral Hazard Theory .................................................................................................................................. 24 Merton’s Default Risk Model ...................................................................................................................... 25 2.4. Summary of literature review ......................................................................................................... 25 Chapter Three ............................................................................................................................................. 26 3. Research Design and Methodology .................................................................................................... 26 3.1. Rationale for Embracing Mixed Method of Research ..................................................................... 27 3.2. Data Collection ................................................................................................................................ 29 3.3. Benefits and Shortcomings of Primary Sources of Data ................................................................. 29 v 3.4. Advantages of Using Questionnaires for Data Collection ............................................................... 30 3.5. Disadvantages of Questionnaires ................................................................................................... 31 3.6. Respondent Motivation .................................................................................................................. 32 3.7. Secondary Data ............................................................................................................................... 32 3.8. Sampling Technique ........................................................................................................................ 33 3.9. Measures to Ensure Care and Accuracy of the Data Collection Process ........................................ 34 3.10. Timescale .................................................................................................................................... 35 3.11. Data Analysis ............................................................................................................................... 36 3.12. Ethical Considerations................................................................................................................. 37 3.13. Research Structure...................................................................................................................... 38 Chapter Four ............................................................................................................................................... 39 4. Analysis and Discussion of Findings .................................................................................................... 39 4.1. Research Question 1 Analysis: ........................................................................................................ 39 4.2. Research Question Two Analysis .................................................................................................... 40 4.3. Research Question Three Analysis .................................................................................................. 41 4.4. Research Question Four Analysis .................................................................................................... 42 4.5. Research Question Five Analysis..................................................................................................... 43 Chapter Five ................................................................................................................................................ 44 Conclusions and Recommendations: .......................................................................................................... 44 5.1. Conclusion ....................................................................................................................................... 44 5.2. Recommendations .......................................................................................................................... 46 5.3. Limitations of the Study .................................................................................................................. 47 5.4. Areas for Further Research ............................................................................................................. 47 References .................................................................................................................................................. 48 Appendices.................................................................................................................................................. 50 Appendix 1: Research Questionnaire.......................................................................................................... 50 vi An Analysis of the Risk Management Framework within the Banking Sector: “A case study of Standard Chartered Bank” Chapter one 1. Introduction 1.1. Background information According to Härle et al. (2016), indomitable risk management strategies are relevant for banks and other financial institutions to gain a unique competitive edge in the highly competitive industry. Many banks across the world have been making significant moves in ensuring that they are able to avoid nauseating incidences such as cyber crimes as orchestrated and launched by people with sinister motives. Risk management within the banking sector has been revolutionized with the intention of complying with regulations that were associated with the global financial crisis. There are expectations that indeed risk management is changing at a drastic rate hence the necessity to comply with technological and other changes. The term “Risk Management” is defined in business terms by the Financial Times as ‘the process of identifying, quantifying, and managing the risks that an organization faces. Since the outcome of business activities are uncertain there is an element of risk. These risks include but are not limited to strategic failures, operational failures, financial failures, market disruptions, environmental disasters and regulatory violations which are all statistically measured’. (Financial Times) Risk Management (RM) is a very important function in every institution particularly the banking sector due to the ever changing environment, market volatility, new financial products, technological advancement and the emergence of digital currencies (Lexicon.ft.com. 2018). The real nature of the banking environment is prone to threats of risks which are embedded in the activities which remain a critical challenge to understand and control. Moreover, during the last decade the RM framework of the banking sector has undergone significant transformation, drastic response to increased scrutiny by regulators due to worldwide financial turmoil and the high cost of non-compliance in the wake of scandals, bailouts and failures of several big banks. The global financial crisis has exposed the failure of banks to manage their core business function “Risk Management”. The deepening impact of the financial crisis eroded public 1 confidence in the banking sector, capital markets retracted to a historical low and regulators have been made to set new directives to avoid future crisis. According to recent studies conducted by McKingsey (2016), all indicators suggest that RM will experience increased changes in the near future. Mckingsey (2016) identified six main drivers which will impact (RM): (1) Increase regulations – new capital requirement under the Basel III and IV which will ensure banks maintain adequate capital to within extreme shocks. (2) Change in customers preference as technology evolve- millennials are more tech savvy and want the latest trend without too much hassle. (3) Evolving technology tend to bring new risks management techniques, systems and tools. (4) New risks factors such as cybersecurity and contagion risk. (5) Behavioral economics to remove bias (6) Increase pressure for banks to contain rising cost. Below is comprehensive examination of the risks that impact risk management framework within the banking sector. 1.2. Drivers of Risk Management Trends in risk management within the banking sector do suggest that indeed banks and other financial institutions can take the advantage of unmatched initiatives in order to remain relevant in the highly competitive industry. Indeed the banking sector has been experiencing drastic changes as sparked by a number of trends. For example, it is known that regulations within the banking sector are expected to broaden and get deep as sparked by number of factors (McKingsey 2016). Financial and nonfinancial regulations will have a significant impact to even banks that are operating in the emerging economies. Most of this impetus is attributed to public sentiments that are intolerant to failures within the financial sector. For example, the 2008 financial crisis is linked to defective risk management strategies among the financial institutions. Risk management is based on the potential of the bank to be more robust in regulatory and stakeholder management abilities (McKingsey 2016). Risk management framework does play pivotal function in the process of aiding banks to reduce risks attributed to technology and human error. Risk management framework within the banking sector is grounded on the regulatory pressure that is exerted to banks by government of the United Kingdom and other governments 2 of the world. For example, it is expected that all banks in the United Kingdom and other regions of the world are expected to take in part in curbing illegal and unethical monetary transactions. This is expected to be accomplished through a number of ways such as detecting and unmasking chances of money laundering, financing of terrorism, fraud and enhancement of tax collection among others (McKingsey 2016). These functions cannot be accomplished without embracing the best strategies of risk management. Governments do require banks to be able to align with national regulatory standards when engaging in global financial business. For example, banks such as Standard Chartered that operate across the globe are required to comply with United States’ guidelines on environmental standards, collection of taxes and bribery among others. This trend has an implication that banks are likely to be monitored and examined in the manner in which they organize their information asymmetries, transparency in conducting financial transactions and ability to inform customers on the quality of products and services they discharge to them. Risk management framework within the banking sector is also based on ever increasing customer expectations due to ever changing technology (McKingsey 2016). Advancement in technology has led to set of competitors who are not interested in being left behind but just being part in creating direct customer relationship and be able to tap the lucrative part of the business. McKingsey (2016) states that there has been a trend of increased use of online apps where customers are able to engage with financial providers at the comfort of their mobile phones. This has compelled banks such as Standard Chartered to up their game of risk management in order to attract and retain huge number of customers. Automation of information systems has compelled banks to attain higher number of customers. Many players such as middle loan providers do not require customers to fill in length documents during the process of applying for loans but instead obtain financial details from eBay, PayPal and Amazon among others. Some of the banks have embraced this strategy where customer data can be obtained from public sources so that the entire process of meeting customer needs is done in the best and convenient manner (McKingsey 2016). Therefore, the entire process of risk management is accomplished by working closely with certain businesses so that the process of offering customized services is easily attained. Generally, the entire process of customization is expensive within the banking sector due to the complex nature of the supporting processes and real business environment. There are number of regulatory constraints that are imposed in this area hence the entire process of risk management 3 is important for ensuring that customers are protected from fraudulent decisions made by various banks. It is of great value for risk management within the banking industry to become seamless and this is a necessary requirement for attainment of unique customer value. McKingsey (2016) argues that risk management has alwa ...
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Tutor Answer

peachblack
School: University of Virginia

Please clarify this issue, "Buddy, please check the documents you sent to me again. Still there is a problem, you provided me with the comments but the attached attachment is wrong attachment. The attchment should concern financial performance of Dog’s Habitat BUT THE ATTACHMENT TALKS ABOUT RISK MANAGEMENT FRAMEWORK WITHIN THEBANKING SECTOR: “A CASE STUDY OF STANDARD CHARTERED BANK." Thank you.
Let me know if you need edits. Cheers!

Running head: REPORT FOR THE PERFORMANCE MANAGEMENT OF DOG’S HABITAT

Report for The Performance Management of Dog’s Habitat
Student's Name
Course Number-Name of Course
Instructor’s Name
Date

REPORT FOR THE PERFORMANCE MANAGEMENT OF DOG’S HABITAT

2

Report for The Performance Management of Dog’s Habitat
To: The Directors of Dog’s Habitat
From: Management Consultant
Date: Feb 12, 2019
Subject: Performance Management
This report provides an assessment of the current financial performance of Dog’s Habitat
and outlines the various techniques and tools which can be applied to a not for profit
organization like for this case, Dog’s Habitat. These performance measurements synchronize
with modern day practices and trends applicable to standards and criteria used by organizations
worldwide. Academics have provided many definitions as to what is performance management.
Rolstadås 2012 defines performance management as “the process of assessing the proficiency
with which a reporting entity succeeds, by the economic acquisition of resources as well as their
efficient and effective deployment, in achieving its objectives. Performance measures may be
based on both non-financial and financial information.”
A. An assessment of the financial performance of Dog’s Habitat using the information
given above and how the current financial performance may impact the business
within the short term. (LO2, LO3) – 40 marks
There are some different ways to assess the performance of an organization to determine
its success. However, in not for profit organizations, performance measurements are much more
complex because financial profit is not the ultimate goal but to provide some social need
continuously (Hahn and Powers 2010). Business performance management (BPM) is unique to

REPORT FOR THE PERFORMANCE MANAGEMENT OF DOG’S HABITAT

3

each organization and is centred on three components; organization structure, product
information and the use of information. This framework is geared towards deploying resources to
develop and implement a strategy in which the goals of the organization can be achieved
effectively using key performance indicators (KPIs). KPIs are quantifiable measures which
reflect these objectives and can be used to guide future decisions. As in the case of Dog’s
Habitat, the key objective is to control and reduce the cost to optimize resources and deliver
successful outcomes for continuity. In order to achieve these goals Dog’s Habitat can consider
the following approach: (1) the goal perspective where output is measured, (2) internal systems
to see how much input was obtained to carry out the daily operations, (3) examining internal
processes to assess efficiency, (4) applying the three “Es”-effectiveness, efficiency and economic
value and (5) value for money.
Value for Money (VFM) is widely used in not for profit organizations which operate with
limited resources and is referred to as the three Es. This perspective would be applied to Dog’s
Habitat. According to Hahn and Powers 2010, VFM aims to maximize shareholders interest.
Therefore, management identifies and align strategic objectives to the key drivers that will add
value.
Effectiveness- is described as the relationship between objectives and results achieved
and the concept is often judged as to whether the organization is doing better. Following the
introduction of the admission fee, there was an increase of 50% and 33.3% in 2016 and 2017
respectively although inflation was 2%. The increased cost has resulted in a reduction of visitors
by 36% by the end of 2017. Of note also, customer spending on accessories and foods remained
consistence although customers are declining. This strategy is indeed positive in comparison to
the admission fee. If there are other alternatives for not for profit centres where customers can

REPORT FOR THE PERFORMANCE MANAGEMENT OF DOG’S HABITAT

4

pay less for the goods and services it would allow for a better analysis of the pricing strategy in
determining the impact on performance. Dog’s Habitat has failed to retain and attract new
customers. Also, total costs have been increasing over the three years suggesting a decline in
overall profit for those years. As a result, one can conclude that the pricing strategy of Dog’s
Habitat is not effective.
Efficiency- this measures the output with inputs to determine how well Dog Habitat was
able to utilize resources by comparing the number of hours allocated to each customer. Although
the number of hours has been reduced the cost of providing the service has increased over the
period. Assuming the number of employees is the same the main driver is the management costs
which are fixed hence efficiency will not improve unless this is addressed. Additionally, the
analysis is limited to financial data and lack qualitative information such as the current standard
of customer service.
Economy- the economic indicators should include ratio analysis of Profitability, Capital
and Liquidity measures the information provided is limited to profitability measures, DRURY
(2013). The overall financial performance of Dog’s Habitat has improved ...

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Review

Anonymous
Tutor went the extra mile to help me with this essay. Citations were a bit shaky but I appreciated how well he handled APA styles and how ok he was to change them even though I didnt specify. Got a B+ which is believable and acceptable.

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