Retail Bank Strategy and Risk Based Performance Management Masterclass, with BankStrat computer based simulation game, by BC&T Ltd
A framework to provide bank managers with the essential competencies to develop Value Based, Risk Adjusted, Compliant bank Management Strategy and the opportunity of testing those skills in a quasi-real life bank management simulation.
A Masterclass Program:
The aim of the programme is to develop retail bank global and operational strategies to: create value for all stakeholders, within risk constraints and in compliance to regulatory constraints. As all bankers know this is complex and technical. Managers must have a good understanding of these financial and quantitative models to structure their business strategies. Relationship based management implies selling the right product to the right customer at the right price and risk based management implies that the underwritten risks are managed within board and regulatory policies and limits.
It is not sufficient to “hear about” the underlying financial concepts; managers must experience the outcome of strategic management decisions to fully understand what is required to generate a winning strategy. We have developed a program that includes the main strategic management domains that the managers must master, and linked the review of these with a hands-on pragmatic, near real-life computer aided bank management simulation.
The training is not intended to create technical specialists in any of the management domains, but to help the participants become truly bankers that can think globally and generate winning strategies that maximize the bank’s risk rewards.
The content and case studies are proprietary and cannot be copied without the explicit approval of Clive Wykes of BC&T Ltd.
Targeted audience and Course Duration
This is a 3 to 10 day training. Ten days may appear to be a very long break from work. To review all the concepts and apply then in the simulation game is a major effort and 10 days will be required for staff without general or departmental management experience. Shorter versions of 3 or 5 day are also available either because we concentrate on only one or two management domains or because the participants already have a strong knowledge and understanding of bank management models (senior managers), in which case they are interested in looking for the integration and dependencies of management domains and the art of strategy development under constraints.
The training is organized for approximately 10 to maximum 24 Managers. They should all have a good understanding of finance and banking.
The programme is focused on a strategy development and implementation to optimise all the drivers of bank value (growth, risk and profitability). Theoretical concepts are supported by a bank management simulation programme, where participants define their bank’s policies, strategies and tactical implementation plans by managing:
- Sales and marketing strategies,
- Treasury strategies,
- Enterprise Risk Management (focused/ limited to Interest Rate Risk, Liquidity Risk, Credit Risk)
- Risk appetite and economic equity budgeting and allocation,
- Solvency (the bank’s credit rating) management,
- The equity compliance (Basel 3).
This course has been very successfully delivered at Board level, senior management level, and specialised business units, down to entry level management teams. Specialised business units have found it very useful including:
- Risk (credit, ALM, compliance) Management Business Unit (BU),
- Retail Sales & Marketing BUs and retail distribution units,
- Private Banking BUs,
- Corporate Relationship Managers,
- Management Accounting and Financial Control units
- Strategy and planning BUs,
- Audit teams,
- As well as IT and solution vendors.
All the course material is delivered in electronic format. This will include presentation slides, descriptions of the main financial concepts, the simulation information of which the participants guide and initial simulated bank financial package.
Provide bank managers with the essential skills to build a framework for enhanced performance. The programme will help to:
- Define the bank value metrics and risk adjusted value drivers (RAROC, EVA, Economic Equity, VaR, EaR…)
- Develop value based operational strategies based on the bank’s mission and shareholders’ vision, and integrate them in the global strategic planning process;
- Develop of risk optimisation strategies including risk quantification, risk budgeting and pricing as well as risk management (Including: credit risk, market risk, interest rate and liquidity risks (ALM), operational risks, business risks, solvency risks…)
- Analyse competitive positioning and differentiation, including product development and management (piecing etc), marketing and Client Relationship Management as well as Event Based Marketing
- Define, measure and manage Client Profitability and Value (Customer Value Management)
This is an intensive, high value programme with a steep learning curve.
Content and Methodology
Content description: Bank Performance Management
Bank strategic management requires quantitative and qualitative analytical competencies. They are confronted to new regulatory constraints and enhanced competition in a global financial market! A rigorous management framework is of vital importance to ensure leadership and management success.
All management domains need to be integrated into a global strategy, in order to ensure the balance between growth (commercial strategies), risk (Enterprise-wide Risk Management strategies) and value (sustained profitability strategies). Without sound and robust risk based management the financial industry will continue to be submitted to regular and very severe financial crisis!
We will also analyse the consequences of the great Banking crisis of 2008 and learn from these events to improve the quality of the management responses to extreme volatility. We will also discuss the new capital constraints (BIII) and ICAAP requirements.
Case Study description: management of a simulated bank under risk constraints and in a competitive environment!
The course is based on the principal that the learning experience is enhanced by hands on exercises that replicate real management situations, where participants can test the concepts learned and analyse the result of their analysis and management decisions. Hence we have created this course with a high level of integration between theoretical concepts, valuation models and risk management methodology descriptions and computer aided Bank Management simulation.
In the simulation and all class room discussions and workshops the participants are divided into a number of management teams (maximum 4). These are typical management team of a small bank. The size of the group will vary on the basis of the specific training objectives and characteristic. Teams can be constituted by a single individual to a maximum of 4 to 5 participants.
Each team will make management decisions in different management domains:
- Strategy definition including markets, risk policies & limits, performance criterions…
- Marketing & Sales i.e. client and product management (pricing, sales volume budgeting, marketing campaign investments)
- Risk management (credit risk, interest rate risk, liquidity risk and solvency risk)
Decisions made by the management teams are input into the computer simulation programme, which calculates the effects of all the decisions and prints a Management Information Report with the results. All the information required to develop and justify the management decisions are in this Management Report including:
- General Market information (economy, interest rates…);
- The Bank’s Balance Sheet and Income Statement;
- Profitability report;
- Risk reports;
- Compliance reports;
- Marketing reports.
The simulation is organised in such a way that each management domain is isolated to improve the analysis of causalities of results with participants’ decisions. In the final decisions participants are required to manage all the variables together and report on their strategy and the outcome of the decisions..
The objective of the simulation is to develop a strong understanding of the key factors that contribute to the optimisation of a Bank performance. Strategic Value Based Performance requires a sound understanding of many management variables sometimes complex and very quantitative. We have simplified some of these domains to make them accessible to non-specialists. For the participants it is important to understand the dynamic of all the management domains and their impact. To illustrate this point the Bank must manage its risks (credit risks as well as Interest Rate Risk, Liquidity risks and Solvency risks). The way to do this is to assume risk (“buy or sell risk”) for an optimised amount, under risk constraints (equity compliance) under profitability constraints (revenues and cost efficiencies) and under value constraints (Economic Value Added performance metric and share price).
For further details please refer to our information brochure “Bank Management Simulation to enhance the results of training”.
The participants will gain useful understanding of bank performance dynamics and more importantly will have a real experience of managing the bank and responding to the challenges of the environment in a near life experience. They will have a good (but general) understanding of three major management domains in Retail, which will be of immediate application on their day-to-day responsibilities.