...Analysis – Risk Management at Wellfleet Bank: All That Glitters Is Not Gold. 1. Given its strategy, what kind of risks does Wellfleet Bank face? The first possible risk would be the operation risk. Refer to Wellfleet Bank, the Group Credit Committee has a unlimited level of authority. They could approve loans of any size within the bank’s regulatory limits which means there is no supervisory group can stop the group’s decision. Furthermore, to preserve the independence of the credit-approval process, the “Alpha Pass” did not involve the most senior executive management (e.g., business CEOs) in the deal flow. Under the current operation procedure, if a billion dollar deal went wrong it could sink the ship. The second possible risk is the regulatory risk. It is related to the compliance with the Basel II Standards and Credit Risks. The cost of operation will increase and the attractiveness of investment in Wellfleet Bank will decrease when the government amends or changes the law on banking regulations (e.g. more restriction). Thirdly, Wellfleet is also facing is the concentration risk. Refer to the case, Wellfleet has a pretty much higher concentration on its Corporate Banking Group. The group contributes around 60% of profit before taxes and 70% of bank assets in the last financial year (2007). As a result, the bank may suffer a huge loss if the business on corporate banking goes downwards. Last but not least, there are also many minor risks that Wellfleet is facing...
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...In relation to a commercial bill, the acceptance fee is: A: the discounter’s fee for taking on the risks associated with discounting the bill B: the fee for drawing up the bill C: the fee for taking the liability for paying the holder at maturity D: the drawer’s fee for taking on the risks associated with drawing the bill. C 33. When a party endorses a bank bill, it: A: repays the face value of the bill to the holder at maturity B: creates a liability for payment of the bill C: provides the funds to the seller D: provides the funds to the discounter of the bill. B 34. A company issues a 90-day bill with a face value of $100 000, yielding 7.65% per annum. What amount would the company raise on the issue? A: $84 130.46 B: $92 350.21 C: $98 123.39 D: $98 148.62 D 35. A holder of a 180-day bill with 60 days left to maturity and a face value of $100 000 chooses to sell it into the market. If 60-day bills are currently yielding 6.8% per annum, what price will be obtained? A: $81 728.61 B: $89 945.79 C: $97 813.27 D: $98 894.55 D 36. Promissory notes have a decided advantage over bills in that: A: they are liquid B: an issuer of a promissory note does not incur a contingent liability C: a borrower without a strong name in the markets does not need bank endorsement D: sole liability to repay the face value at maturity belongs to the underwriting bank(s). B 37. A debenture is: A: an unsecured bond that only best-name corporate borrowers can issue ...
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...This article can be divided into four parts, explaining the risks of Wellfleet Bank, additional risks after new focus and recruitment, calculation for the proposal and analysis of risk management processes in order. Risks of Wellfleet Bank Given its strategy, Wellfleet bank may face several kinds of risks: credit risk, country or sovereign risk, regulatory risk, compartmentalized risk and market risk. Credit risk was the first one that Wellfleet bank may have. Credit risk arises from the possibility that promised cash flows held by the bank, such as loans or bonds, will not be paid in full. According to the case, the number of proposals for the Group Credit Committee to project increased from 220 (for 2008) to over 300 (for 2009). What’s more, the largest credit proposals were nearing $1 billion each and each of these large-scale credit applications involved a mega-risk. As per the mantra of the bank, “If a billion-dollar deal went wrong, it could sink the ship.” Secondly, regardless of its customer base, which was most of its 6 million retail customers and 15,000 corporate clients resided out of the U.K., Wellfleet’s headquarter was still in London and it complied with regulations and standards like any other U.K.-based banks. Wellfleet considered the “first-world compliance standards” as an important competitive advantage over local rivals in emerging markets. But the risk was its repayments from the local borrowers might be interrupted by the interference of foreign governments...
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...Introduction: The Gatwick Gold Corporation business credit proposal brought Wellfleet Bank with an opportunity to obtain a highly profitable deal and conduct a new and long-term relationship with the third-largest gold producer in the world, and a number of “broader issues” at same time. Corresponding to the attitude the Chief Risk Officer Cromwell holds for risk, ensuring the risk infrastructure is growing with business opportunities at same speed. Identifying and measuring all risks involved in any deals becomes a crucial and high priority mission in such risky environment. Question 1: First, it is important and necessary to identify all the kind of risk Wellfleet Bank faces in this strategy. Syndicated and leveraged loans have played important roles in Wellfleet Banks’ corporate bank business since 2004. Facility for Gatwick Gold Corporation, with a large amount of debt already, a 1-year bridging loan of $1billion is considered as a leveraged loan. Gatwick Gold Corporation had committed a $50 million facility before. A sudden increase in this limit by $1 billion surprised relationship manager Jaidev Kapoor, who had 10-year working experience in Wellfleet. In addition, a syndicated loan agreement is the kind of loan in which a borrower requires a large or sophisticated facility or multiple types of facility by the channel through funding from a group of lenders. It facilitates the loan process by combining several separate bilateral loans, each with different terms and...
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...1. Given its strategy, what kind of risks does Wellfleet Bank face? Wellfleet Bank faces a variety of risk in its daily operations. Risk faced by Wellfleet Bank associated with this case study includes market risk when there are changes in interest rates, exchange rates and other prices. This is especially true for Wellfleet Bank because they are considering a $1 billion loan to Gatwick Gold Corporation (GGC), a South African gold producer. Additionally, operational risk are linked through Wellfleet Bank's daily activities that include auditing, monitoring and support systems. An example of operational risk for Wellfleet Bank would be when the group head of client relationships and the deputy group chief risk officer disagreed over a proposal, then the Chief Credit Officer would take the ultimate decision. Credit risk will be directly and indirectly affected by exchange rates, interest rates and gold prices. Moreover, foreign exchange risk and country or sovereign risk would directly impact Wellfleet Bank's operations because it is an international organisation that has expanded operations to 78 countries (Lange, Saunders, Anderson, Thomson & Cornett 2007, pp. 96). Other risk faced by Wellfleet Bank includes interest rate risk when maturities of its assets and liabilities are mismatched. Off-balance-sheet risk as a result of their contingent assets and liabilities. Technology risk when there are technological investments. Liquidity risk when they are sudden surge in liability...
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...‘’ Risk Management at Wellfleet Bank: Deciding about Megadeals’’ 1. a) What kind of risks does Wellfleet Bank face? They consider financial (revenue risk) and other variety of business progress risks. Those risks are depends on industry and company structure. Credit Committee undertakes essential risks are Market Risk, Operational Risk, Compliance Risk, Country Risk (economic and political strength/weakness), Reputational Risk and Business Risk. Also company success is impacted by external factors such as competition, risky environment and internally complexity of products. In my opinion not only financial numbers, company revenue, net profit, debt are the only measurements for risk management. These numbers figure our companies past success, also future business threats and opportunities is taking into account. b) What are the challenges for the risk culture of the organization that its new focus on large corporate deals and its need to recruit relationship managers from investment banks create? Actually the case explains that the flagship business for Wellfleet is corporate banking. They are strongly focused to enlarge transformational deals with clients. It is very profitable business for the bank. Risk culture of the organization works as a circle of Credit Committee, clients and client relationship managers who directly contact each other and understand their needs to find better profitable solution for booth side. Then the bank offer their...
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...1. Wellfleet bank, a UK based business, has international operations in 78 countries focusing on growth opportunities in South Korea, India, Pakistan, and China. The two core businesses include corporate banking and consumer banking. Since Wellfleet is a leader in compliance standards, it has a key competitive advantage over its rivals. The importance of internal controls and risk management is highly recognized at Wellfleet. Wellfleet aligns their risk management to Basel II Accord and guidelines. The bank has a unique risk profile and warranted risk-taking discipline. The bank aggressively pursues growth in the large-scale transformational deals. The bank wants to grow aggressively but with balance. As the bank grows, they need to make sure that their risk infrastructure keeps apace with the business opportunities. A consequence for their growth strategy, the bank is facing several risks, such as legal/regulatory risk, credit risk, business risk and operational risk. The legal/regulatory risk is presented by changing international regulatory rules, the bank is required to set aside and manage capital reserves in response to these new regulatory rules. The global economy is becoming more competitive and Wellfleet bank is growing against a risky environment. Companies may default and that present credit risk to the bank. Wellfleet has more strict risk control than its competitors, and pay more attention to the risk modeling rather than the holistic view of the company requesting...
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...Risk Management at Wellfleet Bank The credit risk is one of the risk facing by Wellfleet Bank owning an important portfolio of debts. This risk is common to most of banks in a position of borrower or counter party in a loan agreement. Nevertheless, we can relativized on the fact that until recently, their credit risk has been well managed involving a positive counter performance in the turmoil of the global financial crisis of 2007 compare to others competitors. The fact is that the bank is growing aggressively their corporate finance area. Work load is well more important than expected and this situation may occur some negative consequences due to credit applications which might be made in a rush. Less time per application involve pressure on risk officer and managers who might do not fully examine each of them. Moreover, a large number of credit application approved can result in a Liquidity Risk when banks get too small amount of cash and cannot meet payment obligations for depositors or to lend. We can noticed that relationship managers “bring everything in from the street. On one side, such situations are positive and bring more clients to the bank but on the other side such situations are negative and might bring “too much” potential clients to the bank which would be denied. A certain level of denied credit application might have some social and ethical consequences. Applicants might do not understand the reject of their application after being “attracted” by a relationship...
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...Risk Management Risk Management Case Study at Wellfleet Bank Xx April 2011 Wellfleet Bank’s Practice Audit & Risk Committee Board Group Risk Committee Reputational Risk Committee Country Risk Committee Operational Risk Committee Group Credit Committee Market Risk Committee Credit Officer Credit Officer Credit Officer Credit Officer 2 Business Risk Committee (Consumer Bank) Business Risk Committee (Corporate Bank) Board of Directors Wellfleet Bank’s Practice • The board of directors and top management demand a “no-surprises” culture. • The board hold ultimate responsibility for the effective management of risks. • The board delegates the management of risks to the Group Risk Committee (which includes all the executive directors), while the board’s Audit and Risk Committee (consisting of non-executive directors) reviews specific risk areas and monitors the activities of the Group Risk Committee Observation from the Case Study • The Corporate Banking Group has been aggressively pursuing large-scale transformational deals in line with the Bank’s strategic intent but there isn’t any Risk Appetite Statement which states the associated tolerance level. • The Board, CEO and Group CRO have no direct involvement with the loan approval process, apart from their periodic review of the corporate loan portfolio after decision has been made. 3 Group Risk Committee Wellfleet Bank’s...
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...FINS5530 – Summer Session Assignment 1 (Not more than 10 double-spaced pages; 15 marks) Case Analysis – Risk Management at Wellfleet Bank: All That Glitters Is Not Gold Students will receive a Case Note on which to base their case analysis in response to the questions below. You will find it useful, if you do not have exposure to the case method, to review “How to Write a Case-Based Essay” [by William Ellet - provided]. Assignment questions 1. Given its strategy, what kind of risks does Wellfleet Bank face? 2. Given Wellfleet’s new focus of large corporate deals and its need to recruit relationship managers from investment banks, what are the additional risks you anticipate will be introduced to the Bank? 3. Calculate the Expected Loss, Economic Revenue and Economic Profit for the proposal. Clearly explain any assumptions you may make. Briefly comment on how management should interpret and use your results. 4. Analyze the risk management processes at Wellfleet Bank. What suggestions might you make to the CEO about improving the process? 1 Hints on points the examiner will be looking for: You are required to use the concepts and terminology you have learnt from this course and from your own research. Refrain from relying solely on nontechnical, “common sense”, arguments. You can discuss the case with fellow students but if you do so, you have to disclose in the first footnote of your assignment who those students were, together with their student numbers. Use...
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...CROSSING THE CHASM. Copyright © 1991 by Geoffrey A. Moore. All rights reserved under International and Pan-American Copyright Conventions. By payment of the required fees, you have been granted the non-exclusive, non-transferable right to access and read the text of this e-book on-screen. No part of this text may be reproduced, transmitted, downloaded, decompiled, reverse engineered, or stored in or introduced into any information storage and retrieval system, in any form or by any means, whether electronic or mechanical, now known or hereinafter invented, without the express written permission of PerfectBound™. PerfectBound ™ and the PerfectBound™ logo are trademarks of HarperCollins Publishers. Adobe Acrobat E-Book Reader edition v 1. October 2001 ISBN 0-06-018987-8 The original hardcover edition of this book was published in 1991 by HarperBusiness, a division of HarperCollins Publishers. 10 9 8 7 6 5 4 3 2 1 To Marie Contents PREFACE TO THE REVISED EDITION FOREWORD ACKNOWLEDGMENTS PART I Discovering the Chasm INTRODUCTION If Bill Gates Can Be a Billionaire 1 High-Tech Marketing Illusion 2 High-Tech Marketing Enlightenment PART II Crossing the Chasm 3 The D-Day Analogy v vi Contents 4 5 6 7 Target the Point of Attack Assemble the Invasion Force Define the Battle Launch the Invasion CONCLUSION Getting Beyond the Chasm About the Author Credits About the Publisher Front Cover Preface to the Revised Edition “Obiwan Kenobi,” says Sir...
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