Strategic Planning And Management In Global Banking

By M. Isi Eromosele

As global banking undergoes a continuing evolution, a key critical success factor for any major bank is how it conducts its strategic planning and management.

In global banking, executive management teams are faced with rapidly changing regulative environment as well as new challenges in operational level management that complicates decision making processes. 

When market share is dropping, the usual reaction is to sell products and services more aggressively. When a segment of the market loans go bad and the percentage of bad debts increases, the reaction is to stop lending.

While the above reactions may be understandable, these actions hardly ever fix the operational or marketplace problems. Selling harder is of little value if the products and services do not fit the customers' demands, needs and capacities.  Cutting off lending activity simply cuts off a source of revenue and does not make the quality of loan portfolios better. These actions fail because they take trial-and-error approach.

The successful bank strategy can only be put into practice by the implementation of a number of coherent, well-planned decisions throughout specific periods of time.

Nature Of Strategy In Banking

Today's high performance foreign banks need to upgrade from annual budget related planning to strategic planning and management. Strategic Planning and Management is the managerial process of developing and maintaining a viable fit between the bank's objectives, businesses and resources and the changing market environment and regulations. 

The goal is to shape and reshape the bank's businesses and products so that they promote sustained growth, yield targeted profits and increase in shareholder value.

Four key initiatives define Strategic Planning and Management.

The first key initiative calls for a strategic vision of the bank (general description of the future organization, businesses and main business strategy of the bank). This enables management through enlightened leadership and a coherent, unifying and integrated set of strategic decisions which are concerned with:

• The scope of the bank's activities
• Matching the bank's activities to its resource capabilities and developing the ability of allocation and reallocation of resources
• The values, expectations and objectives of the bank bank's long-term planning aimed at achieving sustainable advantages and long-term growth
• The implications for change throughout the bank.

The second initiative calls for managing the bank's businesses as an investment portfolio, consisting of quasi separate businesses for which the bank decides which business entities to build, maintain, phase down or terminate. 

Each business needs to have a different profit potential, and the executive management team should allocate the bank's resources according to the profit potential i.e. according to market criteria.

The third key initiative is to accurately assess the future profit potential of each business by considering the bank's position in its marketplace.

The fourth key initiative is that of strategy and planning for each business.

Essence Of Strategic Planning And Management

Today, many banks still do not have a strong sense of direction or strategic focus.  Generally, this weakness results from fragmented leadership and the lack of a carefully conceptualized and clearly articulated strategic vision of the bank.

These result in the lack of a systematic approach to strategic management and planning process that could provide the discipline and accountability needed to maintain strategic focus.

Even in a good global bank, regardless of size, there is no one defending the strategic vision of the institution. Rather, management executives operate from a private agenda, often with conflicting priorities and values. 

The primary reason many banks perform poorly, even when a commitment is made to strategic planning is because the bank and its senior management team are not strategically focused.  They are too concerned with doing things right and not concerned enough with doing the right things.

Strategic Planning and Management is needed to ensure market survival and superior performance in a changing and increasingly competitive global finance environment.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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