Strategic Management in Banks

Agenda

What the case is all about ?

What went wrong ?

Turnaround Strategy

Agenda

What the case is all about ?

What went wrong ?

Turnaround Strategy

What the case is all about?

Australias largest bank and second biggest company, the National Australia Bank (NAB), has faced continued instability including the resignation of both its chairman and chief executive officer. It had lost $ 360 million in foreign currency trading due to the increasing reliance by the NAB and other global corporations on speculation and high-risk investment activity to maintain profitability.

Agenda

What the case is all about ?

What went wrong ?

Turnaround Strategy

What went wrong ?

Risk management group and internal audit team have not communicated the breach of limits, by the NAB traders, to the CEO/ board.

Currency traders breached trading limits on 800 occasions and, at one stage, had unhedged foreign exchange exposures of more than $A2 billion.

What went wrong ?

Risk management system failure:
Breach of limits was tolerated to increase profit of company and bonus of traders. The banks annual reports suggest that the increasingly risky trading was a conscious policy. The average VaR in September 1999 stood at $3 million, but by March 2000 it had risen to $8 million and then $10 million by September 2000. The NAB dropped its usual practice of providing year-on-year comparisons in annual report figures. The NABs foreign exchange options cap was $3.25 million, which meant that the ultimate loss of $360 million was 110 times the maximum VaR.

What went wrong ?

Rival Banks warning ignored:
The ANZ Bank raised warnings against the NAB traders which were making erratic deals.

Improper Corporate Culture:

The organization tended to suppress bad news rather than engaging in transparent communication.

Agenda

What the case is all about ?

What went wrong ?

Turnaround Strategy

Thank you