STRATEGIC PLANNING AND MANAGEMENT IN BANKS

Introduction

Bank have an important role in an economy, they are intermediaries between people with
shortages and surplus of capital. Their products include savings, lending, investment,
mediation and advice, payments, guarantees, and ownership and trust of real estate. These
core activities generate two principal sources of income; interest earnings and provision
earnings. In the first case, a bank is working on its own behalf risk, and in the second case on
behalf of and at the risk of its clients.

It is usual to distinguish between different banking departments such as investment banking,

commercia banking, corporate banking, private banking, trade finance, electronic banking,
securities, finance in and loans, savings and so on. Some banks specialize in one or more of
these areas.

An organization has to develop competitive strategy to out compete the competitors. Strategy
links organization to the environment. to achieve its objective the organization chooses
strategies that align them properly with environment. this is aimed at avoiding any mismatch
between the organization and the environment. This in turn leads to effect on the efficiency
and performance of the organization.

The choice of strategies to employ at a given time is informed by different factors within and
without the organization. Different firms’ strategies differ from organization to another which
is influenced by the external and internal factors. Major factors include firm and industry
factors.

The choice of strategy is an important step in the strategy development process. Since the
beginning of the deregulation of financial institutions in the early 1980s he role of
management within the financial institution has changed significantly.th aspect of planning
has been identified as extremely important in determining the growth and success of virtually
all businesses.
STRATEGIC PLANNING

is a systematic way of making key business decisions, determining the future, following its
vision by defining the objectives and modalities of action. Strategic planning is a basic
premise of survival of companies in the global market. it includes guidance and redirection of
existing business in the context of achieving a satisfactory profit and growth.

Is a useful tool that helps in the management of an enterprise, especially if the strategy and
strategic plans can be successfully deployed throughout the organization. Helps assure that an
organization remains relevant and responsive to the needs of its community and contributes
to organizational stability and growth. It provides a basis for monitoring progress and for
assessing results and impact. it facilitates new programs development; it enables to look into
the future in an orderly and systematic way. From a government perspective, it enables board
to set policies and goals to guide the organization, and provides clear focus to the executive
directors and stuff for program implementation and agency management.

Planning itself does not produce the results, the important issues in banking industry such that
where are now, where we want to go, how to do it, then in which strategic planning should
give the answer. A well-defined successful and applicable model of strategic planning, that
he banks regardless of the modalities of implementation provides a competitive advantage in
the market, which is manifested by increasing profits and customer satisfaction.

Strategic planning is the key in the overall performance of the organization. The strategy
chosen is dependent on various contingent factors. The environment influences the link
between strategy and performance. The combination of the various factors contributes to the
strategies selected which influence the performance of the organization.
BANK RESTRUCTURING

Is the process of restructuring the banking on the ground that they allow the formulation of
new strategy and the future to meet the challenges of financial globalization. Bank
restructuring means to improve the performance of the bank during the restore of solvency
and financial mediation, it includes merger between banks especially among small banks in
order to create a large banking that can provide the following a variety of banking services,
integrated and competitive costs.

The process of restructuring involves the following tools

• Liquidation of the debt owed

• Re capital into banks

• Operation restructuring

The following are the stages of bank restructuring

i) Strategic Plan: here the bank predicts its future positions

ii) Social Plan: here the bank looks on how to deal with human resource expelled from the
bank and how to deal with resources held.

iii) Means the reorganization of the bank: here the bank reorganizes the work in order to face
competitive within the market, through good analysis of the predicament which allows the
bank to draw a future plan to continue the activity.

Restructuring has two types which are: -

• Internal restructuring

This is the process which allows the selection of a strategic reorganization of the structure of
the bank in accordance with the standards and specific form by development of products like
creating new products, make the product available in the existing market.

External Restructuring

Is the process of restructuring of foreign methods used by bank in order to improve

performance and meet the competitive environment in which it operates, this process is based
on the method of buying property to another bank for formation of new structure.
reasons for bank restructure

Geographic diversification

Diversifying loan portfolio and customer base is a clear goal out of market acquisition made
by banks. Through this goal the bank enters into process of restructuring since it needs to
reduce risks of loss like credit risk through diversification of loan portfolio.

Cost cutting and near-term efficiency gain

Attracting a high cost may be the most important factor motivating restructuring, the bank
feel that they are at a distinct cost disadvantage relative to other financial institutions
therefore it need to reduce costs through the following ways like rationalizing excess
capacity, replacing poor management, forming critical mass in geographic area and
eliminating duplicate charter within a holding company.

Strategic positioning for long run benefits

The largest banks are taking steps to position themselves in changing marketplace for
financial services by considering the following: - creating financial supermarket, developing
a strong brand name, creating the scale needed to compete in global market.

The following are the some of importance bank restructuring process

i) Diversification of products and services and developed to expand the customer base and
thus increase the reputation of the bank

ii) the use of advanced technology in banking operations

ii) Increase the competitiveness of the bank by quality of services and products offered to
customers

iv) Minimize risk as a result of respect for safety standards prescribed in agreements

v) The expansion of banks resources by increasing shareholder base and open branches
across the world.

vi) The possibility to improvement.

FINANCIAL MANAGEMENT IN FOREIGN ENVIRONMENT

Bank financial management, refers to the area or function in bank deals with profitability,
expenses, cash and credits inorder to achieve bank's objectives. So far as bank concerned,
liquidity, insolvency and profitability is likely to be considerable for the sustainability of
banks.

Foreign Environment, are business environment in which all uncontrollable forces or factors
that originates outside of the home country that influences the firm or a financial institution
like Bank

Banks in foreign investments are also exposed to foreign environment in which are require to
take measures against the impacts of these environments towards financial stability as banks
concerns. Generally banks in foreign environment takes much consideration the management
of foreign exchange rate and associates risks by looking on the impacts of exchange rate
variations. By doing so Banks ensures sufficient level of liquidity, profitability, cash flow,
reserve requirement ratio and capital requirements. Some of the risks associated from foreign
environment due to banks being invested in foreign countries are;-

 Legal risk, is the risks caused by variations of international regulations and rules
governing banking business
 Exchange rate risk, this rises from banking transaction in the foreign exchange market
 Political risk, is the risk that is caused by political instabilities among nations in which
banks transacts.
 Economic risk, is the risk which caused by economic downturn.
 Country risk, is the risk which affects national wise and caused by political policies
which discourage Bank to perform its business in a conducive environment.
 Interest rate risk, caused by variations in the interest rate in the foreign exchange
money market.
STRATEGIC PLANNING

Strategic planning is a systematic way of making key business decisions, determining the
tactics and the implementation of actions that shape and direct the bank towards the future,
following its vision by defining the objectives and modalities of action. Strategic planning is
a basic premise of survival of companies in the global market. It includes guidance and
redirection of existing business in the context of achieving a satisfactory profit and growth. In
fact, planning itself does not produce the results: it is a means, not the final goal. Objective of
this study is to highlight the important issues in the banking industry (Where are we now?
Where we want to go? How to do it?) in which strategic planning should give an answer. The
purpose of this paper is to define a successful and applicable model of strategic planning, that
banks, regardless of the modalities of implementation provides a competitive advantage in
the market, which is manifested by increasing profits and customer satisfaction. Using the
methods of content analysis, we analyzed the successfully method of German retail banking,
who gave us the result of one of the possible models of strategic planning applications in
banking. The importance of the German model is its efficiency in the market, as well as the
possibilities of application by other banking systems, which work to improve their
performance and quality of operation.

STRATEGIC MANAGEMENT IN BANKING

Strategic management is the management of an organization’s resources to achieve its goals

and objectives. Strategic management involves setting objectives, analyzing the competitive
environment, analyzing the internal organization, evaluating strategies, and ensuring that
management rolls out the strategies .The Strategic Management in Banking programmed
provides senior bankers and board members with the opportunity to reassess and explore the
future of banking, developing new approaches for strategic management in a fast changing
environment: the outcome of the financial crisis, final Basel III (Basel IV) regulations on
capital and liquidity, bail-in debt, ultra-low interest rates, and digital disruption by FinTech
companies.
PROCESS OF STRATEGIC PLANNING

The bank's overall strategic plan is developed by approving or modifying individual plans so
that resources are channeled into areas offering the greatest potential for achievement of the
bank's goals. The strategic planning cycle for each line of business should include eight
planning elements: mission statement; internal analysis including the unit's strengths and
weaknesses; external analysis which includes opportunities and threats in the environment;
goals and objectives; strategies for action; management review action; planning for
implementation; and continuous evaluation of performance of both people and products in
terms of the strategic plan and stated objectives.

i. Formulation of a Mission statement: this is a carefully thought-out, concise

statement of the central purpose of the organization as it currently exists. The mission
statement should clarify the nature of the organization's business describing its scope
and long-range intent. It should provide the focal point around which all the
organizational effort revolves. Like the total organization's mission statement, each
division or department of the total organization should also have a mission statement
briefly describing that organizational unit's purpose, scope and intent.
ii. Internal analysis: A logical point of departure in any attempt to plan where a firm
goes in the future is to review its progress over the past three to five years and take an
objective look at how well it has performed. The firm needs to analyses its strengths,
weaknesses, products/services, customer base, staff, anticipated constraints and the
costs involved in past activities. To help organize this internal analysis it is
recommended a committee be established and assigned the responsibilities of
researching the following aspects;
 Past performance; Depict the trends of the business over the past five years
in terms of turnover, volumes of activity, profitability, growth or other
significant measures. Comment on any significant factors that have impacted
the year-to-year trends.
  Strengths/ Weaknesses; List in an objective manner the strong points and the
weak points of the organizational unit. What is the image of the unit
internally, and in the eyes of its customers?
 Staffing; Present an analysis of current staff in terms of age of key personnel,
experience and expertise in their field, and the degree of stability or turnover
experienced in the staff.
 Product/Services; Describe briefly each of the major products or services the
organizational unit offers. Discuss the year-to-year growth in each of these
products or services and the relative profitability of each.
 Customer base/ Potential; Present an analysis of the present customer base
considering such matters as the number of customers served, the degree of
concentration and diversity of the customer base, geographic dispersion of
customers, and customer loyalty. If a significant portion of the unit's
profitability is dependent on a few key customers, make an evaluation of the
position with regard to each of these customers, which is relationship with key
individuals, factors which could cause the firm to lose that customer, etc.

iii. External analysis; looking in the organization and assessing past performance, it is
also essential to look outside at various external factors that influence productivity
and ability to achieve goals. To supplement the committee's efforts, it may be
necessary to concentrate external fact-finding and analysis by assigning this aspect to
a technical planning staff or engaging an outside consultant or research firm. The
principal analysis should include the following major areas;
 Competition; List banks, building societies, and other firms that the
committee considers to be the major competition in the firm's market area.
Analyze to the degree possible to their strengths and weaknesses and best-
guess the share of the market they currently hold.
 Market; Described in terms of geographic area and total monetary volume
the current and potential market for the relevant unit's services. Estimate the
share of this potential market that the unit currently serves. Indicate portions
of this potential market that appear promising for further cultivation.
  Industry environment; Any attempt to develop plans for the future of any
business must take into consideration external forces and the environment in
which the industry will be required to operate.
iv. Setting up Goals and objectives; the first step in this process is the development of
goals and objectives for the organization together with the criteria to be used in their
measurement.

Goals are the ideal end or outcome of purposeful action. They are the important
conditions and outcomes that the managers wish to attain, and toward which they direct
their efforts. These can include such matters as improving profitability, increasing share
of market, providing the best in services, challenging the human resource, accepting
community and industry responsibilities, etc.

Objectives; represent the translation of goals into measurable terms. They are primarily
quantitative performance targets designed to strive for the achievement of a goal.
Objectives are accompanied by specific assignments of responsibility and achievement
dates.

v. Strategies for action; these are specific action plans, programs, and projects selected
from among alternatives by means of which an organization intends to attain its goals
and objectives. They are the commitment to specific action aimed at capitalizing on
strengths, correcting weakness, solving problems, capitalizing on opportunities and
improving performance. This is the who, what, where and how phase of the planning
process in which goals are translated into unit actions and individual responsibilities,
through formal planning decis10ns and communication sessions. Among the factors
to be considered in determining what course of action will be adopted and how it will
be carried out are: Corporate performance goals and priorities, anticipated competitor
strategies/responses, the specific levels and types of resources required, together with
their cost and availability, The means of deploying new resources (or redeploying
existing resources), the cost/benefit implications, acceptable trade-offs in terms of
profit, risk and customer relations, and the impact upon market or internal
relationships.
vi. Management review action: The management review action is the process of
presenting, reviewing and deciding upon the strategic plans. Each staff department or
divisional manager will present to the executive management review (EMR) board
 (senior management) his or her strategic plan. It is recommended that the plan first be
presented as a written report at least one week prior to an oral presentation to the
EMR board.
vii. Implementation; the responsibility for implementation of a management decision
rests with the managers accountable for affected functional areas. If the plan is well
thought out, the resources required to implement the plan should be identified and
their expenditure approved. It is now up to the individual managers and their
employees to implement their plans on a day-to-day basis in order to achieve their
objectives within the resources approved.
viii. Evaluation; the evaluation should take place on a continuous basis throughout the
implementation phase of the cycle. However, it is recommended that a formal
evaluation be made each year on how well the organization has performed against its
plan and established objectives.

IMPORTANCE OF STRATEGIC PLANNING:

1. It allows organizations to be proactive rather than reactive

A strategic plan allows organizations to foresee their future and to prepare accordingly.
Through strategic planning, companies can anticipate certain unfavorable scenarios before
they happen and take necessary precautions to avoid them. With a strong strategic plan,
organizations can be proactive rather than merely reacting to situations as they arise. Being
proactive allows organizations to keep up with the ever-changing trends in the market and
always stay one step ahead of the competition.

2. It sets up a sense of direction

A strategic plan helps to define the direction in which an organization must travel, and aids in
establishing realistic objectives and goals that are in line with the vision and mission charted
out for it. A strategic plan offers a much-needed foundation from which an organization can
grow, evaluate its success, compensate its employees and establish boundaries for efficient
decision-making.

3. It increases operational efficiency

A strategic plan provides management the roadmap to align the organization’s functional
activities to achieve set goals. It guides management discussions and decision making in
determining resource and budget requirements to accomplish set objectives thus increasing
operational efficiency.

4. It helps to increase market share and profitability

Through a dedicated strategic plan, organizations can get valuable insights on market trends,
consumer segments, as well as product and service offerings which may affect their success.
An approach that is targeted and well-strategized to turn all sales and marketing efforts into
the best possible outcomes can help to increase profitability and market share.

5. It can make a business more durable

Business is a tumultuous concept. A business may be booming one year and in debt the next.
With constantly changing industries and world markets, organizations that lack a strong
foundation, focus and foresight will have trouble riding the next wav

CONCLUSION.

Strategic planning for the banking industry is unique in a way that it doesn't exactly follow
the same rule as other industry because so many financial industries which directly affect the
institution income are made on a day-to-day basis and many times left up to the manager on
duty at the time. This allows for deviation from the plan if proper oversights are not put into
place. In a manager’s eye, he might think he is making the best decision for the bank by
closing a deal for extra short-term profits, but it could hurt the bank in the long-term by not
following the strategic plan that has been laid out for sustainable grow of the institution. With
new regulations and public criticism, the banking industry must adopt more stable strategic
plans to prove themselves as a rational industry that’s not just trying to make a quick profit at
any chance they get. As with any business, strategic planning is a necessity for banks if they
are going to be able to keep up with the fast-moving economy. With proper execution of a
strategic plan, the banking industry can achieve success in this new economy just as it has I
the past. There is a great need for financial institutions like banks to think strategically about
what is going on (Schmenner, 1995). In response to increasing complexity and change in the
financial services industry most of the banks begun to review their strategic planning on
regular basis and revised them due to forces that government and regulatory agencies impose
on them. a

e.