Strategic Management of the Main Elements of the Bank's Financial Strategy

2020 ◽  
pp. 96-109
Author(s):  
Tatiana P. Goncharenko
Keyword(s):  
Risk Management ◽  
Strategic Management ◽  
Banking Sector ◽  
Financial Analysis ◽  
Profit Maximization ◽  
Risk Minimization ◽  
Financial Strategy ◽  
Theoretical Understanding ◽  
Liability Management ◽  
Asset And Liability Management

The banking sector has typically operated in a highly competitive environment, which has increased significantly as a result of recent structural economic transformations. Such conditions require a more thorough exploration of one of the fundamental elements of a bank's strategic management, i.e its financial strategy, the proper construction and adherence of which will let it successfully adapt to existing and possible changes and ensure effective financial activities. This article systematizes the theoretical understanding of the main elements in the bank's financial strategy during strategic management, which include asset and liability management, risk management, revenue management, expenses and profit/loss. The author analyzes the history of the main object formation in the assets and liabilities management of the bank, as well as the peculiarities of financial analysis of assets and liabilities. In particular, the author studies the issue to ensure a sufficient level of bank liquidity, risk minimization and profit maximization as assets and liabilities management goals. While studying the features of revenue, expenses and profit/loss management, the main approaches and directions for their implementation are identified. As a result, the author of the article proposed to consider the bank’s financial strategy in terms of its main elements, distinguishing such components as the regulation of financial status indices and financial activity results. Key words: strategic management, bank, financial strategy, asset and liability management, risk management, revenue, expense and profit or loss management.

scholarly journals Structural Equation Modelling in Microscoping Nepalese Commercial Banks’ Profit Maximization by Risk Minimization

2019 ◽  
pp. 60-82
Author(s):  
Chakra Bahadur Khadka
Keyword(s):  
Risk Management ◽  
Commercial Banks ◽  
Structural Equation ◽  
Management Practices ◽  
Banking Sector ◽  
Profit Maximization ◽  
Interest Rate Risk ◽  
Equation Modeling ◽  
Risk Minimization ◽  
Risk Manager

This paper examines the degree to which the commercial banks of Nepal used risk management practices and techniques in dealing with different types of risk. The structural equation modeling (SEM) is applied in this study to analyze profit maximization and risk minimization of commercial banks in Nepal. Symmetry and balance to cover four aspects and four components of risk management and use of quantitative data from Banking and Financial Statistics of NRB is considered in the study. SEM is the cross-sectional statistical modeling. Factor analysis, path analysis and regression equation SLs are used for data analysis. Maximum likelihood estimation is the additional estimation equation. The significant findings of the study are: important types of risk being faced by the commercial banks of Nepal like credit risk, operational risk, and interest rate risk. Study also finds that the Nepalese commercial banks staff members properly understand risk and its management. Most of the components of risk management are very sound. There is a strong, positive relationship between risk management practices and understanding of risk and its management, board and senior management oversight, risk assessment and measurement, ownership structure and presence of separate risk manager. Findings of the paper are limited to the RMPs of commercial banks of Nepal. Results help to understand the current practices of Commercial Banks of Nepal. Findings can be used as a valuable feedback on improvement to RMPs and will be of significance to those who are interested in the banking sector of Nepal.

scholarly journals Balance Between Risk And Profit In The Context Of Strategic Management: The Example Of Ukrainian Banks

2020 ◽  
Vol 4 (1) ◽  
pp. 111-121
Author(s):  
Tatiana Goncharenko ◽  
Liliana Lopa
Keyword(s):  
Risk Management ◽  
Strategic Management ◽  
Profit Maximization ◽  
Matrix Analysis ◽  
Risk Minimization ◽  
Business Goals ◽  
Net Interest Margin ◽  
Total Capital ◽  
National Bank ◽  
Strategic Goals

The article explores the issues of strategic management of banks, the formation of long-term strategic goals, in particular – the construction of an effective financial strategy of the bank aimed at finding a balance between the need for risk minimization and profit maximization. Balanced risk and return management should protect economic entities from potential income shortfalls or a reduction in the market value of capital due to adverse effects of external or internal factors, from losses that can be both direct (loss of income or capital) and indirect (investment). the ability to achieve your business goals). The article presents the author’s own approach to the calculation of the taxonomic method of the bank’s integrated risk and profitability indicators, as well as the results of matrix analysis, which made it possible to trace the bank’s risk/profit ratio. All Ukrainian banks are selected as the subject of study, and the first three quarters of 2018 are the time horizon. Economic norms and limits of open currency position on regulation of banking activity by the National Bank of Ukraine were selected to assess the level of riskiness of the bank, and the main indicators of bank profitability (total level, cost recovery, return on assets, total capital, net interest margin) were selected for profitability level. The study empirically confirms that risk management in Ukrainian banks is at a critical level and profit management is at medium and low levels. Basically, banks are characterized by a focus on profit maximization, eliminating high-risk activity. The risk-reward strategy is chosen by a small number of Ukrainian banks and profit maximization is rare enough for Ukrainian banks. Keywords: strategy, bank, strategic management, risk management, profit management, taxonomic analysis, matrix analysis.

scholarly journals Key stages of financial strategy development for construction enterprises

2019 ◽  
pp. 221-228
Author(s):  
Yulia Yurchenko
Keyword(s):  
Strategic Management ◽  
Asset Management ◽  
Financial Risk ◽  
Financial Analysis ◽  
Theory And Practice ◽  
Strategy Development ◽  
Financial Strategy ◽  
Construction Enterprises ◽  
Value Based Management ◽  
Definition Of

The subject of the study covers theoretical, methodological and practical aspects of strategic management of financial activity of construction enterprises. The purpose of the work is to determine the theoretical and methodological provisions and to substantiate the practical recommendations for the development of financial strategy of construction enterprises including definition of the sequence of stages and their essence from a methodological point of view. Method or methodology of work. The theoretical and methodological basis of the research includes general scientific (dialectic, structural and functional methods) and special methods of cognition of the studied economic phenomena and processes. Result of work. The article presents the essential characteristics of the financial strategy of construction enterprises, its features, structural elements and the course of its development and implementation stages. The paper describes and proposed areas in which it is necessary to develop a financial strategy for construction enterprises. Areas of results application. The results of the study can be used in the theory and practice of strategic management of construction enterprises in the process of developing and implementing their financial strategy. Conclusions. The financial strategy development is a long and complicated process covering the following stages: analysis of the strategic financial position of the construction enterprise, including financial analysis of external and internal environment; definition of the strategic financial goals; financial strategy development in the following areas value-based management, accounting, asset management, cash flow management, credit policy, investment policy, financial risk management, dividend policy; financial strategy implementation and monitoring.

scholarly journals Solving a fractional programming problem in a commercial bank

2021 ◽  
Vol 0 (0) ◽  
pp. 0
Author(s):  
Ankhbayar Chuluunbaatar ◽  
Enkhbat Rentsen
Keyword(s):  
Programming Problem ◽  
Fractional Programming ◽  
Optimization Problems ◽  
Risk Minimization ◽  
Balance Sheets ◽  
Fractional Programming Problem ◽  
Minimization Problems ◽  
Liability Management ◽  
Asset And Liability Management ◽  
Local Solutions

<p style='text-indent:20px;'>We formulate a new optimization problem which arises in the Bank Asset and Liability Management (ALM). The problem is a fractional programming which belongs to a class of global optimization. Most of optimization problems in the Bank Asset and Liability Management are return maximization or risk minimization problems. For solving the fractional programming problem, we propose curvilinear multi-start algorithm which finds the best local solutions to the problem. Numerical results are given based on the balance sheets of 5 commercial banks of Mongolia.</p>

scholarly journals Risk Minimization as a Tool to Ensure the Banks Security

2020 ◽  
Vol 22 (1) ◽  
pp. 90-94
Author(s):  
Olena Sukach ◽  
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Structural Changes ◽  
Banking Sector ◽  
Negative Impact ◽  
Banking System ◽  
Financial Security ◽  
Risk Minimization ◽  
Management Tools

Introduction. The banking system of Ukraine, in the conditions of the current crisis, turned out to be untenable to quickly adapt to structural changes in the economy, which manifested itself in the absence of an effective system for managing banking risks. Further instability in the financial market will increase the negative impact on the level of financial security of the banking sector. Today there is a need for the formation of preventive measures for risk management, prevention of their occurrence and minimization, which will contribute to the safe position of the bank. Purpose. The main purpose of the study is to identify modern methods and approaches regarding the classification of banking risks and substantiation of proposals for their minimization, as well as ensuring the financial security of the banking sector in Ukraine. The main research methods are methods of quantitative, qualitative analysis and statistical analysis, as well as methods of expert assessments. Results. Summarizing the results of research by scientists, it was stated that banking risk is the likelihood of losses in the form of loss of assets, shortfall in planned income, or the appearance of additional costs as a result of the bank’s financial transactions. The main results of the banking system of Ukraine in 2019 and the dynamics for 7 months of 2020 are determined. Despite the positive trends of 2019, there is a risk of new problem loans due to non-conservative policy of banks in the growing segment of consumer lending. Modern practice shows that any credit product of a bank leads to the formation of a certain credit risk, and until the client returns the received resources, the bank is forced to form reserves for possible losses from non-repayment of funds. Conclusions. Сonclusions are drawn regarding the credit risk management tools. Based on the results of the study, the author’s approach to the classification of risks and reasonable approaches to their management are presented. In particular, it has been proved that during the formation of risk management tools, namely credit risk, and ensuring the bank’s security, it is necessary to take into account that risk assessment indicators should consider not only the ratio between assets and liabilities, but also their maturity dates.

scholarly journals CREDIT RISK EXPOSURE OF SELECTED NEW PRIVATE SECTOR BANKS IN INDIA WITH REFERENCE TO ASSET LIABILITY MANAGEMENT

2021 ◽  
Vol 4 (1) ◽  
pp. 36-41
Keyword(s):  
Private Sector ◽  
Credit Risk ◽  
Profit Maximization ◽  
Strategic Decision ◽  
Risk Minimization ◽  
Asset Liability Management ◽  
Future Earnings ◽  
Liability Management ◽  
Different Types ◽  
One Way Anova

Asset Liability management of a bank refers to strategic decision making and devising strategies with respect to mitigation of different types of risk with a core objective of risk minimization and profit maximization. Banks are exposed to varied types of risk of which credit risk is crucial as it enhances the risk of insolvency and bankruptcy of a bank. It arises when borrowers turn out to be defaulters. Credit risk not only wipes out the capital of the banks but also hampers the present and future earnings of the bank. The present paper analyzes the credit risk of selected private sector banks to know if the Asset Liability management (ALM) policy of a bank with respect to credit risk is effective or not. The different measures of Credit risk as Gross Non-performing assets and Net Nonperforming assets are analyzed using One-Way Anova to see if credit risk of selected banks is significantly different or not.

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