Market expansion modules

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  • October 19, 2000 11 © 2000 Arthur Andersen All rights reserved. The Arthur Andersen Business Risk Model TM is a comprehensive framework for assessing risk in all areas and levels of the business environment, creating a common language for business risk. With 76 risks in 9 categories and three broad areas – environment, process and information for decision making – the BRM provides both a road map to risk and a means to envision and implement a risk management solution. This model was developed jointly between AA and the Economist Intelligence Unit and has a comprehensive set of definitions behind each risk. This is the tool that enables us to have a common risk language – it is the heart of an integrated risk management approach.
  • Market expansion modules

    1. 1. Market Expansion Training Day 1 September 12-13, 2011 RBAP Conference Room, RBAP Building Intramuros, Manila
    2. 2. Case for Expansion
    3. 3. Case against Expansion
    4. 4. Exploring Various Expansion Strategies
    5. 5. The Strategy Challenge <ul><li>S-O Strategy </li></ul><ul><li>Enter new territories in Visayas through new branches/MBOs. </li></ul><ul><li>S-T Strategy </li></ul><ul><li>Maintain the current markets among farmers, traders, LGU employees, and microentrepreneurs by introducing better designed products. Business focus shall remain on farmers (30%), micro (20%) and SMEs (30%) totalling 80% of loans allotted to these sectors. </li></ul><ul><li>Improve IT systems and credit processes to support overcome competition. </li></ul>
    6. 6. The Strategy Challenge <ul><li>W-O Strategy </li></ul><ul><li>Implement a total quality thrust in the bank. </li></ul><ul><li>Implement a centralized and integrated IT infrastructure for all units by 2007. </li></ul><ul><li>Institute organizational development plan for personnel. </li></ul><ul><li>W-T Strategy </li></ul><ul><li>Develop fee-based services and alternative financial services beyond lending such as remittances, collection services, ATM, new MF products (MF Agri/HMF), etc. </li></ul><ul><li>Improve risk management and good governance towards globally acceptable best practices. </li></ul><ul><li>Build-up of equity via plowback of profits. Reduce dividends. </li></ul>
    7. 7. Product Diversification <ul><li>2000: BPI became the first bancassurance firm after it acquired the insurance companies of the Ayala Group </li></ul><ul><ul><li>FGU Insurance Corporation </li></ul></ul><ul><ul><li>Universal Reinsurance Corporation </li></ul></ul><ul><ul><li>Ayala Life Assurance, Inc. </li></ul></ul><ul><ul><li>Ayala Health Care, Inc. </li></ul></ul><ul><ul><li>Ayala Plans, Inc. </li></ul></ul><ul><li>2009: Completed sale of its 51% stake in Ayala Life to Philamlife to form the BPI-Philam Life Assurance Corporation.  </li></ul>
    8. 8. Market Re-segmentation <ul><li>2000: BPI introduced its Internet bank, BPI Direct Savings Bank </li></ul><ul><li>2010: Partnered with its sister firm, Globe Telecom, in establishing Globe BanKO, a mobile savings bank with microfinance as its main thrust. </li></ul><ul><li>Followed by the launch of the BPI Family Ka-Negosyo program, a reinforced program to fit the financing requirements of micro and small entrepreneurs, signaling BPI's foray into small and micro-entrepreneurship. </li></ul><ul><li>BPI “Micro deposit” ATM account... </li></ul>
    9. 9. Mergers & Acquisitions <ul><li>Pro </li></ul><ul><li>Rapid gain of market share </li></ul><ul><li>Secure critical technologies </li></ul><ul><li>Fill-up gaps in product lines </li></ul><ul><li>Have faster product roll-out </li></ul><ul><li>Acquire talent </li></ul><ul><li>Con </li></ul><ul><li>Risk of failure due to incompatible culture and processes </li></ul><ul><li>Over-paying for acquisition </li></ul><ul><li>Internal dissent </li></ul><ul><li>Employees turn-over </li></ul>Manage the acquisition process by assigning a top executive to over-see the integration process with focus on managing social and cultural fit.
    10. 10. Product Diversification <ul><li>Pro </li></ul><ul><li>Used to enter new market niche </li></ul><ul><li>Answer customer needs of existing market </li></ul><ul><li>Protect core products and market </li></ul><ul><li>Deliver top-line revenue growth </li></ul><ul><li>Con </li></ul><ul><li>Time-consuming preparation and change of internal processes </li></ul><ul><li>Reconfigure IT support structure </li></ul><ul><li>Heavy cost in initial product roll-out </li></ul><ul><li>Risk of market rejection </li></ul>Appoint product management unit to lead product research, design, and process improvements in coordination with other bank departments.
    11. 11. Customer Re-segmentation <ul><li>Pro </li></ul><ul><li>Discover new market segments </li></ul><ul><li>Support profitable market segments </li></ul><ul><li>Boost investments in key technologies and products </li></ul><ul><li>Expand sources of demand from existing products </li></ul><ul><li>Con </li></ul><ul><li>Risk of poor market uptake </li></ul><ul><li>High cost of investment for small markets </li></ul><ul><li>Complexity of managing multiple markets and delivery channels </li></ul><ul><li>High incremental cost with potentially lower incremental profits per new customer. </li></ul>Market research unit and financial planning unit must carefully consider cost implications as you go to a different market niche. Impact on per unit cost or profits must be considered.
    12. 12. Geographic Expansion <ul><li>Pro </li></ul><ul><li>Expand market reach </li></ul><ul><li>Diversify geographic risk </li></ul><ul><li>Enhance brand recognition </li></ul><ul><li>Tap new clients from the same market segment </li></ul><ul><li>Increase resources (loans, deposits) </li></ul><ul><li>Con </li></ul><ul><li>Capital intensive </li></ul><ul><li>Burn-out of assigned employees </li></ul><ul><li>Complex management control systems </li></ul><ul><li>Heavy investment in IT infrastructure </li></ul><ul><li>Lax internal controls </li></ul>Key executive should focus on putting together interdisciplinary team for market research, construction, IT, HR, and branch operations opening.
    13. 13. Market Expansion Training Day 2 September 12-13, 2011 RBAP Conference Room, RBAP Building Intramuros, Manila
    14. 14. Microfinance Expansion Strategies
    15. 15. Geographic Expansion <ul><li>Pro </li></ul><ul><li>Expand market reach </li></ul><ul><li>Diversify geographic risk </li></ul><ul><li>Enhance brand recognition </li></ul><ul><li>Tap new clients from the same market segment </li></ul><ul><li>Increase resources (loans, deposits) </li></ul><ul><li>Con </li></ul><ul><li>Capital intensive </li></ul><ul><li>Burn-out of assigned employees </li></ul><ul><li>Complex management control systems </li></ul><ul><li>Heavy investment in IT infrastructure </li></ul><ul><li>Lax internal controls </li></ul>Key executive should focus on putting together interdisciplinary team for market research, construction, IT, HR, and branch operations opening.
    16. 16. Sample MBO Organization
    17. 17. Nightmare Scenarios without a Risk Management System Source: AJA Registrars, 2008 <ul><li>INCREASED COSTS </li></ul><ul><li>INADEQUATE RESOURCES </li></ul><ul><li>HIGH MAINTENANCE COST </li></ul><ul><li>PROJECT DELAYS </li></ul><ul><li>EMPLOYEE FRUSTRATIONS </li></ul><ul><li>CUSTOMER DISSATISFACTION </li></ul><ul><li>DOWN TIME DUE TO POOR MAINTENANCE </li></ul><ul><li>FIRE, FLOOD, THEFT, DAMAGE & DETERIORATION </li></ul><ul><li>HIGH CUSTOMER COMPLAINTS </li></ul><ul><li>LOSS OF REPEAT ORDERS </li></ul><ul><li>ANOTHER CUSTOMER LOST </li></ul><ul><li>BAD PUBLIC IMAGE </li></ul><ul><li>POOR QUALITY SERVICE </li></ul><ul><li>POLICY CONFLICTS </li></ul><ul><li>CONFLICTING PRIORITIES </li></ul><ul><li>MANAGEMENT DISINTEREST </li></ul><ul><li>RE - WORK </li></ul><ul><li>LACK OF SKILLS </li></ul><ul><li>UNPLANNED VARIATIONS </li></ul><ul><li>MATERIAL WASTAGE </li></ul>
    18. 18. Business Risk: “ The level of exposure to uncertainties that the enterprise must understand and effectively manage as it achieves its objectives and creates value ” An EWRM Approach Needs a Context
    19. 19. Categories of Business Risks ENVIRONMENT RISK PROCESS RISK INFORMATION FOR DECISION-MAKING RISK Sources of Uncertainty Uncertainties affecting the viability of our business model Uncertainties affecting the execution of our business model Uncertainties over the relevance and reliability of information that supports our value-creation decisions
    20. 20. BSP Risk Framework
    21. 21. Sources and Mitigation of Risk Risk Area Sources of Risk Risk Mitigating Activities Credit Risk Market Risk Operational Risk Reputational Risk Financial Risk Other Risks
    22. 22. BUSINESS STRATEGY BARRIERS TO SUCCESS BUSINESS RISKS Business Risk Source: SGV & Co., 2006 WHAT WILL NOT ALLOW US TO SUCCEED ? CHANGES IN EXTERNAL ENVIRONMENT
    23. 23. © 2000 Arthur Andersen All rights reserved. The Business Risk Model TM Source: Arthur Andersen, 2001
    24. 24. Increasing Expectations of the Internal Audit Function Greater Business Risks Higher Expectations of Internal Audit Source: SGV & Co., 2006 Technology Advancements Globalization of Operations Rapid Expansion Increasing Competition Speed of Change Fluctuating Market Demands Technology Advancements Globalization of Operations Rapid Expansion Increasing Competition Speed of Change Fluctuating Market Demands
    25. 25. Why go for Risk Management? <ul><li>Compliance with regulatory requirements </li></ul><ul><li>A documented risk management system is intended to provide the framework for consistency of approaches </li></ul><ul><li>Efficiency of actions and approaches and cost savings associated from preventive rather than reactive management </li></ul><ul><li>Elimination, or at least, minimization of risk damaging to profit and to reputation – customer complaints, penalties imposed. </li></ul><ul><li>Employee motivation and satisfaction - cost saving of staff “turnover </li></ul>
    26. 26. Why go for Risk Management? <ul><li>ENLIGHTENED MANAGEMENT FOCUS </li></ul><ul><li>Enlightened management focus is – </li></ul><ul><li>“ Whatever we do, WE DO FOR US and not because it is forced on us” - </li></ul><ul><li>then this initiative WILL be: </li></ul><ul><ul><li>Rational </li></ul></ul><ul><ul><li>Effective </li></ul></ul><ul><ul><li>Economic </li></ul></ul><ul><ul><li>Sustainable </li></ul></ul><ul><ul><li>Sensible </li></ul></ul>
    27. 27. <ul><li>The SUCCESS of a Risk Management System depends on COMMITMENT from all levels and functions of the organization especially top management. </li></ul>

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