MBA7061: Operations Management Case Study of Central Bank of Oman

This case study delves into the operations management practices of the Central Bank of Oman (CBO), examining ten critical elements including capacity management, personalization, procurement, customer satisfaction, quality management, speed, flexibility, cost, risk management, and integrated design and maintenance. The analysis evaluates CBO's strategies, identifies scenarios (positive, just right, and negative), and proposes recommendations for achieving operational excellence. The study highlights CBO's role in maintaining currency stability and financial security, its efforts in customer satisfaction through various banking schemes, and its adoption of ISO 9001:2008 for quality management. The report concludes with recommendations for enhancing customer value through improved online banking portals and continuous improvement in banking operations. Desklib provides access to this and other solved assignments for students.

OPERATIONS MANAGEMENT
A CASE STUDY OF CENTRAL BANK OF OMAN (CBO)

Table of Contents
1.0 Introduction................................................................................................................................4
2.0 Capacity management................................................................................................................5
3.0 Personalization/ Customization.................................................................................................7
4.0 Procurement...............................................................................................................................8
5.0 Customer satisfaction.................................................................................................................9
6.0 Quality management................................................................................................................10
7.0 Speed / Velocity.......................................................................................................................12
8.0 Flexibility.................................................................................................................................13
9.0 Cost..........................................................................................................................................16
10. Risk management.....................................................................................................................18
11. Integrated design and maintenance..........................................................................................20
12. Recommendation.....................................................................................................................23
13. Conclusion...............................................................................................................................24
References:....................................................................................................................................25
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Executive Summary
The supply chain may be considered to be one of the most success-critical aspects of the study of
operation management. The instant report deals with the various aspects of the supply chain of
the Central Bank of Oman (hereinafter may be referred to as "CBO" or the bank, as the case may
be). At the very beginning of the study, the report provides an overview of the supply chain
concept with respect to the banking industry and especially to the CBO. In the subsequent
sections of the paper, 10 different aspects of supply chain management of BO have been briefly
analyzed which are capacity management, personalization or customization, procurement,
customer satisfaction, quality management, speed or velocity, flexibility, cost, risk management
and integrated design cum maintenance. In the last part of the report, the researcher provides a
brief recommendation followed by the concluding note.
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1.0 Introduction
Operation management is considered as the business function accountable for supervising the
procedure of product and service creations. In the opinion of Slack and Brandon-Jones (2018),
the process includes organizing, planning, coordination and control every possible resource
required to produce a businesses’ product and service lines. Operation in the banking sector
ensures that it’s all procedures and transactions are executed without any interruption that tends
to minimize the risk likelihood and maximize service quality standards (Kerzner and Kerzner,
2017). Hence, correct maintenance if the operation process in the banking sector helps
management to establish the highest degree of process efficiency within the organization
(Avkiran, 2018). The Central Bank of Oman (CBO) is majorly accountable for retaining stability
in its national currency, which is the Omani Rial and guaranteeing financial stability in the open
financial and deregulated system. The present project aims to evaluate the operation
management efforts followed in the Central Bank of Oman. It would determine its capacity
management, supply chain system, inventory process, procurement efforts, quality management
supervision, customer satisfaction index, customer support function, etc.
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2.0 Capacity management
Scenario – Operational capacity may be denoted by way of inventory and hence, capacity
management may well be equated with inventory management in the given example. In the case
of banks, inventory primarily refers to the money. An analysis into the operation of the bank
reveals that the sufficient monies are available in the CBO reserve which includes foreign
reserves and gold and liquid monies as well. These all monies are floating in the market issued
by the bank.
Strategy – The reserve amount of money ensures that there is no need for any stimulus package
e.g., printing excessive monies (borrowing from the future), stable interest rate. In this context, it
may be noted that the interest rate structure in the Oman country is basically determined by the
two factors. The first determinant is market forces. In a deregulated environment, the rate of
interest is determined by the equilibrium point of demand and supply forces which are driven by
the market. Secondly, the LIBOR impacts interest rate heavily and a number of countries across
the world keep the LIBOR as a benchmark for setting the rate of interest level for own country.
CBO also keeps a close watch on the movement of LIBOR. The insight denotes that the bank
sets only the interest rate ceiling on personal loans, which gets changed from time to time
depending on the developments in the economy. In this context, the recommendation proposal
for Basel III regarding the capital requirement and maintenance is worth mentioning which aims
to ensure the adequacy of the capacity from the view point of systematic risk management. CBO
has introduced capital conservation and countercyclical capital buffers for all banks in line with
BIS requirements, which are briefly shown below.
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Figure 1: Capital as percent of Risk Weighted Assets in OMAN based Banks
(Cbo.gov.om, 2017)
The figure shows that the recommended capital buffer is a strategic move towards the stability in
terms of operating capacity which afterwards will help the banks tyo sustain the capex (capital
expenditure) and also the routine expenses.
Recommendation – The bank should consider building the reserve for future expansion and
growth of the entire banking system of the country. Such reserve will help CBO in assuring the
capital and money flow within the banking channels of the country.
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3.0 Personalization/ Customization
Scenario – The banking business caters the basic financial needs of the people which have been
evolving with the growth and complexity of the business world as a whole and therefore, the
offering of the banking service has also been changing over the time in order to meet the
customer's demands and preferences. Since the choices and preferences horizon has been rapidly
changing for the people, the banks have also introduced new producers and banking services so
that the same may satisfy the requisite needs and create value for the public.
Strategy – CBO has been involved in devising monetary policy measures along with the
regulators and the Government. Besides, the bank has been playing a major role in Government's
debt management and foreign exchange management as well. As stated earlier, CBO is
responsible for maintaining the banking reserve and determining the inter-bank lending rates.
Recommendation – Since the operation of CBO has been multi-faceted, the same automatically
creates a distinct identity for the bank in the market in terms of its brand value which may again
further be corroborated by way of stating that the CBO has been effectively handling the capital
adequacy ratio of the banks of the country and the same has improved considerably in the last
few years. All these examples establish the fact that CBO has been involved in customizing its
offering in the form of policy measures or regulation.
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4.0 Procurement
Scenario – In the case of the banking industry, the concept of procurement may be read in line
with customer deposits. The insight into the various publications of the bank may reveal that the
bank has taken a substantial amount of deposits from customers and number of unrestricted
investment accounts. The interim condensed financial statement for the third quarter of 2018
shows that the total deposits stand at around 25,00,566 thousands RO; whereas, the total
liabilities of the bank for the given period is 29,37,678 thousand RO. In other words, the majority
(around 80%) of the bank's liabilities are occupied by the deposits from the public.
Strategy – The procurement strategy may be analyzed by way of a detailed reading of the annual
report. Further reading of the financials of the bank may disclose that the source of the deposits
is primarily of three types namely current accounts, savings accounts and term deposits. The
way, raw materials are procured from the market or vendors to produce the finished stock, the
bank also takes deposits from the customers from various sources (or it may be said that these
deposits are kept in those three options).
Recommendation – Since the deposits attract interest payment, the bank may need to carefully
observe the legal requirement with respect to the minimum capital requirement by the banks. It
may so happen that the policies implemented may have gathered sufficient public funds, but the
cost implications may have been huge for the entire system.
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5.0 Customer satisfaction
Scenario – CBO has been considered to be one of the most reputed banks in the country of
Oman. The bank replaced the Oman Currency Board as the principal currency authority in the
country.
Strategy – As previously stated, the bank takes a substantial amount of deposits from the public.
In other words, the people of the country are largely reliant on the CBO in terms of their
individuals and well as business banking need. The people take loans and advances from the
bank in order to satisfy their financial need and such loans and advances stand at around
26,34,736 thousand RO as per third quarter interim condensed financial statements. Apart from
taking a large number of deposits from the public and giving loans to them, the bank has been in
active participation in helping the Government in formulating various monetary policy related
measures. The bank rate and repo rate and reverse repo rate are being strictly regulated by the
CBO which serves the basic banking purpose of the people in the long-run in the form of
controlled rate of interest. In addition, the bank provides an insurance benefit on the deposits
under Banking Deposits Insurance Scheme which ensures the safety of customers' money and
thereby promotes the banking goodwill. In other words, the CBO acts towards the maintenance
of public faith in the banking system. It is needless to mention that such actions and measures
largely creates value and hence customer satisfaction. Lastly, it has also been observed that the
bank introduced RTGS (Real Time Gross Settlement) system for smooth and hassle-free money
transfer which again provided effective satisfaction to the general public.
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Recommendation – The bank needs to provide more value to the customers and deposit holders
in the form of the smooth banking system by way of provision of an online portal with greater
ease of interaction with banks.
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6.0 Quality management
Scenario – It has been identified that The Central Bank of Oman had taken the initiative of
enhancing its value for the stakeholders to amplify their service experience by launching ISO
9001:2008 certification project for the currency management service lines (Newspaper, 2018).
As per the source of the press, the specific bank had previously organized for the "Project Kick-
off” to receive the certification for service augmentation. Moreover, the Quality Improvement
Domain of CBO had further organized for an ‘executive briefing’ event for the higher
management officials and seniors to comprehend the value and purpose of ‘ISO 9001:2008
Awareness’ project. In addition to the latter context, it has been recognized that CBO had been
considered as the first bank in the nation to receive an ISO certification for improving their
service lines for the stakeholders (Observer, 2018). Although the bank had several global
guidelines and structures that administer its authoritarian activities, yet, the management of the
bank had opted for ISO 9001:2008 certifications as a part of its dedication towards its service
excellence. As per the consideration of Hitt et al. (2016), the specific trend of incorporating this
quality standard is adopting presently where each of the service providers, either Government or
regulator/private, are seeking for different lucrative methods to improve service standards for
their stakeholders.
Strategy – In the statement of Haimes (2015), the bank has generally implemented the quality
management system in its currency department in order to ensure a reduction in the waiting time
of the customers neat the counters, increase in the counting efficacy and thereby amplifying its
customer experienced related to CBO’s service lines. Avkiran and Ringle (2018) determined that
COB has also implemented the current management system besides its quality management
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system to ensure that every customer expectations get fulfilled and their satisfaction index
increases over time. In addition, the bank had conducted an employee survey to identify the areas
that require special attention. In the survey, the employees had opted for options like continuous
improvement, customer focus and employee involvement. However, the incorporation of ISO
9001:2008 certification had helped the organization in terms of transforming their work
environment and promotes the culture of quality assurance within the workplace (Observer,
2018). The certification is valid for 3 years, hence, the brand also conducts surveillance audit
each year to ensure the purpose of the continuous quality management system is served.
Recommendation – The information highlights the fact that in the previous year since the
inauguration of the certification project was initiated during October 2013, in which the CBO has
opted for a number of stepladders to increase staff engagement and service excellence that
involved the release of its Quality Strategy as well (Observer, 2018). The staff involvement
efforts the management had conducted several training schedules on spreading quality awareness
and expertise progress, conducted surveys to measure its customer satisfaction index, developed
effective quality objectives, scrutinized its existing procedures, conducted several in-house
quality review, established some of the quality manuals, initiated management supervisions
alongside the prologue of its fresh customer service efforts (Reim et al. 2016).
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