Comprehensive Enterprise Risk Management Analysis: Standard Chartered

This report provides a comprehensive analysis of Enterprise Risk Management (ERM) at Standard Chartered Bank. It begins with an introduction to the bank's aims and objectives, followed by an examination of major problems encountered in the past, including credit, market, and legal risks, and how these compare to challenges faced by other organizations in the same sector. The report then explores the applicable regulations and potential opportunities for enhancing company performance, such as expansion in developing countries and technology infrastructure setup. A detailed risk assessment is presented, identifying and scoring risks like technical, market, credit, legal, strategic implementation, and wealth management, along with proposed mitigation actions. The report concludes with a summary of findings and references.

Enterprise risk management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
The aims and objectives of the organization...............................................................................1
Major problems which enterprise has encountered in past..........................................................1
Problems have other organizations in the same sector encountered in the past..........................2
Regulation is applicable to the organization/sector.....................................................................3
Potential opportunities that could enhance company performance.............................................3
Identification of risks and scoring each risk................................................................................6
Concept of the acceptable risk threshold...................................................................................11
Mitigation actions for risks that are above the stated threshold................................................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16
APPENDIX 1.................................................................................................................................18

LIST OF TABLE
Table 1: Opportunities.....................................................................................................................4
Table 2: Threats for bank.................................................................................................................6
LIST OF FIGURE
Figure 1: Quantitative method for risk measuring.........................................................................12

INTRODUCTION
Standard charted bank is UK base banking group and it provides variety of financial
services to its customers throughout the world. In addition, firm have more than 500 offices in
more than fifty countries in order to deliver consumer banking and institutional banking services
in a significant manner. However, enterprise is facing several risks or issues including legal and
reputational, risks-credit, foreign exchange, business and regulatory that affects business of
enterprise. The main purpose behind choosing Standard charted bank is to explore various risks
associated with the banking operations of company and strategies taken by management to
control over risks in the modern arena. By conducting research, investigator would be able to
understand the role of Risk Management System and its applicability in managing risks and
baking operations effectively.
The aims and objectives of the organization
Aim: The main aim of Standard charted bank is to provide banking and investment related
services to high net worth clients by managing risks in dynamic changing era.
Objectives of bank
 To build a sustainable business and become a leading international leading group over the
long term with managing risks
 To offer variety of products and services to personal and business customers across
different countries (Standard Chartered Annual Report, 2015)
 To perform significant private banking and international banking operations to magnetize
customers by effective use of Enterprise Risk Management tactics in business functions.
Major problems which enterprise has encountered in past
Over the past few years, several changes arise in international financial market and these
changes negatively influence baking operation of banks such as corporate losses and imprudent
business etc. Earlier, Standard charted bank was faced several challenges related to its corporate
strategy including legal and reputational, wealth management liquidity and operational risks. As
per the standard charted report (2004), it is clear that firm has encountered credit, market,
liquidity, operation and other kinds of risks in their business operations. Credit risk was occurred
in case of individual borrower and portfolios on the banking and trading books functions no
execute in a proper way. Besides that, due to potential changes in market prices and rates,
customer retention and magnetizes new customer’s kinds of issues are also faced by organization
1

(Standard charted report, 2004). Despite of that, operation and liquidity kinds of problems were
also encountered in firm and affects direct or indirect loss on business operations of bank such as
processes, infrastructure and personnel failure. Apart from this, due to inappropriate strategies
and inadequate allocation of resources, management of bank was failing to achieve business
targets and gain competitive advantages (Akatova and Curran, 2013). As per the report of Atos
consulting (2007), standard charted bank is struggling to understand the market sentiments and
changes occur in financial markets. The adverse impact of these kinds of risks can be seen in
forms of huge corporate losses and declined margin of international bank.
According to Davies (2015), from past couple of years, enterprise is facing rising bad
loans and commodity management related risks. In addition, share price of bank is very low and
it dilutes investors to invest money in international bank. However, on the other hand,
shareholders of bank are also throwing good money after bad situation raised. These kinds of
strategic issues create questions about its capital strength and creates negative image in the
canvas of the minds of customers. From the study, it is found that enterprise is still facing
different legal issues such as sanctions breaches and fines. On the other side, cut back on low-
returning, banking exposures and wealth management strategies kinds of risks and forced firm to
cut $20 billion of risk weighted assets and invest $1 billion to refocus on wealthy clients (Davies,
2015).
Weinland (2015) stated that Standard charted bank is facing technology related risks
including fail to set-up adequate financial infrastructure; manage database and the regulatory
issues associated with the appropriate use of technology in banking functions. Furthermore,
enterprise is also concentrating on credit modelling systems and SWIFT techniques to overcome
issues and takes financial decisions effectively (Weinland, 2015).
Problems have other organizations in the same sector encountered in the past
In the same financial sector, other organizations including Wellfleet, Barclays Plc and
HSBC banks were also created same kinds of business issues. In the time period of 2007-2010,
management of firm was faced credit risk and performance measurement kinds of problems in
their banking operations (Borghesi and Gaudenzi, 2013). Due to this kind of risk, profit and
customer base of company were also affected. Besides that, soggy commodity markets, changing
needs of customers and fluctuation come in market are also created problems for Barclays
2

Plc and other banks also created challenges for banks to meet personal and business customers
needs in a significant manner.
Regulation is applicable to the organization/sector
In the context of meeting regulatory standards and requirements, government,
international regulatory developments have developed different codes and regulations. For risk
management, managing and supervising the company, Norway’s Public Limited Liability
Companies Act was framed. In addition, to address sustainability issues and manage capital
adequacy in the banking sector, firm was developed Asset and Liability Committee (ALCO). In
addition, for capital adequacy, Group Capital Management Committee (GCMC) and Group
Treasury (GT) committee have been prepared by Standard charted bank. Capital Planning
Framework has been framed to ensure that each entity of bank have sufficient capital or funds to
meet local regulatory capital requirements in a significant manner (Standard Chartered Annual
Report, 2015).
In order to support its strategies, five years strategic, business and capital plans were
developed by international bank. In present arena, for risk management, enterprise has a strong
governance culture and framework. Despite of that, for managing and meeting the local
regulatory requirements, risk management principles were developed by bank (Garvey, 2008).
Risk management framework helps enterprise to better perform in risky business environment
such as market, operational, liquidity and credit risks etc. Besides that, functional and divisional
committees were established to monitor over risk issues and bringing alignment across the
business and the functions. Country Risk Committee (CRC) was framed within organization for
the effective management of risks and allocation of the roles and responsibilities of RCOs
locally. Regulatory requirements and policies of bank are varying as per different locations and
countries (Standard Chartered Annual Report, 2015). For example, in India, specific provisions
and guidelines of bank is framed under the RBI guidelines. On the other side, in Norway,
policies are framed under the Norway’s Public Limited Liability Companies Act. Due to
different locations and standard set by various banking institutions, policies and services offered
by bank to its customers also influence.
Potential opportunities that could enhance company performance
As a leading international bank, to retain its existing and attracting new customers, it is
essential for bank to adopt appropriate system and follow guidelines developed by government.
3

Atos consulting (2007), defined that in order to overcome financial risks, management of
Standard Chartered Bank was employed Basel II Calculation and Reporting Solution Programme
(BCRS). The main purpose behind executing this system was to develop and deploy effective
data and information management systems at workplace to overcome risks face by firm. This
new system was helped company in terms of increasing risk management capability and
deploying the IT solutions to support the Basel II. Despite of that, this new IT system will help
organization to grasp opportunity related to calculate automated credit risk and testing data in a
secure manner (William and Shenkir, 2007). The success of BCRS can be seen in form of
support providing by different countries business units of the bank like United Kingdom
Financial Services Authority’s. Besides that, this technique provides opportunity to company to
make better informed business decisions and respond to the broader business imperatives in the
modern world. Bank can grab business opportunities through considering different strategies that
can be explored as follow.
Table 1: Opportunities
Strategies Opportunity Likelihood Impact on
company
performance
Risk
score
Expansion of
business in
developing
countries
By emphasizing on
developing countries
market including Middle
East, Asia and South
America, international
bank would be able to
generate more revenue.
On the basis of better
product portfolio,
enterprise can be able to
ease competition
pressure and increase
customer base
(Handlechner, 2008).
3 -3 -9
4

Technology
and
infrastructure
set-up
By effective use of
BCRS and new
emerging technologies
like Big Data and Cloud,
management of
company will be able to
grasp business
opportunity in a proper
manner. By adding
values for their clients,
firm would be able to
meet diverse and
inclusive workforce
effectively (Chapman,
2011).
However, security and
privacy related issues
can create hurdle in
success path of
organization.
By using IT system, firm
would be able to
calculate automated
credit risk and testing
data in a secure manner.
Enterprise is still facing
financial infrastructure set-
up and manage database
related issues effectively.
4 -3 -12
Strengthen
employee
In order to respond the
increasingly complex
1 -3 -3
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engagement regulatory environment,
management of
international bank
should focus employee
engagement and
establish greater
collaboration among
employees (Weinland,
2015).
On the basis of opportunity table, it can be said that employee engagement and collaboration
strategy highly influenced company performance. On the other side, by considering expansion of
business in developing countries and technology and infrastructure set-up related tactics,
management of Standard charted bank would be able to grasp business opportunities in a
significant manner.
Identification of risks and scoring each risk
Table 2: Threats for bank
Risk Explanation Likelihood Impact Risk rating Mitigation
1. Technical
Risk
Most of the
banking
organizations
are facing such
kind of
problem
presently
(Shergold,
2015).
Today’s banks
are
emphasizing
on use of bio-
3 5 15 This kind of
risk can be
reduced by
taking
suggestion
from IT
experts and
buy software
from reliable
software
vendor.
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metric, big
data, CRM and
BCRS system,
but in the
absence of
proper
knowledge and
skills,
employees will
unable to grab
business
opportunity
(Khan, 2015).
2. Market risk Demographic
profile of
people, natural
disasters and
currency
fluctuation
factors are
responsible for
creating market
risk for
international
bank.
4 5 20 By
conducting
market
research and
taking
feedback from
customers,
enterprise can
understand
personal
sentimental of
customers.
3. Credit risk This type of
risk can be
occurred due to
change come in
budget,
investors or
4 4 16 By proper
allocation of
resources and
maintaining
better
relationship
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economic
conditions.
with
stakeholders,
company
would be able
to identify
credit risk. In
addition, by
managing
adequate
amount of
funds, firm
would be able
to overcome
negative
impact of
credit risk.
4. Legal and
reputational
risks
Government
and legal rules
&regulations
related factors
can create
hurdle in
successful
implementation
of
organizational
policies in a
significant
manner (Khan,
2015).
3 4 12 By
maintaining
transparency
and
confidentiality
in entire
transactions
and
information
sharing, firm
can enhance
integrity. By
following
regulations
developed by
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government
and financial
institutions,
chances of
negative
implications
of law and
regulations
can be
reduced.
5. Strategic
implementatio
n and resource
allocation
Standard
charted bank is
struggling
issues related
to allocation of
resources and
framed proper
strategies. In
the presence of
these factors,
firm was facing
issue to
achieve
business
targets and
gain
competitive
advantages
(Atos
consulting,
2007).
4 5 20 By managing
resources and
increasing
involvement
of people,
firm can
overcome
resource
allocation
kind of
problem in a
proper way.
9

6. Wealth
management
Enterprise is
facing problem
in delivering
wealth
management
services to its
client at right
time (Weinland,
2015).
3 4 12 Management
of firm should
focus on
maintaining
better
relationship
with
relationship
managers and
team-
members. In
addition, firm
should
concentrate
on
simplifying
processes for
delivering
high quality
solutions
effectively.
7. Reputational
risk
Organization is
facing various
legal issues that
create negative
impact of
organization in
the mind of
customers
(Standard
charted report,
2004).
3 5 15 By following
regulations and
guidelines,
management of
company can
be able to
create its brand
image and
enhance
customer
loyalty.
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8. Operational
risk
This kind of
issue can be
occurred due to
failure of
procedure and
system (Khan,
2015).
4 5 20 Standard
charted bank
should
emphasize on
establishing
global financial
inter-linkages
and speed-up
banking and
financial
services to
reduce impact
of operational
kind of risk.
The Likelihood score is provided in a range of 1-5 and impact is defined from negative to
positive (-1, 0, 1,2,3,4 and 5). In addition, risk score has been allocated on the basis of different
risk classification (x<1, 1to5, 5 to10, 10 to 15 and15 to 25).
Organization can grasp business opportunities through emphasizing on reducing negative impact
of different types of risks including market, operational, wealth management and legal rules and
legislations effectively. In addition, customer centric approach, stakeholder engagement and
technology advancement types of tactics can be beneficial for international bank in terms of
grabbing business advantages in dynamic changing arena.
Concept of the acceptable risk threshold
The term risk threshold can be defined in term of the amount of risk that enterprise can be
taken in forms of schedule, cost and scope of project. For example, Standard Charted Bank has a
policy that increases investment cost of firm by not more than 5%. It is acceptable for company
because organization can bear the cost of increasing cost of technology advancement. Increasing
threshold value high as compared to acceptable will create negative impact on the organizational
policies and create burden in financial resources of firm. Standard Chartered's has massive
restructuring plan and in this regard firm will invest $3 billion over the next three years to
upgrade technology and regulatory systems (Caruthers, 2015). For example, if currency
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fluctuation will arise in the market and price of dollar will be declined then it will affect
investment amount of organization. It will cross the threshold value which will not acceptable by
firm (Akatova and Curran, 2013).
Mitigation actions for risks that are above the stated threshold
In such kind of situation, it is necessary for management of Standard charted bank to use
risk response planning techniques including strategy for positive risk (exploit, share and
enhance) and negative risk (avoidance, mitigation and transfer). By reducing the Expected
Monetary Value and simplifying complex processes, international bank can be able to negative
impact of threshold value. In addition, through developing risk mitigation plan and taking
alternative course of action, firm can be able to control over value that is above to threshold
value (Davis and Jarvis, 2007). With help of this plan, company would be able to address each
risk and determine thresholds that define when a risk becomes unacceptable for enterprise. In
order to measure the impact of the risk on organization, quantitative methods of risk assessment
can be employed. In this regard, Modeling Technique (Sensitivity Analysis), Scenario Technique
(Monte Carlo Simulation) and diagramming technique can be used that can be understood with
help of below figure.
Figure 1: Quantitative method for risk measuring
(Source: William and Shenkir, 2007)
By applying these kinds of strategies, enterprise would be able to continuous monitoring and
reviewing the risk management process and mitigate the chance of risk value above threshold
value.
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Risk register for Standard Charted Bank
Table 3: Risk register for Standard Charted Bank
Risk Number
Risk
Description
Risk Information
sources (ie references
from research)
Likelihood (1-
5)
Impact
(1-5)
Risk Rating
(Likelihood x
Impact)
Above
acceptable
rating? Mitigation
actions
1 Credit risk: In
UK baking
industry,
different types
of regulations
including
Foreign
Account Tax
Compliance Act
(FATCA), Basel
III and New
anti-money
laundering rules
have been
framed.
Changes come
in baking and
financial
functions drives
major disputes
in industry.
Shergold (2015)
4 4 16 No
Through
preparing
full credit
report and
reviewing
recent credit
history,
enterprise
would be
able to
overcome
negative
impact of
credit risk
on financial
health of
bank.
13

2
Technology
change and
cyber crime:
banking sector
of UK and other
countries are
facing security
and cyber-fraud
kinds of issues.
Khan (2015)
3 5 15 Yes
By taking
help of
cyber
experts and
providing
training to
customer
and
employee
regarding to
adequate use
of
technology
3
Market risk :
Changes arises
in interest and
foreign
exchange and
commodity
price affect
policies of
Standard
Charted Bank
Shergold (2015)
4 5 20 Yes
By
conducting
market
research and
regular
monitoring
over
changes
come in
market, firm
can
overcome
negative
impact of
market risk.
CONCLUSION
On the basis of the current report on enterprise risk management at Standard Charted
Bank, it can be said that enterprise is facing problems due to several kinds of risks in their
business. Due to different types of risks, performance and operational activities of bank also
influenced. From the opportunities and threats matrix, it is clear that by emphasizing on different
strategies, enterprise would be able to grasp business opportunities in a significant manner. By
14

implementing risk management plan, management of international bank can be able to overcome
risks and generate profit margin effectively.
15

REFERENCES
Akatova, E. and Curran, R., (2013). From initial risk assessments to system risk management.
Journal of Modelling in Management. 8(3).pp.262 – 289.
Atos consulting, (2007). Enabling Better-Informed Business Decisions And Increased Flexibility
Through Risk Management. [Pdf]. Available Through:<
http://atos.net/content/dam/global/case-studies/case-study-standard-chartered-bank.pdf>.
[Accessed on: 8th December 2015].
Borghesi, A. and Gaudenzi, B. (2012). Risk Management: How to Assess, Transfer and
Communicate Critical Risks. Springer.
Caruthers, R., (2015). Investments in digital banking, compliance automation key to Standard
Chartered overhaul. [Online]. Available Through :<
http://www.fiercefinanceit.com/story/investments-digital-banking-compliance-
automation-key-standard-chartered-ov/2015-11-05>. [Accessed on: 9th December 2015].
Chapman, J. R. (2011). Simple Tools and Techniques for Enterprise Risk Management.John
Wiley & Sons.
Davies, P., (2015). Standard Chartered’s Winters Risks Leaving Investors Cold. [Online].
Available Through :< http://www.wsj.com/articles/standard-chartereds-winters-risks-
leaving-investors-cold-1446554185>. [Accessed on: 8th December 2015].
Davis, E. A. and Jarvis, R. P. (2007).Risk Management: Survival Tools for Law Firms.
American Bar Association.
Emblemsvag, J. and Kjolstad, E. L. (2006). Qualitative risk analysis: some problems and
remedies. Management Decision.44(3).pp.395-408.
Garvey, R. P. (2008). Analytical Methods for Risk Management: A Systems Engineering
Perspective.CRC Press.
Handlechner, M., 2008. Risk Management. GRIN Verlag.pp.105-110.
Khan, A., (2015). Five challenges for the banking industry in 2015. [Online]. Available
Through :< http://www.bankingtech.com/270792/five-challenges-for-the-banking-
industry-in-2015/>. [Accessed on: 9th December 2015].
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