Chase Bank Credit and Risk Management - Case Study Example

Problem Solving Process al Affiliation Problem: Chase Bank credit and risk management Executive summary This paper examines the various ways in which Chase Bank credit management department in can solves the numerous challenges within its scope. It outlines the nature of problems faced by Chase bank with regards to provision of credit facilities and how an effective research process can be conducted by the concerned department to solve these challenges. It also provides suggestions for the restructuring of the credit and risk management system in efforts to make it more effective and responsive to the dynamic banking sector (Wilspon, 2006). Introduction Problem solving process simply refers to a systematic approach used to mainly conceptualize a problematic situation and its identify needs and analyze the main factors contributing to it. It designs strategies and effective plans to meet those needs. Evaluation and implementation of the strategies then follows (Armstrong & Sperry, 1994) A banking institution may be faced by a problem of credit management. This is defined as the process of collecting and controlling of payments from firms customers. The function of credit management is within a bank institution or company is very crucial. If control credit policies are well adhered to by the firm, firm revenues improves and reduce the financial risks. A credit manager is tasked to oversee credit management. He is the personnel employed by a banking institution to manage the department of credit and make decisions on issues such as acceptable risks to be considered and credit limits to be given to particular clients. The scope of credit management in a financial institution includes the following. I. The Controlling of bad and doubtful debt exposure and expenses to the bank. II. The maintenance of strong cash flows through efficient and effective collections means and policies III. Making sure that a reasonable Allowance for Doubtful Accounts is kept by the bank. IV. Ensuring efficient monitoring of the Accounts Receivable ledgers for warning signs and contemporary trends. V. The enforcement of the stop list to a bank client in a situation where by the client is deemed credit worthless. VI. The determination of the credit ceilings for different clients. VII. The Setting and periodical evaluation of credit-rating criteria. VIII. The Setting of and ensuring adherence with the bank credit policy. IX. The obtaining collateral interests where it is deemed necessary. X. The Initiation of the legal and recovery actions against clients who default to pay the loan. In carrying out its the functions, a credit management department in a bank may come across several challenges that need to be addressed. The problems are varied and diverse in nature. Some of them will require urgent attention while some are challenges of low intensity. This problems need to be engage in problem solving process. The problem may be assigned to an individual or a group of personnel within the department to look into the problem (Evanschitzky, Armsrong, & Habbard, 2007). A Problem Solving process comprises of a series of segments that normally fit together depending on the type of problem to be solved. These include Problem structuring This is the first of the any research inquiry. It builds the foundation of the research mission. This stage can be illustrated as follows. The group or individual assigned is going to define the problem it mainly faces .This particular stage is probably the most crucial stage in the research process. This is because it encompasses several interconnected steps. This particular step ascertains the decision makers aims and objectives. This is the core drive for carrying out the research and what the decision intends hopes to achieve (Martyn, 2011). This stage also narrows down broad and imprecise ideas and ideals into more manageable definite that can easily be solved. This initial step assists decision makers on how best to frame the research question. Problem definition stage it background synopsis of the of the research question in view. I mainly points out to where the problem is, how it suites with present developments and what the present situation is, which is deemed critical when working out on a solution (Gilbert, 1946). This basic issue separates and outlines the problem. This stage gets nerve center of the problem to be solved so that possible solution to the research question. The problem definition permits the decision makers to recognize the specific problem to be solved so they can search for alternate resolutions. In this case a credit management department in a bank may be faced with a problem of effective credit and risk management. In order to solve this, they may formulate the following research question (H, 2012). What are the best ways to reduce credit and risk management­? Based on this, the group embarks on a research finding mission to answer the above question and come up with ways and solutions to solve the problem of credit and risk management. The Problem Analysis stage This is usually the second step of any research question. It builds up the foundation of the research question. It’s an important step in research process. This stage can be illustrated a follows. The group or individual has defined the problem and agreed that they want towards finding an solution. Hence they embark on thorough analysis the problem. The group commences this by gathering data about the identified problem. The group facilitator or moderator can take group members through a progression of comprehending every bit of the research problem. This include attempting to answer the question word such as how much, when, who, why and what. This particular process of problem analysis includes the following types of enquiries (Armstrong & Fildes, monetary incentives, 2006): i. What is the problem that the department faces? The group already has the research problem statement. Hence this particular part is more or less done. Ii. Why does the problem at hand exist within the department? There need to be an agreement among the group members as to the reason why the problem exists. This stage encompasses the following. Analysis phase a. Problem analysis check on the subject with the participants in the area of concern Make an overview of the stock of all perceived challenges Check on whether these challenges and problem are commonly understood Build the problem tree analysis b. Objectives analysis Conversion of the problem tree into an objective tree analysis Confirm on consistency of means end relationship. If it is very essential reformulate objectives above. c. Analysis of strategy Sub divide the objective tree into clusters Selection the clusters which will be incorporated in the interference The objective diagram is as follows. Generation of possible Solutions stage When the group has learnt the actual problems that need solved within the credit management department and have examined the climate under which the possible solution must fit, then the next step is to come up several of solutions to the problem. At this particular point the group ought to focus on creating many solutions. It should not in any way assess them at all. Each of the idea produced new should be factored in (Schwab, 2006). Even with an assemblage of gifted and devoted individuals, its not always an easy task to come up with an acceptable solution to any problems facing an organization. Much or less a solution that is feasible effective. Coming up with an acceptable solution takes a considerable amount of work. This work include some thoughtful, appraising, and decision-making of all the individuals of the group. Before individuals in the group embark on the process of generating possible solution it is of paramount importance that they are composed relaxed and at ease both physically and mentally (Nick & Ruiten, 2013). This is due to two main reasons i.e. to promote creativity and promote an open discussion among the participants. Creativity among participants can be enhanced by use of comfortable chairs, soft lighting in the place of discussion, as well as provision of relaxing background music. This can promote the innovativeness of participants. Open discussion can be by participants can be encouraged by making the participants comfortable to freely speak about their ideas and opinions. In this participants ought to have a high level of confidence in them and in the group. To ensure that the participants are comfortable, the group leader should make sure that the participants are at ease mentally and their physical welfare is okay. Consequently, members ought to have reached a high degree of rapport, a considerable degree of freedom among members. This catalyzes the process of team building. Generating a solution When the participants are relaxed, they will be ready to work together and come up with a solution. The list below show how solutions can be generated by the group. The group members can try the methodology that one of members prefers. The methodology chosen must yield a good solution to the problem. i. The moderator should go around the room and urge the participants to come up with ideas that can be used minimize the problem of credit and risk management in the bank. There should be no use of tricks or gimmicks. ii. The moderator can pass over a piece of paper around the room. Participants then are instructed to write down their ideas of the ideal solution of how best the bank can deal with the problem of credit and risk management. The suggested ideas are then discussed by the group without knowledge of who suggested which idea iii. Idea writing. This methodology of Idea writing is very helpful to individuals who love to write .The methodology also helps many participants generate and remark on ideas in a short span of time. In case of relatively large groups, it should be sub divided into small groups for convenience purposes. Every participant in the group writes down on neither his nor her papers a possible solution to the problem. Each participant within the group each puts their paper on a table at the center of the group gathering. Then every in individual in the group takes a paper randomly and remarks on the idea outlined in the paper. Group members repeats this particular process until everyone in group has remarked on another person’s idea iv. Brainstorming of ideas. Brainstorming is an effective way of generating solutions for any given problem. It is a simple method to generate an idea. Normally, it starts with problem statement, the group leader stands at a visible point within the group gathering a newsprint .The participants in the group then says ideas and opinions that comes into their minds. Then the group leader notes down all the ideas suggested. Post the brainstorming session, the task force should listed down the activities that would enable them reach their goal. Among the strategies include; soda, interviews and workshops. a. Why Soda? The challenge of credit and risk management affects the bank financial stability. The only way to solve this challenge is to gather information by probing. b. Workshop. Brainstorming session should help the group in understanding the issues faced by the credit management department; nevertheless there should be suggestions for improvement. A workshop will help the group get a forum to discuss the problems in a more professional platform. This should be done by inviting all stake holders and specialized professionals to discuss this challenge of credit and risk management. c. Interview. Consequently, the task force may decide to conduct interviews. In interviews data is collected through inquiry and recorded by researcher. Forms of interviews vary, structured interviews are conducted by use of survey forms while open interviews are notes taken while the researcher engages the respondents (Irving, 1998) d. . Notes taken during this interview are subject to further analysis by the researcher. An open-ended interviews need to be analyzed and interpreted by a well-trained researcher or an observers. Under this, the credit management task force engages the bank clients and other stake holders in the department with a series of questions regarding how best the bank should conduct its credit management. Stake holders of different strata’s within the bank should be involved and interviewed so as to get an objective feed backs with regards to credit management policies. Numerous data is obtained through interviews. The participants should then sit down and analyze all feedback from the interviews objectively. The best suggestion and ideas on how the bank should conduct its credit and risk management should be considered and subjected to further analysis by the group members. Interview is a process and it encompasses the main segments as follows. Evaluating the suggested solutions The group work at this point has produced numerous potential and amicable solutions to the credit and risk management in the bank. What remains is for the group to decide and settle on best idea. There are several methods on how this can be done. One of the methodological approaches comprises of doing the following things. Assess each of the idea independently. The participants should state on a separate pad the following a. What they like about the idea preferred idea b. What they dont prefer about the idea c. side effects upon adoption of the preferred idea The participants ought to consider the following question before adoption of the preferred ideas: Are the suggested solutions practical? Are the suggested solutions it effective? Is it cost effective to adopt and implement the solutions? Shall it be a strenuous task to put the suggested solutions into practice? Will the suggested solution be acceptable to bank clients and other stakeholders? Are the solutions consistent with the bank credit policies? Selection of the best solution This part is the section which the group you looks through the various types determining factors for each possible solution as suggested by participants. It is at this point that the group members decide which of the suggested solutions to keep and which to ignore. The group members look at the available solutions as a whole and use their judgmental analysis and decide on whether to use the solution or abandon it. The group members can then vote for the solutions viable solutions. After voting for the viable solutions, the group will end up with a list of potential resolutions. The task force may wish increase the depth in the analysis of each idea. This necessitates them to vote again among the shortlisted solutions. The group will finally end up with the most necessary solutions. (Kai, 1992) This process of selecting as solution is best done by consensus. The participants engage in discussion and debate on the possibilities to a point where they all come in to an agreement. The idea chosen at this stage is usually the strongest of the suggested ideas. This is because every person at this point has to be part of the solution. Build of consensus within a group is not always an easy task. But at particular times may be. This is when the assemblage has considered cautiously at all available alternatives options available to them (W.P & Haeffel, 2014). The process of problem solving is illustrated as shows below. This process can be applicable to many entities that face a challenge. The Planning of the subsequent course of action This is the stage in which the credit management department outlines what it is going to do next a faster coming up with feasible solutions regarding credit and risk management (Buchanan, 2010). The department now possesses now potential feasible solution or solutions. This solution may include i. Effective credit collection policies. This is the procedure to be used in debt collection. ii. Review of credit terms. These are the policies that guide credit provision. The task force may propose tighter credit terms to curb the problem of bad debts. iii. Review of credit standards. This is normally the criteria the bank institution uses to give loan facilities to clients. The task force may propose arise in standard to ensure the loan facilities are only available to eligible clients. iv. Proposal of acquisition of a credit and risk management software. This will go a long way in helping the department keep its base in a more coherent manner. T may also be used for credit and risk management analysis as well as market prediction on issues of credit. The task force need to decide how best to effect the available and make happen. This will implicate that stake holders will have to do various things at various times, as opposed to the traditional way conducting things. This particular stage safeguards the valuable thinking that has ensured solving the department problem becomes into a reality (Gittins, 2014). The solutions settled on are incorporated in the bank credit and risk management policies. Through thee usage of the solution, the bank is able to maximize on the interest it gets through the provision of loan facilities to its clients. Chase bank Decision Tree Opportunity cost associated with the problem solving policies This refers to the cost that will be incurred by the bank due to adoption of the above credit management and risk policies (David, 2008). The bank will incur significant cost implementing the new policies. The cost likely to be incurred includes the cost of; a. Cost of acquisition of new credit and risk management software. The cost of acquiring this technology is high; it also needs a specialist to manage it. b. The review of credit terms and standards my bar a significant number of bank customer from accessing the loan facilities. This is likely to reduce the interest the bank gets from provision of loan facilities. The befits of the new policies include; a. Reduced cost of credit ledger management. This problem is reduced by acquisition of credit and risk management software. b. Reduced cost of credit collection and protection against defaulted bad debts. Reviewed standards on credit management of credit terms will bar credit worthless clients from access the credit facilities. c. The new software will ensure provision of effective and effective information to credit management department. d. The new policies will help the firm safe on credit administration cost. Since the merits of the new policies out ways the demerits, it is advisable for the firm to adopt the new policies. This will ensure that the problem faced by the credit and risk management department in the bank is solved. References Armstrong, J. S., & Fildes, R. (2006). monetary incentives. International journal forecasting. Armstrong, J. S., & Sperry, T. (1994). Research. Buchanan, J. m. (2010). Palgrave of economics. London: Webstar University press. David, H. (2008). Opportunity cost. Cape Town: Oxford University press. Evanschitzky, H., Armsrong, J. S., & Habbard, R. (2007). Replication of research. Anote on disturbing trend, 23. Gilbert, G. (1946). A guide to research methods. New York: Fordhan University Press. Gittins, R. (2014). At the core face economist are struggling to measure up. The sydney morning herald. H, K. (2012). Researchand Evaluation. A time saving guide, 102-114. Irving, s. (1998). qualitative research. a guide for research, 49. Kai, B. (1992). the making of America establishment . New York: Oxford University Press. Martyn, S. (2011). Defination of research. New Yolk: Oxford University Press. Nick, W., & Ruiten, S. V. (2013). Share hand book for artistic research. Amsterdam: Valand Acedemy. Schwab, m. (2006). Draft proposal. Artistic research. W.P, V., & Haeffel. (2014). Qualititive Reseach. New York: Oxford University Press. Wilspon, J. D. (2006). The Chase . Boston: Harvard University Press. Read More