Risk Management at Wellfleet Bank: All That Glitters Is Not Gold.

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Assignment 1
Case Analysis – Risk Management at Wellfleet Bank: All That Glitters Is Not Gold.

1. Given its strategy, what kind of risks does Wellfleet Bank face?

The first possible risk would be the operation risk. Refer to Wellfleet Bank, the Group Credit Committee has a unlimited level of authority. They could approve loans of any size within the bank’s regulatory limits which means there is no supervisory group can stop the group’s decision. Furthermore, to preserve the independence of the credit-approval process, the “Alpha Pass” did not involve the most senior executive management (e.g., business CEOs) in the deal flow. Under the current operation procedure, if a billion dollar deal went wrong it could sink the ship.

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We would recommend that Wellfleet Bank should stay away from GGC under it current financial position.

4. Analyze the risk management processes at Wellfleet Bank. What suggestions might you make to the CEO about improving the process.

The current risk management process at Wellfleet Bank is mainly a continuous bargaining between the relationship managers and risk officers. Relationship managers are responsible to contact new customers and suggest different proposal to earn revenue for the bank. Meanwhile, the risk officers are independent department to approve and evaluate those proposals in order to prevent any proposals which are too risky or non-profitable to the bank using their analysis model.

On the side of risk officers group, they have a hierarchy structure based on the experience of credit offices. The higher experience officers have more authority and approval limit on proposals. The most experience group of officers can be a member of Group Credit Committee., they are responsible to approve those credit proposal which are mega deal. Besides the Group Committee, there are also 7 kinds of risk committee analysis on specific risk separately. They include reputational risk, country risk, operational risk, credit risk, market risk, business risk (consumer bank) and business risk (corporation bank)
Under the current structure, there are 2 major problems we are spot out.

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