Strategic Risk Management - A Trail of Two Strategies

32 Pages Posted: 14 Feb 2019

See all articles by Patrick J. McConnell

Patrick J. McConnell

Macquarie University, Applied Finance Centre

Date Written: March 15, 2015

Abstract

In late 2012, two of the world’s Systemically Important Banks (SIBs), Barclays and Deutsche Bank, announced new Corporate Strategies at almost the same time. These announcements provide a rare opportunity in business research to study the development and execution of ‘strategy’ over time as the banks concerned operate in the same international markets with similar products. The banks are of a comparable size, operate within the same global regulatory frameworks and, while they have different national regulators, their regulatory pressures are broadly the same.

Studying ‘strategy’ over time is difficult because the outcomes are situation dependent, contingent on (inter alia) the state of market competition at the time that strategy was announced, economic conditions as the strategy evolves and the achievement (or otherwise) of firm-specific objectives. In business, there are no static ‘control groups’ against which a particular strategy can be evaluated. However, the two banks studied here allow a cross-sectional, longitudinal case study of how the banks manage their ‘Strategic Risks’ i.e. risks in the environment that may derail their respective strategies. This paper is the second, in a planned sequence of four, analyzing the evolution of the two strategies over time. After summarizing the first paper in the series, which discussed Strategy Development, this paper describes, using Annual Reports and other disclosures, the state of Strategic Execution for each bank at roughly the midpoint of their chosen strategic timeframes. No judgments are made as to the likely success, or otherwise, of each bank’s strategy although it is apparent that Deutsche is progressing fairly well as regards its stated objectives, whereas Barclays is facing heavier weather in its progress. The success, or otherwise, of the long-term strategy of any ‘Too Big to Fail’ bank is important not only for shareholders but also for regulators and the general economy so the paper makes some suggestions as to how regulators may approach the monitoring of a bank’s Strategic Risks.

Keywords: Strategy, Strategic Risk, Barclays Bank, Deutsche Bank, Banking Regulation

JEL Classification: G20, L1

Suggested Citation

McConnell, Patrick J., Strategic Risk Management - A Trail of Two Strategies (March 15, 2015). Macquarie University Faculty of Business & Economics Research Paper No. 38. Available at SSRN: https://ssrn.com/abstract=3327988 or http://dx.doi.org/10.2139/ssrn.3327988

Patrick J. McConnell (Contact Author)

Macquarie University, Applied Finance Centre ( email )

New South Wales 2109
Australia

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