Regulation Archives - Consilue https://consilue.com/en/tag/regulation-en/ Consulting professionals Mon, 22 Nov 2021 11:30:56 +0000 en-US hourly 1 https://wordpress.org/?v=6.9.4 https://consilue.com/wp-content/uploads/2019/10/favicon.ico Regulation Archives - Consilue https://consilue.com/en/tag/regulation-en/ 32 32 Key success factors – a must for a good corporate strategy? https://consilue.com/en/key-success-factors-corporate-strategy-2/ Mon, 19 Mar 2018 11:39:36 +0000 http://consilue.com/?p=765 Read about the key success factors and why their understanding is of crucial importance for any corporate strategy.

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Key success factors (also referred to as KSFs) refer to one of the crucial strategic tools. Correct understanding of the key success factors is a good base for a well-structured company differentiation.

Although key success factor refer to a different concept as key performance indicators (also referred to as KPIs), these two are in fact intertwined. As long as the monitoring system is properly set up, the management monitors the effectiveness and efficiency of operations with key performance indicators, designed based on the key success factors.

Key success factors are key to proper development and execution of strategy.

Let’s name most obvious key success factors for shoe industry in order to understand what this concept is all about – i.e. quality, price, comfort, branding & marketing, style & aesthetics, design & fashion, reflectance of the customer’s style, technology etc.

Not all key success factors are of similar importance for the target group.

Luxury shoe brands will most likely differentiate based on key success factors such as:

  • Brand image
  • Unique design
  • High quality (production, material)
  • Prestige
  • Reflectance of the customer’s style

… while casual/sport shoe brands focus more on:

  • Reasonable price
  • Comfort
  • Brand image
  • Sponsoring athletes
  • Technology

Once a manager understands key success factors, he/she understands why for example a shoe giant Geox, that technologically revolutionized the shoe industry with its breathable shoes, has dominated the casual shoe brands for years. Furthermore, also expanding to casual clothes segment seems rather logical and much wiser decision as luxury shoe brand segment penetration.

Often key success factors have some critical level of acceptance. The company needs to respect it in order to ensure its existence on the market. Often, these factors relate to security, regulation, privacy, ethics, quality, price etc.

Once critical success factors and key success factors are defined, they should be supervised on a regular basis. Strategy is a living thing, especially if its build mainly based on intangibles such as image, brand, trends etc.

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]]> Bank specifics and value creation https://consilue.com/en/bank-specifics-value-creation/ Mon, 19 Mar 2018 11:32:40 +0000 http://consilue.com/?p=763 In order to understand banks & their specifics, you need to first understand how they generate value, the role that they play and systematic limitations.

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Banks represent a crucial element of the modern economy. Often we read about bank specifics. What exactly is it about? How do banks operate and what kind of risks and regulation are they facing? Do the risks and regulation impact the value creation?

Generally speaking we divide banks into four groups according to the source of the bank’s income:

  • Net interest income is income generated as a difference between funds attracted in the form of customer deposits and debt and funds provided to customers in the form of loans such as mortgages, credit card loans, and corporate loans.
  • Fee and commission income is income charged for services such as transaction advisory, underwriting and placement of securities, managing investment assets, securities brokerage, and many others.
  • Trading income is income generated from trading financial instruments such as equity stocks, bonds, foreign exchange and exotic financial products.
  • Other income is income generated from wide variety of nonbanking activities, including real estate development, minority investments in industrial companies, and distribution of investment, insurance, and pension products and services for third parties.

Ideally, any activity involving financial advisory service should consider businesses and dependent value drivers separately according to the source of income.

Besides value drivers, a very good understanding of the business activities and value creation is required. In contrast to non-banks institutions, most of banks create value on both sides of the balance sheets – on the equity and liabilities side, due to the customer deposits costs that are below the market interest rate, and on the asset side, due to the value added to financial products. By definition, financial obligations carry operational meaning for banks and are not meant only as a source of financing as for non-financial companies.

One should also account for risks related. In last decade the volatility of profitability of the banking industry has increased, causing the impact on market-to-book ratios. Banks deal with interest rate risks, due to the mismatched maturities of loans and deposits. High leverage causes a bank to be highly vulnerable to even small changes in interest rates. Besides that, banks take on significant risks inherent in balance sheet items (such as proprietary trading activities) and also risks related to off-balance sheet positions (such as swaps, forward deals and options on foreign currencies or securities).

Furthermore, the way modern banks operate in the financial markets result in a general dependency on exogenous factors such as the economic cycle or trends in money, capital or real estate markets, showing up through changes in a bank’s credit losses. Financial planning and other financial advisory services thus require a thorough analysis of several parameters and forecasting future trends.

Last but not least, law and regulation is also crucial. Banks are subject to various bank-specific rules. High regulation is necessary due to specific role within the financial system, risks they face and dependency on economic cycles. Regulation is imposed at the state level and occasionally at the international level, as in the case of bank capital requirements. Six types of regulation seek to enhance the net social welfare benefits of financial intermediaries’ services: (1) safety and soundness regulation, (2) monetary policy regulation, (3) credit allocation regulation, (4) consumer protection regulation, (5) investor protection regulation, and (6) entry and chartering regulation. The regulation that significantly influences the value of a bank is capital adequacy.

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