Catastrophe Bonds at Swiss Re SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Catastrophe Bonds at Swiss Re
In 2002, Swiss Re, the world's second--largest insurance company, is considering securitizing parts of its risk portfolio in the capital markets. This would be a first for the company that, until then, had never transferred risk off its balance sheet. Peter Giessmann, head of the Retrocession Group, is considering catastrophe bonds as a way of transferring risk. "Cat bonds" are securities whose payments depend on the probability of a catastrophe occurring, such as an earthquake or hurricane. This case outlines the traditional reinsurance market and securitization efforts that have taken place in the past and then focuses on Swiss Re's decision as a sell-side participant in the cat bond market.
Authors :: George Chacko, Vincent Dessain, Anders Sjoman, Peter Hecht
Swot Analysis of "Catastrophe Bonds at Swiss Re" written by George Chacko, Vincent Dessain, Anders Sjoman, Peter Hecht includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Catastrophe Bonds facing as an external strategic factors. Some of the topics covered in Catastrophe Bonds at Swiss Re case study are - Strategic Management Strategies, Financial management, Financial markets, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Catastrophe Bonds at Swiss Re casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic ,
central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Catastrophe Bonds at Swiss Re
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Catastrophe Bonds at Swiss Re case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Catastrophe Bonds, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Catastrophe Bonds operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Catastrophe Bonds at Swiss Re can be done for the following purposes –
1. Strategic planning using facts provided in Catastrophe Bonds at Swiss Re case study
2. Improving business portfolio management of Catastrophe Bonds
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Catastrophe Bonds
Strengths Catastrophe Bonds at Swiss Re | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Catastrophe Bonds in Catastrophe Bonds at Swiss Re Harvard Business Review case study are -
Strong track record of project management
– Catastrophe Bonds is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Catastrophe Bonds is one of the leading recruiters in the industry. Managers in the Catastrophe Bonds at Swiss Re are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Catastrophe Bonds in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Catastrophe Bonds is present in almost all the verticals within the industry. This has provided firm in Catastrophe Bonds at Swiss Re case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Organizational Resilience of Catastrophe Bonds
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Catastrophe Bonds does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Catastrophe Bonds are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High brand equity
– Catastrophe Bonds has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Catastrophe Bonds to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Catastrophe Bonds has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Sustainable margins compare to other players in Finance & Accounting industry
– Catastrophe Bonds at Swiss Re firm has clearly differentiated products in the market place. This has enabled Catastrophe Bonds to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Catastrophe Bonds to invest into research and development (R&D) and innovation.
Analytics focus
– Catastrophe Bonds is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by George Chacko, Vincent Dessain, Anders Sjoman, Peter Hecht can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Innovation driven organization
– Catastrophe Bonds is one of the most innovative firm in sector. Manager in Catastrophe Bonds at Swiss Re Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Catastrophe Bonds is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Catastrophe Bonds is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Catastrophe Bonds at Swiss Re Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Catastrophe Bonds at Swiss Re | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Catastrophe Bonds at Swiss Re are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Catastrophe Bonds at Swiss Re, it seems that the employees of Catastrophe Bonds don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
No frontier risks strategy
– After analyzing the HBR case study Catastrophe Bonds at Swiss Re, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow to strategic competitive environment developments
– As Catastrophe Bonds at Swiss Re HBR case study mentions - Catastrophe Bonds takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Increasing silos among functional specialists
– The organizational structure of Catastrophe Bonds is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Catastrophe Bonds needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Catastrophe Bonds to focus more on services rather than just following the product oriented approach.
High cash cycle compare to competitors
Catastrophe Bonds has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– It come across in the case study Catastrophe Bonds at Swiss Re that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Catastrophe Bonds at Swiss Re can leverage the sales team experience to cultivate customer relationships as Catastrophe Bonds is planning to shift buying processes online.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Catastrophe Bonds at Swiss Re HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Catastrophe Bonds has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Catastrophe Bonds has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Catastrophe Bonds even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Lack of clear differentiation of Catastrophe Bonds products
– To increase the profitability and margins on the products, Catastrophe Bonds needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the segment, Catastrophe Bonds needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High operating costs
– Compare to the competitors, firm in the HBR case study Catastrophe Bonds at Swiss Re has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Catastrophe Bonds 's lucrative customers.
Opportunities Catastrophe Bonds at Swiss Re | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Catastrophe Bonds at Swiss Re are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Catastrophe Bonds can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Catastrophe Bonds can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Catastrophe Bonds to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Using analytics as competitive advantage
– Catastrophe Bonds has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Catastrophe Bonds at Swiss Re - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Catastrophe Bonds to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Catastrophe Bonds can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Catastrophe Bonds to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Catastrophe Bonds to hire the very best people irrespective of their geographical location.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Catastrophe Bonds in the consumer business. Now Catastrophe Bonds can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Catastrophe Bonds has opened avenues for new revenue streams for the organization in the industry. This can help Catastrophe Bonds to build a more holistic ecosystem as suggested in the Catastrophe Bonds at Swiss Re case study. Catastrophe Bonds can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Catastrophe Bonds can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Catastrophe Bonds can use these opportunities to build new business models that can help the communities that Catastrophe Bonds operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Catastrophe Bonds can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Catastrophe Bonds at Swiss Re, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Catastrophe Bonds has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Developing new processes and practices
– Catastrophe Bonds can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Threats Catastrophe Bonds at Swiss Re External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Catastrophe Bonds at Swiss Re are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Catastrophe Bonds can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Catastrophe Bonds at Swiss Re .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Catastrophe Bonds with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Catastrophe Bonds at Swiss Re, Catastrophe Bonds may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Catastrophe Bonds can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Catastrophe Bonds
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Catastrophe Bonds.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Catastrophe Bonds in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Stagnating economy with rate increase
– Catastrophe Bonds can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Catastrophe Bonds in the Finance & Accounting sector and impact the bottomline of the organization.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Catastrophe Bonds business can come under increasing regulations regarding data privacy, data security, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Catastrophe Bonds will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Consumer confidence and its impact on Catastrophe Bonds demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– Catastrophe Bonds has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Catastrophe Bonds needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Weighted SWOT Analysis of Catastrophe Bonds at Swiss Re Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Catastrophe Bonds at Swiss Re needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Catastrophe Bonds at Swiss Re is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Catastrophe Bonds at Swiss Re is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Catastrophe Bonds at Swiss Re is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Catastrophe Bonds needs to make to build a sustainable competitive advantage.