Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A)
In June 1999, the Basel Committee on Banking Supervision announced plans to revise the capital standards for banks. The Basel Committee believed that project loans were significantly riskier than corporate loans and, therefore, warranted higher capital charges under the new proposal (known as Basel II). Bankers, fearing that higher capital charges would damage project lending by lowering profits and driving borrowers to nonbank competitors, formed a consortium to oppose the proposal by studying the actual default and loss characteristics of their combined portfolios of project loans. The study showed that project loans were not riskier than corporate loans. Armed with this data, the consortium sent a letter to the Basel Committee in August 2002 urging them to lower the proposed capital charges on project finance loans.
Swot Analysis of "Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A)" written by Benjamin C. Esty, Aldo Sesia includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Loans Basel facing as an external strategic factors. Some of the topics covered in Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) case study are - Strategic Management Strategies, Negotiations, Project management, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) casestudy better are - – technology disruption, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China,
supply chains are disrupted by pandemic , increasing energy prices, etc
Introduction to SWOT Analysis of Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Loans Basel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Loans Basel 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 Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) can be done for the following purposes –
1. Strategic planning using facts provided in Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) case study
2. Improving business portfolio management of Loans Basel
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 Loans Basel
Strengths Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Loans Basel in Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Loans Basel 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.
Operational resilience
– The operational resilience strategy in the Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Analytics focus
– Loans Basel 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 Benjamin C. Esty, Aldo Sesia 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.
Organizational Resilience of Loans Basel
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Loans Basel does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Loans Basel 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
– Loans Basel is one of the leading recruiters in the industry. Managers in the Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Loans Basel has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Loans Basel to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Loans Basel 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 Loans Basel is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Finance & Accounting field
– Loans Basel is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Loans Basel in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Loans Basel in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Loans Basel is present in almost all the verticals within the industry. This has provided firm in Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) 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.
Low bargaining power of suppliers
– Suppliers of Loans Basel in the sector have low bargaining power. Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Loans Basel to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) are -
High bargaining power of channel partners
– Because of the regulatory requirements, Benjamin C. Esty, Aldo Sesia suggests that, Loans Basel is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High operating costs
– Compare to the competitors, firm in the HBR case study Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) 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 Loans Basel 's lucrative customers.
No frontier risks strategy
– After analyzing the HBR case study Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A), 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.
Aligning sales with marketing
– It come across in the case study Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) 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 Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) can leverage the sales team experience to cultivate customer relationships as Loans Basel is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Loans Basel has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) 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 Loans Basel has relatively successful track record of launching new products.
Lack of clear differentiation of Loans Basel products
– To increase the profitability and margins on the products, Loans Basel needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Loans Basel has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Loans Basel is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Loans Basel needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Loans Basel to focus more on services rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Loans Basel is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Loans Basel 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.
Opportunities Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) | 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 Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Loans Basel in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Developing new processes and practices
– Loans Basel 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Loans Basel can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Loans Basel can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Loans Basel 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, Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Loans Basel has opened avenues for new revenue streams for the organization in the industry. This can help Loans Basel to build a more holistic ecosystem as suggested in the Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) case study. Loans Basel can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Loans Basel to increase its market reach. Loans Basel will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Low interest rates
– Even though inflation is raising its head in most developed economies, Loans Basel can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Buying journey improvements
– Loans Basel can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Manufacturing automation
– Loans Basel 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.
Using analytics as competitive advantage
– Loans Basel 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 Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Loans Basel to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Loans Basel 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 Loans Basel to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Loans Basel 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.
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 Loans Basel in the consumer business. Now Loans Basel can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) are -
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 Loans Basel in the Finance & Accounting sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Loans Basel 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.
High dependence on third party suppliers
– Loans Basel high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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. Loans Basel 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.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Loans Basel needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Loans Basel with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Loans Basel can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Loans Basel needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Loans Basel can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Shortening product life cycle
– it is one of the major threat that Loans Basel is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Loans Basel
– 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 Loans Basel.
Consumer confidence and its impact on Loans Basel 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
– Loans Basel has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Loans Basel 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 Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) 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 Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) 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 Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) 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 Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) 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 Basel II: Assessing the Default and Loss Characteristics of Project Finance Loans (A) 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 Loans Basel needs to make to build a sustainable competitive advantage.
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