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Strategic Planning Formulation

You may choose to report on the feasibility of a business you want to start, or you may choose to report on applying the models to a problem at the organization in which you currently work.

This project does not include writing a business plan, but in actuality, the assignment is reporting on the analysis that should be conducted before a business plan is written.

Please follow this outline:
1. Executive Summary
2. Proposal Section
3. Rationale for the proposal
4. Research/Best Practices
5. Research Findings
6. Recommendation
7. Appendices

Please see the attached PDF document.


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Executive Summary
This paper will deal with the Russian banking sector and the problem of capital and asset risk in the International Bank of St. Petersburg, Russia (BSP). The basic strategic approach is simple, and revolves around both an "issues" and "vision" approach. The mission of the bank is connected with the main sectors of the economy the bank is mostly in touch with. In this case, it is construction and transportation.

This, plus keeping a sharp eye on the state and her always changing regulations (especially for capital quality and reserve ratios), is the heart of her strategic plan. International rating agencies have praised the bank's restraint in lending, and this paper will give exhaustive statistics concerning BSP's financial condition and the quality of her assets (relative to debt).

Proposal Section
Tis paper will deal with the regulation of Russian banks, specifically that of the Bank of St. Petersburg (BSP) one of Russia's more successful institutions. The issue that is raised by Standard & Poor's analysis, as well as Moody's, is the poor asset quality of these banks. While this is improving, it puts the entire rehabilitation of the banking system at risk. From the Yeltsin administration to Medvedev, banks went from the private property of a few billionaires to a fairly profitable set of institutions.

The BSP has several asset problems, not the least of which is the concentration of loans to a few sectors of low risk, hence leading to low returns, but a stable economic situation. Their rating is stable at BB. Improving this is essential.

The Central bank of Russia reports that capital adequacy of Russian banks in general has fallen a bit since January of 2011, from 14% to 18%. The larger banks have suffered the most, while smaller banks are more exposed to credit than security or market risk. Yet, the number of banks with capital risks under 12% (that is, adequacy ratios) more than doubled. Yet, the international standard is 8%. This is a measure of a bank's reliance on debt for its funding. The point is to develop a plan to get the BSP's asset ratio to 8%, or the present standard.

According to the bank itself, her capital quality ratio hovers around 9%, with some variation. Other estimates vary, but in general, while improving, it is still above the 8% standard.

Rationale for the Proposal
In 2005, A. Gnezditskaia, writing in Europe-Asia Studies, stated the following:

"Evidence shows that the current Russian banking sector displays many features found by petrostate theorists in other petrostates. In the first place, owing to abundant oil revenue all the oil banks are subsidized and exist in a regime of limited competition. This comes from having oil-endowed shareholders, which offer banks abundant mineral revenues on the liabilities side. Moreover, these shareholders lobby for even larger limitations on competition than currently exist. Without the need to compete, oil banks show remarkably limited capacities as far as mobilizing the population's funds and earning profits by lending is concerned. To use the metaphor of Woodruff (1999), there is a lot of money unmade by Russia's oil banks" (476).

This is not exactly a ringing endorsement. It strongly suggests an unbalanced economy totally dependent on one or two sectors. This also suggests that these sector, therefore, will have a huge amount of power over finance and banking in general.

Yet, the Bank of St. Petersburg has seemingly avoided this kind of control and has remained stable for 20 years. This requires analysis, since the last 20 years have been anything but kind to the undercapitalized Russian banks. This has everything to do with asset quality and risk ratios.

Research/Best Practices
The Russian Banking sector remains small. The top 5 institutions hold about half the country's liquidity up to the year 2010. Many of the major banks in Russia are entirely or partially owned by the state, yet the central bank is private. Most of Russia's banks are headquartered in Moscow, ...

Solution Summary

The expert examines the strategic planning formulations.