The Principles of Banking, 2nd Edition

CHAPTER 15Bank Strategy I: Inputs and Setting

Abstract

Strategy is a much discussed and often much misunderstood concept. It is no less so in banks than it is in any other area. This chapter considers the main areas for review and discussion at the Board and ALCO level when addressing strategy setting. The most common approach is to set a rolling 3- or 5-year planning cycle. This is not necessarily strategic in nature. Ideally the Board will have a long-term vision for the bank and, with this vision in mind, look to set an implementation plan to achieve this vision. The biggest challenge then is in articulating this vision in sufficient detail and clarity to enable implementation to be planned and executed.

This chapter provides an overview of the development of a strategy for a bank, as well as the identification of the likely key elements of a strategic plan for a bank.

Unsurprisingly, we will not be providing an in-depth review of either the strategy development process or the elements of a strategic plan. Strategy is a vast topic, and those wishing to have a deeper understanding are urged to become familiar with some of the writings of leading thinkers on the topic. Some further readings are suggested in the reading list to this chapter.

The development of an effective strategy is as much an art as it is a science. Fundamental analytic work is a key element of the process, but the crafting of an effective strategy requires much more. Equally important is a deep understanding ...