Strategic Decision And Risk Analysis And Recommendations

Executive summary

The banking sector in Saudi Arabia managed to grow because of favorable oil prices, generous government donations, and protectionist policies, which have imposed restrictions on foreign banking agencies. However, since 2012, the balance between local and foreign investment has shifted considerably. As it stands, 24 banks are operating in Saudi Arabia. Only 12 banks are locally authorized, whereas the other 12 are representative offices of foreign entities (Johnes, Izzeldin, & Pappas, 2014). Central foreign banks in the region are from Qatar, Europe, and China.

This presents stiff competition for the local banks, especially the Riyad Bank, one of the region’s largest banks. The situation calls for a revision of strategic banking decision-making and an increased demand for the business’ risk analysis. The purpose of this paper is to present a plan for strategic decision-making and risk analysis for quality improvement of the Riyad Bank, utilizing the established concepts and theories of the strategic planning process.

Table of Contents

1.0 Introduction. 3

1.1 Brief Company Description. 3

1.2 Industry description. 3

2.0 Strategies to be Used by the Riyad Bank. 4

2.1 Industry analysis. 4

2.2 Operational analysis. 4

3.0 Corporate Culture Change. 5

3.1 Business model determination and risk profile. 6

3.1 The risk governance structure. 6

4.0 Conclusion and Recommendations. 6

References. 8

1.0 Introduction

1.1 Brief Company Description

Riyad bank is among the largest banks within the Kingdom of Saudi Arabia, taking the fourth place inside and outside the country according to its total assets and net income recorded for the past five years. (Company Overview, n.d). The Saudi Arabian controls the Bank, owns 5% of its total shares, and directly respond to the Saudi Arabian monetary agency. Additionally, the Bank operates outside the country with offices in all major countries of the GCC. The Bank also has a branch in London, a representative office in Singapore, and an agency in Houston, USA (Riyadbank.com. 2021). the Bank has more than 5,900 employees nationally. To the population and the financial agents, the Bank offers multiple services such as corporate banking, personal banking, international banking, and treasury. Additionally, the Bank has a substantial retail banking franchise.

The Bank was formed in 1957 as part of the centralized banking sector within Saudi Arabia. Since then, the Bank has had multiple transformations and names and has been shifted from public to private currently with a public offering of 49% sold to individuals and corporations as public shareholders (Company overview, n. d).

1.2 Industry description

The banking industry in Saudi Arabia is massive as it serves the country’s oil and gas production with its financial needs as it is capital intensive venture (Mirzaei & Moore, 2016). n the first quarter of 2018, the total size of the KSA banking sector amounted to 2.262 billion SAR, having suffered a slight decrease in the balance sheets of 0.2% in YoY (Year over Year) and 1.9% in QoQ (Quarter over Quarter) margins. According to the Quarter Capital Report provided by Aljazira Capital (2018), 62% of all assets for banks amount to loans in the private sector, with an additional 14% being loaned to the government.

The remaining 24% is spread among foreign assets, SAMA bills, deposits, and cash-in vaults. Regarding liabilities, the KSA banking industry has over 86% in deposits and capital accounts (Aljazira Capital, 2018). Foreign deposits represent a small fraction of total liabilities in the banking sphere, indicating that the banking sector primarily serves domestic customers.

2.0 Strategies to be Used by the Riyad Bank

2.1 Industry analysis

Grant and Jordan (2015) illustrated that Porter’s Five Forces is an external business unit strategy that analyzes the industry, the market segment, and the various powers affecting a company. Porter’s Five Forces strategy is an essential strategy that can be used to analyze the existing business climate around Riyad bank and come up with informed decisions. The five forces involved include the threat of new entrants, power of suppliers, power of buyers, the availability of substitutes, and competitive rivalry. The threat of new entrants to the banking sphere of KSA is currently considered low, given that all the major players are already in the industry. Creating a bank requires significant monetary and administrative resources.

The suppliers’ power in the Saudi Arabian banking industry is medium to high. This is because a majority of the liabilities emerge from the deposits. The suppliers’ power is established to be at the same level as the loans offered to private and government entities make up 76% of the banking sector’s assets (Aljazira Capital, 2018). Twenty-three more competitors contend with Riyad bank, which makes the threat of substitutes relatively high given that three competitors have more assets. Additionally, the Riyad Bank is not established as a bank with a unique line of products such as the Al Rahji Bank, which is widely known for its Sharia banking practices (Ali & Hassan, 2020). Despite the large number of banks in the KSA, the competitive rivalry is considered low. This is partly because the foreign banks lack popularity and government support, and the four central banks are all controlled by the government.

2.2 Operational analysis

Six Sigma is one of the most effective changes and quality management frameworks at the operational level (Grant & Jordan, 2015). The framework is applied to improving supply chain management, human resource management, and operational processes to improve an organization’s quality. In Riyad Bank, the Six Sigma framework can be applied to identify potential issues in the customer management process within the banking sphere. Currently, the Bank is a largely traditional bank that uses conventional approaches to banking services (Saif-Alyousfi, Saha, & Md-Rus, 2017). Most of the Bank’s clients visit the Bank in person in order to fulfill their banking needs. As a result, the banks always have high customer volumes to be accommodated in the offices. Key challenges are the long waiting times, crowding, low customer satisfaction, the intent to switch banks, and operational errors due to the high working loads and pressure to speed up services.

Automation and customer service mechanisms can significantly reduce the load on Riyad bank offices. Although the Bank already uses ATCs, many customers do not know how to use them properly and are wary of them, preferring to stand in lines instead of using self-service machines. This issue is prevalent among the elderly population of KSA (Bhatt & Gor, 2012).

Encouraging the use of online banking, ATC machines, and self-service booths when they are available would not only improve customer satisfaction but also massively improve the quality of delivered services, as the individuals requiring the attention of a banking employee would not be rushed and have more time and effort dedicated to them. The use of e-banking and ATCs would positively improve the image in the eyes of the younger generation, who value autonomy and access to banking accounts from anywhere that has the internet.

3.0 Corporate Culture Change

As it stands, Riyad Bank seems to have an issue with high turnover rates. The KSA banking system is characterized by high retention rates in middle and………..

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