Instructions: in the spaces provided, describe strengths, weaknesses, and/or recommendations. Enterprise risk management Transformation bank\'s mission is to alleviate poverty through microfinance. Management\'s philosophy is that the poor can be best served, not through handouts, but through access to the financial and knowledge resources that could help ther grow. The founding president came from a food aid organization, and the board consists of friends of the president who are wealthy and well-connected in the community. The organization is egalitarian, with every employee having an equal say. There are few written job descriptions or policies. The structure of the organization is very informal, with people stepping in to do tasks on an as-needed basis without direction from the president or other managers. The culture of the organization includes a deep concern for the poor. The employees include dedicated, hard-working volunteers and employees with experience in other aid organizations. Hiring is generally done through word-of-mou contacts, compensation is generally much lower than in commercial banks, but employees seem to be happy. Governance & Culture th There are few regulations governing microfinance that are only involved in lending, so the organization has a lot of flexibility. The microfinance industry is well established, so transformation bank models its practices on those of other microfinances in the area. The organization doesn\'t have a formal strategy or objectives, and does not use formal planning and budgeting to guide actions. However, all of the employees understand that the bank seeks to identify clients who have small businesses and provide loans for equipment and other assets that will help those businesses grow. A lot of the bank\'s new clients are smallhold farmers who borrow money for seeds and fertilizer. Microbusiness loans are very risky, and donors cover shortalls between interest received from clients and costs incurred Strategy&Objective-Setting;
Governance and culture: In terms of strength the governance and culture at Transformation bank is informal and this leads to lower level of bureaucracy within the organization and hence faster decision making. Communication is fast within the organizations and this has a powerful influence on productivity. The governance structure in Transformation bank will help the organization to fulfill the social needs of providing access to financial resources to the poor people.
In terms of weaknesses in the long run the lack of a formal culture will lead to lack of specialization with bank. Secondly the risk management framework is missing and my recommendation is that the bank should put in place an effective risk management framework.
Strategy and objective setting: Lack of formal strategy and objective setting, though might help in quick decision making, is not good for the bank in the long run. Without formal planning and budgeting the bank might start facing the problems of not having systematic workings in place, especially when it starts growing at a healthy rate. My recommendation is that the management of the bank should put in place a formal plan with well defined goals and objectives, policies and procedures, and communication channels.
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