Advertisement

Strategic Planning by International Banks to Cope with Uncertainty

  • Jack M. Guttentag
  • Richard J. Herring
  • Dietmar K. R. Klein
  • Lionel D. D. Price
  • Rainer S. Masera

Abstract

This paper is a preliminary effort to develop principles and methods that will allow international banks to deal with uncertainty regarding major shocks. When a bank fails, or suffers enormous losses, it is often because it paid insufficient prior attention to a hazard that it might have avoided or mitigated. We believe the strategic planning function should include responsibility for anticipating and developing defensive strategies against such hazards. In this paper we consider how this can be done.

Keywords

Interest Rate Central Bank Strategic Planning Country Risk Individual Bank 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Ackerlof, George and William T. Dickens, ‘The Economie Consequences of Cognitive Dissonance’, American Economie Review, June 1982, pp. 307–19.Google Scholar
  2. Brau, E. and R. C. Williams with P. M. Keller and M. Nowak, ‘Recent Multilateral Debt Restructurings with Official and Bank Creditors, Occasional Paper 25, International Monetary Fund, December 1983.Google Scholar
  3. Cossier, R. A., ‘The Effects of Three Potential Aids for Making Strategic Decisions on Prediction Accuracy’, Organizational Behavior and Human Performance, 1978, pp. 295–306.Google Scholar
  4. De Leon, Peter,’ scenario Designs, An Overview’, Simulation and Games, March 1975, pp. 39–60.Google Scholar
  5. Guttentag, Jack, ‘Defensive and Dynamic Open Market Operations and the Federal Reserve System Crisis-Prevention Responsibilities’, Journal of Finance, May 1969.Google Scholar
  6. Guttentag, Jack and Richard Herring, The Lender-of-Last-Resort Functions in an International Context, Essays in International Finance, no. 151, Princeton University, May 1983.Google Scholar
  7. Guttentag, Jack and Richard Herring, ‘Credit Rationing and Financial Disorder’, Unpublished Working Paper, The Wharton Program in International Banking and Finance, 1983.Google Scholar
  8. Mason, R. O., ‘Dialectical Approach to Strategic Planning’, Management Science, 1969, pp. 109–14.Google Scholar
  9. Mitroff, I.I., V. P. Barabba and R. H. Kilmann, ‘The Application of Behavioral and Philosophical Technologies to Strategic Planning: A Case Study of a Large Federal Agency’, Management Science, 1977, pp. 44–58.Google Scholar
  10. Pollock, Alex, J., ‘Why Most Strategic Financial Plans are Useless’, Long Range Planning, April 1984.Google Scholar
  11. Prussia, Leland, S.,’ structural Change and Innovation in International Banking’, paper presented at the meeting of the American Finance Association, December 1983.Google Scholar
  12. Shubik, Martin, ‘Political Risk: Analysis, Process and Purpose’, in R. Herring (ed.) Managing International Risk (New York: Cambridge University Press, 1983) pp. 109–138.CrossRefGoogle Scholar
  13. Simon, Herbert, A., ‘Rationality as Process and as Product of Thought’, American Economic Review, May 1978, pp. 1–16.Google Scholar
  14. Tversky, Amos and David Kahneman, ‘Availability: A heuristic for judging frequency and probability’, Cognitive Psychology, 1973, pp. 207–32, reprinted in Kahneman, Slovic and Tversky (eds) Judgment under Uncertainty: Heuristics and Biases (New York: Cambridge University Press, 1982) pp. 163–78.CrossRefGoogle Scholar
  15. Woods, Donald, H., ‘Improving Estimates that Involve Uncertainty’, Harvard Business Review, July–August 1966, pp. 91–8.Google Scholar
  16. 1.
    Shell is the leading corporate model here: see Strategic management and planning in an uncertain world, pamphlet, Financial Times, 1981.Google Scholar
  17. 2.
    J. Métais, Emergence et développement des multinationales bancaires: aspects théoriques et empiriques, in ‘International lending in a fragile world economy’, D. E. Fair and R. Bertrand (eds), Boston: M. Nijhoff, 1983.Google Scholar
  18. 3.
    See for example D. T. Llewellyn, ‘Avoiding an international banking crisis’, National Westminster Bank Quartery Review, August 1982; and A. Boursier and J. Métais, Le marché des eurocrédits et la perception par les banques du risque-pays, working paper, Université de Paris-Dauphine, 1981.Google Scholar
  19. 4.
    T. Agmon and J. K. Deitrich, ‘International lending and income distribution — an alternative view of country risk’, Journal of Banking and Finance, December 1983.Google Scholar
  20. 5.
    S. Edwards, LDCs’ Foreign Borrowing and Default Risk: An Empirical Investigation, 1976–80, NBER Working Paper, No. 1172, 1983.Google Scholar
  21. 6.
    The Measurement of liquidity, Bank of England, 1982.Google Scholar

Copyright information

© Paolo Savona and George Sutija 1986

Authors and Affiliations

  • Jack M. Guttentag
    • 1
  • Richard J. Herring
    • 1
  • Dietmar K. R. Klein
  • Lionel D. D. Price
    • 2
  • Rainer S. Masera
    • 3
  1. 1.Wharton School of the University of PennsylvaniaUSA
  2. 2.Bank of EnglandUK
  3. 3.Research Department of the Bank of ItalyItaly

Personalised recommendations