Strategic and Financial Management Performance at Commercial Bank of Qatar

Strategic and Financial Performance Management

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Table of Contents

Introduction        2

The Budgeting Process        2

Recent Project        3

Product and Services Costing        3

Critique of the Costing Approach at CBQ        4

Advantages        4

Drawbacks        4

Recommendations        5

Conclusion        5

References        6

Strategic and Financial Performance Management

Introduction

Commercial Bank of Qatar (CBQ) is a leading bank in Qatar that offers both retail and corporate banking services. The bank was established in 1974 as the first private bank in Qatar and has had a profitable history since its inception (CBQ 2016a). As at the end of 2015, the bank operated 30 branches and 154 ATMs and its stock is listed on the Qatar Exchange (CBQ 2016a). Apart from organic expansion within Qatar, CBQ has also used acquisitions to expand outside Qatar as was exemplified its acquisition of a majority stake in Turkey-based A Bank in 2013 (CBQ 2016a). The entity’s business is organised into two segments: the wholesale banking segment that provides commercial and investment-banking services to corporate clients and the retail-banking segment that offers deposit, lending, and credit-card services to retail customers (CBQ 2016a). Based on its most recent annual report, the bank’s assets were valued at QAR123.42 billion while its net interest income for the year was QAR2.53 billion. The success of CBQ rests not only in its market positioning but also in its ability to achieve operational efficiencies. This paper focuses on the budgeting process of CBQ with a close analysis of a recent project as well as its costing process and a recommendation on how the process could be made better.

The Budgeting Process

CBQ budgeting process can be defined as the way in which the bank approaches the process of building its periodical budget. Building a budget for an organization like CBQ involves engaging all stakeholders responsible the implementation of the budget. As such, the entire process is done through incorporation of both senior staff in the bank as well as the financing committee, this helps to ensure that enough research, revision, feedback, and review is done before the budget is presented to the full board of the bank (Grossi,  Reichard, & Ruggiero, 2016). The budgeting process, which is done on annual basis, is well documented, with a clear definition the task at hand, the assigned responsibilities, and the deadlines. To ensure an effective budgeting process, CBQ ensures that strategic planning initiatives are incorporated in the process as well as ensuring that income is budgeted first before expenses. To further strengthen the budgeting process, CBQ make certain that fixed cost in the organization are linked to reliable revenue and any decision pertaining the budgeting process is based on priorities, fiscal accountability and their mission (Grossi,  Reichard, & Ruggiero, 2016).

Some of the primary steps in the budgeting process of CBQ include writing down the entire budgeting process. Putting the budgeting process in a written format helps to create a tool to against which the process can be monitored. It helps to create a check list through which the goals and objectives of the budget can be achieved thoroughly. Well written budgeting processes become a more useful management tool in the organization rather than elusive ideas in the head of one person.

The next main step in the budgeting process at CBQ is to list particular tasks with particular responsibility assignments. Although a number of people may be involved in execution of a particular task, it is important to ensure that a specific person is accorded the responsibility of ensuring the actual execution (Hope, & Fraser, 2013). This help to ensure that tasks are completed before or on time as the individual given the responsibility know he will be held accountable if the task is not completed as expected.

The stakeholders in charge of the budget have to ensure synchronization between budget line items and accounting line items. This is important as it helps to ensure that the comparison between budget and the actual needs in the bank is effectively done. Failure to match the two items creates extra work for the administrative workers, who would have to translate between the two which is likely to be inconsistence. The next thing after synchronization is to develop templates, tools and worksheet that will help to promote incorporation of components that can facilitate alternatives. Lastly is to adopt policies that will ensure that the budget is adhered to as well as in addressing of possible variances and handling of authority (Hope, & Fraser, 2013).

Recent Project

Among the latest project undertaken by CBQ, is introduction of an innovative Biometric solution that enables ATMs transactions without Cards. Upon its implementation, the new technology will enable customers of CBQ to gain access to their accounts at any branch of CBQ and ATMs using their finger as their authentication key. The bank has also signed an agreement with 01system Company for a project that will help in automation of the entire banking operations based on Business Process Management (BPM).  The BPM system will help in giving the CBQ’s customers unparalleled banking experience like never before. This is in line with the CBQ’s policy to ensure that their offer first class service to their customers using secure state of art system. According the CEO Joseph Abraham, biometric system is an important tool in fighting finance related frauds as well as identity theft.  Such a system will help in improving the customer experience while at the same time ensuring their security is not compromised. Finger vein scanning technique will help in provision of efficient way for the clients to access their accounts without having to produce documents or cards for identification. CBQ is the first bank in the Middle East to introduce such technology in the banking arena.

Product and Services Costing

At CBQ, the costing approach employed is the full costing approach. This costing approach entails the allocation of direct costs to the service being offered and any overheads are assigned based on the cost centres identified. For instance, in the retail-banking segment, the bank divides its services into standard accounts, sadara (premium) accounts and private banking accounts (CBQ 2016b). Based on such segmentation, costs are assigned to the account based on the service offered. For instance, the costing of similar services offered for the standard account is essentially higher compared to costing on the sadara and private banking accounts (CBQ 2016b). Apart from these three segments that deal with account activity issues, CBQ also has separate costing approach for services offered on various products such as personal loans, vehicle loans, mortgages, and overdrafts. Apart from the interest amounts that such loan facilities attract, the bank has product-specific costing for services such as loan cancellation, postponement of instalment on loan repayment, and replacement of a guarantor on a loan. Moreover, in respect of credit card services, the bank uses a full costing approach that is based on the type of credit card issued and the transactions associated with each credit-card type (CBQ 2016c).The costing approach used in CBQ is as demonstrated in Table 1 below.