Citibank Indonesia

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Category: Business and Industry

Date Submitted: 12/06/2011 12:44 PM

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Citibank Indonesia - Case Study

According to the case study, Mr. Mistri is not new to the banking industry, he has been part of the organization for many years, and also has proved to be a successful executive in his current and prior roles. The budget submitted by Mr. Mistri was a reflection of his concerns about the risk return ratio of his branch, which is the return in terms of risk for a specific time period, oil prices decreasing based on the recession Indonesia is going through, and the high staff turnover, a situation that he also considers a serious constraint to the growth of the branch.

Raising a budget when your corporate office requires revision of the original is not an easy task. You can’t be too conservative, but being too aggressive is also a big risk. If it was a fairly easy decision, Mr. Mistri would have been the first one interested in raising the forecasted budget, not just because it measures the overall success of his operation, but also based on the incentives he would receive. In the case of a country manager, compensation based on performance could range up to approximately 70% of their base salary. The only thing that makes me question Mr. Mistri’s approach to his original budget is the fact that he decided to operate with a sovereign self-impose risk limit that is lower than the one approved from the corporate office. I understand he is responsible for both, managing risk and generating profit, but he might be too conservative in the eyes of the corporate office considering that he is performing under the risk limit approved by Citibank’s management. And sometimes, risks can be taken regardless of economic climate.

Scenario A

Without knowledge of the original budget it’s difficult to determine if the goal is particularly high ($0.5M - $1M). Assuming that the increase is high, my first instinct would be that Mr. Mistri communicates with his direct boss, David Gibson and explain that the budget was already aggressive...