Project Change Risk and Opportunities Management

 Introduction

Change management is a systematic approach that is used by the organizations. Organizations adopt change management in order to effectively implement the new technologies, transform the procedures and strategic objectives. Change management also allows the firms to implement the changed tactics effectively in the organizational operations, control the impact of these changings on organizational operations, and motivate the employees to adopt these transformations. Change management processes has variety of aspects. While implementing any change in the organization, it is necessary for the organizations to consider the manner in which the management will implement the change in the organizations and also determine the extent in which these transitions will impact the procedures, employees and operations of organization. When the organizations go for mergers or acquisitions, then it is necessary to consider the resources, operations and employees of both the firms in order to effectively implement the change and to avoid conflicts, disputes, miscommunications and poor information distribution for successful execution of whole project. The mergers and acquisitions procedures of Southern and Northern Banks have been analyzed in this report. This report also identifies the key elements of change, the main drivers of project (intrinsic as well as extrinsic), how the existed culture, procedures and employees will be maintained after acquisitions, significance of some business decisions, ranking and reviewing of stockholders that are related to project, and identification of different factors that effects the strategies of business and risks that is associated with implementation of project.

Drivers of Change

External Drivers

Political: Some declarations by U.S President Donald Trump strongly influence US economy and impose great influence on banking industry such as, the President declared to withdraw from TTP agreement (Ylan Q, 2017), also he threaten to withdraw from NAFTA agreement (J & J, 2018) and from the WTO (World Trade Organization) (Korte, 2018). These declarations may reduce the demand of commercial loans by Multinational Corporations that operates in market of US. Moreover, the banks will also effect by changing economical situations due to elections. The recent elections held in America also change the political as well as economic situation of country and strongly influence the banking industry.

Economical: U.S has been positioned itself as the world strongest economy and the current GDP of US is $ 21.44 trillion which is expected to rise in future. The Income tax rates are also declining in US which is a positive factor for international firms. The benchmark rate for the American Banks is enhanced up to 2.25% and is expected to rise in future. This indicates that the financial activities of individuals, companies and corporates will decline and the desire for borrowing will also reduce, while the increasing benchmark show the increasing value of US currency which attracts the foreign investor to invest in US market and make saving accounts in US in order to enjoy maximum returns. The announcement that has been made by Donald Trump to amend the agreement of Dodd Frank also influenced banking industry. Dodd Frank agreement was accepted in 2008 in order to restrict the lending operations by banks of US. This indicates that banks will have much flexibility in terms of short and long term lending. Moreover, the increased import duties on steel and aluminum reduce the profit margins of motor companies which ultimately reduce their demands for commercial loans.

Socio Cultural: The U.S population is about 331 Million at start of 2020 and expected to grow at the rate of 0.71%. It is important to note that the unemployment rate has been declined to 3.7% in 2018 in US which is a positive factor. The lowest unemployment rate also enhances the demand of bank accounts, credit cards, loan applications and credit cards. Thus, decrease in unemployment is a positive factor for banking industry. After the huge financial crisis and economic downturn of 2008, the public trust in banking sector reduced much so now it is an opportunity for banks to gain the public trust by incorporating both traditional and modern methods of marketing.

Technological: Cyber risk and Cybercrime are major concerns for the banks and financial institutions all over the world, and in order to secure the accounts the banks have to spend more budgets and need to cooperate with other banks. Technology also enrich the payment systems such as, Apple pay, contactless cards and Android pay. The technological innovations such as ATM and other electronic platforms enables the banks to serve their customer in better way and electronic platforms also enhance the wealth management. These technologies also enable the firms to manage the customers with a smaller number of employees and with reduced branches. Increase in crypto or digital currency is also considered. The US regulator reported that bitcoins has changed the traditional exchanges.  

Environmental: Banks have to perform CSR activities in order to create their positive picture in the society, for instance, paperless banks. Banks have to dispose off their waste effectively that must not create any pollution in the environment.

Legal: The legal regulations also influence the banking industry, the reforms in the regulations of banking sector by last President changed the working environment of banks. The abolition of Dodd Frank agreement by the Donald Trump also change the regulations for US banking sector.

Market Analysis

As per the recent figures there are around 4519 banks in US (Statista.com, 2020). The new merger of the bank would result in attaining top position in the USA. After the merger of both these banks it would increase their productivity and attaining a stable position in the banking industry. The southern bank’s experience the market will help in the development of the opportunities in the market and help both these banks capture high market share and customer loyalty through the use of new services and introduction of latest technology. 

Internal Drivers

SWOT Analysis

SWOT analysis identifies the external and internal environment of firm by determining its strengths, weaknesses, opportunities and threats.

Rationale for Integrated Decisions

While integrating the plan for both northern and southern bank, there were many folks who had varied opinions that were terrible for merger on huge scale (Marks and Mirvis, 2010).  Their opinions revealed some important factors that head of retail banking of northern bank was not satisfied with the software that is used to review the loan approval processes. Moreover, the northern bank HR director Hector Rice demanded to change the southern bank practices and Head of retail of southern bank Tina Yoshiro and HR director Elaine Murphy also opposed the plan as Tina gained the authority and don’t want to lose the power because of layoffs. IT director Ivan Taylor of Northern bank also desired that the IT systems would remain similar after merger because he recently upgraded them by putting a lot of efforts.

The strategy that is used to implement the integration process is that the best practices should be taken from both banks. Thus, following the mutually exclusive strategy. And the retention of employees will be done according to their performance. Headquarter of the merger will be retained the one that is Northern bank headquarter. The rule is established that there will be one branch in every town. The performance and ratings to each branch should be assigned according to number of customers. The rating of 2 shows the improved performance of branch while 1 shows unimproved performance. Human resource practices of northern bank seem to be better than southern bank. It means that southern bank practices of human resource should be replaced by those of the northern bank. Southern bank practices of loan approval will be changed by incorporating those of northern bank.

The mergers and acquisitions make the operations and workings of the amalgamated institutes more efficient. Every bank has its own methods for dealing with risk management, compliance, information technology, accounting and several other operations. Once two banks are merged together, they get an option to unite these basic operational infrastructures and dispense them more effectually and systematically by choosing the best implementing methods used by both the institutes (Gupta, 2012). Moreover, mergers and acquisition also give financial benefits to banks as larger banking institutions face lower aggregated risk because enhanced percentage of similar risk and complementary lending’s lessens the entire risk posed to the banking institution.  Mergers and acquisitions also help the incorporated entities in business processes and technologically (Gomes et al., 2012). When a bank is acquired it facilitates the incorporated entity to attain explicit financial services that could help in the formation of a new business unit. Considering the technological outlook; mergers and acquisitions help in uplifting the technological platform for banking operations pertaining to the presence of increased resources.  

Business Decisions having High Significance

There are a number of business decisions which are to be executed for effective and efficient merging and acquisition. Out of all the business decisions the ones which are of great importance with regards to this project are discussed in this section. The first one being is the enforcement of a new and novel IT framework in the unified entity. This step would require a great time and money investment and the banks’ workforce will have to be skilled and trained to operate the new system. But, in future this decision will prove to be extremely beneficial for the business (Ferraiolo, Atluri and Gavrila, 2011). As this system will help in effective transfer of information and communication between various branches of the bank; present in Southern and Northern regions of the country. Besides, an advanced IT system will assist the employees to complete all difficult and complicated operations more productively and effortlessly.

The termination of 20% of the managers and 25% of the workforce of both the banks is another important decision to influence the merger and acquisition. The termination will have to be made fairly and by a specific method to make sure that the existing employees don not take it negatively and it does not hamper their esteem. The termination should take place on the basis of performance evaluation. For that an in depth performance review should be initiated to recognize low performing employees (Johnston and Land Kazlauskas, 2018). This step will help the organization in achieving an extremely qualified and well skilled workforce for executing basic banking operations and functions. Moreover, it will also help the organization in saving the amount to be invested on human resource.

Preserving the Culture, Employees and Practices

Considering the fact that the Northern Bank is acquiring the Southern Bank; it is not necessary for the former to make sure that the values, employees, cultures, practices of the latter are conserved. Nonetheless, the Northern Bank will have to safeguard some of the above mentioned elements for better transformation process and for well planned alignment of employees, operations and practices of both banks. The Northern Bank will have to check which of the banking operations and branches of Southern Bank are performing efficiently and need not to be changed for driving out the best possible advantages from this merger and acquisition (Maley, 2019). After an in depth evaluation of banking functions and operations; the banks will be able to replace or improve those services which have been performing ineffectually by implementing new strategies and tactics. The Northern Bank could also convert some outlets of both banks to function specific branches. For example; places where banks are high in number the bank could alter a branch into ATM specific, passbook update specific or transaction specific outlet. This will help the Northern Bank to reach to a large number of customers present in both the areas and will help the customers in time preservation by reducing the hassle of waiting in queues for getting the service accomplished. As a cost saving tactic; the bank might close some of the outlets where the performance of banking services is inefficacious.

Stakeholder Analysis

Stakeholder analysis is basically an analysis done by the organization in order to analyze and join all the requirements of the individuals that have some interest in the organization or linked with the organization. Change promoters of the organization can analyze the stakeholders and then pick the best method to convince the stakeholders about the change that is legal and politically supportable (Eskerod and Larsen, 2018).

Strategies and tactics to help stakeholders adopt

Shareholders who are concerned about the mergers are categorized in the group. They need to enhance their stock value after the merger. Then, shareholders get convinced for the change in the form of acquisitions. The shareholders are emphasized by the increasing value of stocks.  Employees are the second group who are concerned for their jobs after the change and they are motivated by retaining the employees whose performance are best. Other stakeholders are the customers who are assured that change will bring new and customized products for them (Charan and Murty, 2018).

Current models of stakeholder analysis applied to get quantitative information from the partners, and their enthusiasm for the adoption of specific change.

Mapping Stakeholders

Banks have to analyze their stakeholders because they significantly influence the business actions.

Power Ranking of the Stake Holders:

Stakeholder’s mapping

Stakeholder mapping is done in order to make the list of the firm’s stakeholders, analyze the positions and characteristics of stakeholders and the findings are then present in order to formulate management strategy for stakeholders. In order to make the strategic report in this study, the stakeholders were properly mapped (Raum, 2018). The other tool for stakeholder analysis is matrix that present the attributes of stakeholders. Significantly, among all the stakeholders, about 47% are the major players and 77% of them are in support of merger. It has been observed that 26% of the stakeholders take great interest in merging both banks and have reasonable influence. These stakeholders should tackle carefully so that they will remain satisfied with the merger. Two stakeholders that account for almost 11% have the greater influence on the merger. If the strategy that has been formulated to merge the banks violates any American banking regulation will block the merger. The marketing department of merged banks should make valuable campaigns in order to attract existing and potential customers. The inefficient marketing strategies may reduce the market growth of northern bank. However, all the stakeholders need to be monitored in order to effectively form the merger.

The framework of stakeholders as well as executive analysis involves;

1. By using various techniques and approaches, risks and hazards associated with stakeholders can be analyzed, such as the chance appraisal has been used for chance distinguishing estimations.
2. Fitting the stakeholders according to hierarchical structure of bank.
3. Pointing the authoritative stakeholders that highly influence the decisions.

In this task, the banks are specifically considering the accompany dangers which includes liquidity hazard, banks ventures dangers, focus chance which include outside market dangers, operational hazards that includes the legitimate hazards, danger of avoidance of tax illegally, and other vital hazards.

Key Stakeholder Identification and Ranking

The major stakeholders of Northern bank involoves; CEO Jon Pettinger, CFO Carla Feinberg, HR Director Hector Rice, Head of Retail Banking Luke Stanio and IT Director Ivan Taylor. The major stakeholders of southern bank are, Sue Beckerman (CEO), Nick Liang (Head of Corporate Banking), Tina Yoshiro (Head of Retail Banking), and Elaine Murphy (HR Director).

Some external stakeholders include;

1. People Power CEO Patrick Green
2. State Representative of American Banking Authority Maria Calperra
3. Fund Director of Sunrise Pension Fund Bill John

The ranking of stakeholders according to their influence has been mentioned in following table;

Communication Plan

Effective communication is very essential for implementation of effective strategies. It is necessary for bank to communicate its stakeholders about the proper statistics. Moreover, in order to accomplish the complicated mission, higher verbal exchange among stakeholders is required. Three modes of communication which are as follows (Manetti, Bellucci and Bagnoli, 2017).

Push Communication: Stakeholders are provided with clear information.

Pull Communication: Information demanded by stakeholders is pulled towards them.

Push and Pull Communication: stakeholders switch the information during interactions.

The following table explains the way of communication of stakeholders of both the banks. The frequency and mode of communication depends upon the importance of information or decision that has been communicated.

Key risks may rise from stakeholders and mitigation strategy

In the current merging process, the major risks also include the hobby war between employees of two banks for certain issues, such as, branch closure, and the laying off the employees should be tackled with mitigation strategy.

Change Management after Merger

Change management is basically the preparation that the banks have adopt in order to train their employees after the sudden change of merger. This management helps in accomplishing the organizational goals and to enhance employee performance. It is also help in fulfilment of organization mission, vision and objectives. It also enhances effectiveness of whole company. The weak, incapable and unprofessional management of bank reduce the service quality of bank. Thus, in order to effectively manage the operations of bank, the management may exert efforts to incorporate all the elements that are crucial for smooth running and for increasing firm’s profitability.

Strong bank management is a key factor for its success. Moreover, it is necessary that bank must apply those strategies that are easy to apply in both companies (Park et al., 2004). These strategies will help in increasing the current progress of both companies every day. The top management also needs to monitor the overall working of banks merger. Thus, a strong leadership is necessary which ensures that performance of employees at merger is enhancing and clients are served with better services (Shamshad et al., 2018). After the formulation of merger, the leaders of both banks will be assigned the duties of effectively manage the cultural change in companies. Moreover, they should determine the changes in culture and see that if these changes affect the merger or not. The owners of these banks must identify the changes in culture by analyzing the history. Other factors that need to consider before making any important decision are size of organization, vision, mission, employee size, leadership and technology.

Conclusion

After making the preliminary plan and consult all the stakeholders for the plan finalization and formulation of merger different evaluations were obtained. While formulating the final integration plan, various changes and adjustments has been made as per the requirements of stakeholders. It is also very difficult to convince each stakeholder for merger and to decide whose priorities should be considered. As many stakeholders were not agree for plan and have negative review about the plan. The opinions of most influencing stakeholders were considered in planning. Moreover, effective communication also crucial in convincing the stakeholders for plan. From all the facts mentioned above, a number of conclusions could be made. It could be concluded that the acquisition of Southern Bank will prove to be fruitful for Northern Bank. But to make sure that the transformation and the merger goes smoothly and successfully; the Northern Bank should take ample amount of time to assess which of the procedures, policies and operations are fruitful and which are to be terminated for saving itself from losses. Acquiring an entity is not a risk free action. Therefore, Northern Bank should cautiously devise all the steps of acquisition and should secure a complete merger of the two units.

References

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