Inspired by one of the few banks that successfully weathered the 2007-2009 credit crisis, the case illustrates risk management in the world of corporate lending. Chief executive Alastair Dawes has to decide if the risk governance process is adequate to uncover mega-risks, based on reflections on the risk assessment and sanctioning of a $1 billion credit proposal. Students are invited to assess and review the risks in the proposal, prepared by the bank's sales organization on behalf of a large gold-mining company, and to arrive at a decision (whether Well fleet should accept it or not). At the same time, students will learn that gray-area risk decisions and, in particular, risk-adjusted performance measurement can rarely be automated. Risk governance requires executives to strike a balance between risk modeling and qualitative business judgment-a holistic (rather than silo-based) view of risks.
Economic Loss (EL) ($)
Risk Adjsuted Revenue
1- Given its strategy, what kind of risks does Wellfleet face?
2- Given the Wellfleet’s new focus on large corporate deals and its need to recruit relationship managers from investment banks, what are the challenges for the risks culture of the organization, and its style of the risk management in particular?
3- What is your decision regarding the proposal at hand?
4- Calculate the expected loss, Economic Revenue and Economic Profit for the proposal?
5- Analyze the risk management process at Wellfleet. What suggestions might you make to the CEO about the improving the process?