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This case focuses on a critical weakness of Pakistan’s commercial banks, namely the insufficient attention paid to the costs involved in banking operations. The decision-maker, Ali Ahmed, (disguised name) served as both Financial Controller and Head of Consumer Banking, of First Commercial Bank (disguised name for Prime Commercial Bank), a small, privately-owned bank. He believed that the Bank was not properly quantifying the risk associated with its clients, because of the lack of suitable techniques for measuring client performance. He wanted to get away from a more generalized model of customer profitability to a composite indicator that could help in segmenting customers through internal risk rating criteria. Additionally, he wanted to define the relevant funding cost to be adopted to measure performance within the Bank. |
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