Retail Banking SinglePlayer Business Simulation
Introduction
IndustryMasters ‘Retail Banking’ (SingleUser) is a business simulation – one in a series of dynamic, interactive business simulations which deal with real issues in industry.
In this exciting business game you must manage a broad product portfolio in the Retail Banking industry.
This is a Single User Business Simulation model where you compete against Virtual Intelligent Competitors, which are programmed to spot strategic gaps in your defences and take advantage of them. No other competitors are engaged in the market.
You take over a retail bank where your objective is to build sales, improve profitability and to maximise the market share of your company. You must also comply with Basel III regulations relating to your Core Capital Quota.
Our business simulation worlds allow you to perfect marketing and financial strategies, before attempting to create - or destroy - value in the real world of retail banking management.
These business “test-beds” will become a valuable tool where you can try out different approaches and new ideas as you develop your business philosophy.
Business success will be measured in the share price for your company which is based on your profitability.
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Objectives Your main objective is to increase the Share Price of your company above
that of your competitors in the simulation.
Share Price is based on your ability to make long term, sustainable business profits.
You will manage your company over 16 business quarters (4 years). Setting interest rates for loans and deposits, adjusting marketing budgets,
expanding into new areas of business and borrowing fresh capital from the central bank are the main decision areas you can use to build your new business plan and increase profitability. Your competitors will compete in their own way, according to their own strategic business plan but in some cases reacting to your decisions. With careful study of their management actions you may find some clues to their approach and use this to outperform them in the market. In essence, the goal of the simulation is to maximise Cash, reduce Risk Assets and avoid penal interest rates from accessing the Discount Window by limiting Interbanking Debt and maximizing client deposits
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Opening Scenario You will take over a bank with no products or services in your business
portfolio and your first job will be to consider investment opportunities and make some early decisions about company direction. On entry the initial share price of your company is €90 and your available investment budget is €880M a mix of Equity Capital (Seed Equity) and Loan Capital (Debt) and will change as you make investment and other operating decisions. This is your capital investment budget not an operating budget and can only to be used to invest in your choice of product and service markets. You have 4 competitors that have different products and strategies. The US Accounts Bank and the UK Bank are the strongest competitors and will try to outgrow each other. Two other competitors, the Global Trust bank and the Euro Bank Group, are heavily hit by the financial crisis. Your cash position will also vary as you make decisions, and the system will give you additional loans should you need them (for example, if you make losses or cannot cover your credit offerings).
Your company’s credit rating may fall or rise depending on the amount of
debt you have to take to support your company’s activities. Copyright © 2011 Tycoon Systems Inc
Basel III Regulations Basel III (or the Third Basel Accord) is a global regulatory standard on bank
capital adequacy, stress testing and market liquidity risk agreed upon by the members of the Basel Committee on Banking Supervision in 2010–11, and scheduled to be introduced from 2013 until 2018. Basel III requires banks to hold 4.5% of common equity and 6% of Tier I capital of risk-weighted assets (RWA). Basel III also introduces additional capital buffers, (i) a mandatory capital conservation buffer of 2.5% and (ii) a discretionary countercyclical buffer, which allows national regulators to require up to another 2.5% of capital during periods of high credit growth. Players in the simulation must keep their liquidity above the Minimum Core Capital Quota. This is the core capital mandated by the Central Bank and is specifically drawn from the Basel III agreement i.e.: Core Capital Quota (CCQ) ≥ Min Core Capital Quota
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Treasury Console The financial position of the bank
is displayed on your main company page in the ‘Treasury Console’ section. The Treasury Balance Sheet section details your current shares, market capitalization value and has a dynamic balance sheet chart showing assets and liabilities. Interbanking details the level of debt taken from other banks (if any) and the rates of interest. The Central Bank column indicates the current central bank interest rate and the level of debt taken from them known as the ‘Discount Window’ (if any).
Copyright © 2011 Tycoon Systems Inc
Treasury Console The Interbanking section also displays
where excess cash has been converted to government bonds and generate income.
The Instruments and charts here
show important key ratios. The ‘Discount Window’ occurs when your bank is forced to borrow from the central bank if your refinancing needs cannot be met by your level of client deposits or raising Interbanking debt. This will affect customers’ risk
perception of your bank, the share price will fall dramatically and raising customer deposits is more difficult.
You will also see the minimum Core
Capital Quota allowed at that time and your current level.
Copyright © 2011 Tycoon Systems Inc
Competitor Information You can track your performance
against your competition by using the ‘Real Time Scores’ section. Click on their company name to access their company homepage where you can review their product portfolio and analyse their strategies in terms of interest rates, marketing, expansion and so on. You can also check competitor market share and other important data by clicking on the product details page. The market is extremely dynamic, with growth mainly dependent on the decisions of all companies involved in the market.
Copyright © 2011 Tycoon Systems Inc
Markets and Products
There are two markets you can enter: Personal and Corporate.
Overall there are five main product categories comprising Short and Long Term Credits, Short and Long Term Deposits and Services. These are described as follows:
Deposits: Those products on which you pay interest to your customers.
Short Term Credits: Those products from which you earn interest and the borrowing repayment cycle is short
Long Term Credits: Those products from which you earn interest and the borrowing-repayment cycle is long.
Target Market
Retail
Corporate
Deposits
Term Deposits Savings Accounts Recurring Deposits
Bonds
Short Term Credits
Credit Card Auto Loan 2 Wheeler Loan
Working Capital Loan Overdraft Trade Finance Loan Against Asset Capital Market Loan
Long Term Credits
Home Loan
Capex Loan Acquisition Loan Project Finance Bank Guarantee
Personal Loan
Services
Services: Those products on which you earn a monthly fee income for every unit sold to a customer
Copyright © 2011 Tycoon Systems Inc
Current Accounts Insurances Retirement Plans
Business Accounts Cash Management
Product Data For each product you will find a
pyramid graphic which details the breakdown of the product in terms of costs and expected profit margins. In the example here for a typical auto loan the cost of refinancing matches the central bank rate and risks are accounted for through a calculation relating to typical default rates on this type of product. Operating costs and capital utilization are factored in leaving the spread - or margin - expected from the overall rate of 8.85%
Copyright © 2011 Tycoon Systems Inc
Product Management The Product Management panel
provides an overview and access point for the range of products and services you have invested into. Key information including deposit and loan volumes and revenues will be displayed along with the number of accounts, staff employed across each area and the interest rates. To manage each product function you must click on the ‘view’ button in the Action column which will take you to the business unit panel.
Copyright © 2011 Tycoon Systems Inc
Business Unit Decisions Click on the gold button to navigate to your company
page. This is where you will make all business unit decisions. All products will be shown as part of your business portfolio in the product management panel and you can now start to adjust several business parameters. You will be able to make decisions across the following areas: Interest Rates/Fees, Marketing and Expansion. Any adjustments you make will be reported in the following business quarter therefore you will not see an immediate impact to your financial or business position reported on the screen as you make these changes.
Copyright © 2011 Tycoon Systems Inc
Sales
Moving the slider shown - to the left or to the right - will reduce or increase your offered price to the market. It may not be the final price you are able to sell at.
In this simulation, the rate or service fee that you set is the average price you are offering.
High rates may increase profit margins, but may also discourage customer acquisition.
Lower rates may increase customers, leading to a higher market share, but could also lead to lower profit margins and possible operating losses.
Pricing policy is a major tool for business management and you should closely monitor competitors and the average market price displayed in the sales tab.
Copyright © 2011 Tycoon Systems Inc
Marketing Change and set a marketing budget
to promote your products and guarantee sales. A larger marketing budget will encourage higher sales but will also depend on other actions you take. A good ballpark for how much you should spend on marketing can be arrived at by looking at the prescribed customer acquisition cost for that product.
Copyright © 2011 Tycoon Systems Inc
Competitors In addition to the competitive
intelligence which can be accessed by clicking on your competitors’ name in the Newsticker or Real Time Scores section, specific competitive information relating to the business unit you are viewing is also available in the ‘Competitors’ tab. This shows relative performance across market share, interest rate and number of accounts. As with the other options if you click on any competitor name you will be taken to their company homepage where you can attempt to review their apparent strategy.
Copyright © 2011 Tycoon Systems Inc
Expansion You can increase your capacity to
serve more lenders/depositors through the ‘Expand’ tab for each product. Expansion of your facilities will be offered later in the simulation if you have funds available to you – either from initial capital, loans or operating profits, or from capital raised by selling new shares. If the supply level forecasted as a result of any expansion is expected to exceed certain high levels, you will not be allowed to expand. It is also possible to liquidate the product line for a cost.
Copyright © 2011 Tycoon Systems Inc
Staffing In this tab you will be able to set the
salary and training budgets for staff as well as manage the number employed. Staff Productivity is the arithmetic
average of Motivation and Qualification and new staff come into your company with low productivity and will need training and motivating. Motivation is affected by salary levels
and Qualification is a function of your training budget. Low levels will affect productivity and revenue. Monitor staff attrition as high levels of
‘churn’ increases costs from recruitment, selection and training. Companies with low-performing staff
may demonstrate excessive “workload” issues and low productivity. Copyright © 2011 Tycoon Systems Inc
Acquisitions
Acquisitions will be offered to bid for a competitor after 4 quarters. If you have sufficient funds available, then this offer will be made in the “Takeover” panel onscreen.
If you are performing poorly you may be a target for competitors.
All competitors will be displayed in the Takeover Panel and bids invited for them. The takeover bidding process takes 3 months.
The suggested bid prices shown on the bid buttons are based on the target company’s equity price plus a bid premium.
The Acquiring Company will pay the amount of its bid from its cash balances and investment budget, and will receive all assets and liabilities of the target company into its financial statements. Copyright © 2011 Tycoon Systems Inc
Real-time Scores The REAL TIME SCORES button
takes you to a section where you can see the leader table at any time. This is updated every quarter, and shows a summary table listing Company name (with the number of business invested), their Credit Rating and Debt Ratio, Net Interest Income, Cost to Income, Share Capital and the company’s Share Price. If you click on any corporation’s name in this list, you will be able to go to see what that company’s summary corporate information looks like.
Copyright © 2011 Tycoon Systems Inc
Corporate Dashboard At the top of your screen there is a
summary of your business performance. Indicators include: Your company’s current share price The current investment budget available to you Your corporate credit rating (a function of interest cover, based on your ability to service the total debt that you have borrowed)
Copyright © 2011 Tycoon Systems Inc
Information Categories Take some time to navigate around
the simulation as there is considerable information available to you such as: Sector and Product data Newsticker (with competitor decisions in real time) Financial Charts Accounting Statements Decision Logs
Copyright © 2011 Tycoon Systems Inc
On-screen Help Any (light green) underlined word on
the screen has a hyperlinked help screen attached to it, so you can better understand any terms used. Click on these words to get a full explanation of the term. After use, close the window with “X”.
Copyright © 2011 Tycoon Systems Inc
General Terms and Conditions for use of simulations owned by Tycoon Systems Inc. Tycoon Systems will allow use of its online simulations (“TS Service”) to users under the following general terms and conditions. TS Services include, but are not limited to, access for selected individuals to Tycoon’s business simulation systems, business games and web-based software, for use in executive education programs and on-line business competitions, on payment of access fees as specified in an agreed Scope of Services. These General Terms and Conditions will form an integral part of any agreement to supply such services. Where a supply of TS Services involves access to Tycoon Systems’ webservers and websites then, the terms and conditions as specified on the websites are deemed to have been read and understood and agreed prior to using such TS Services. A current example is available for inspection at http://www.industrymasters.com/termsofuse.html Tycoon develops online, webserver based simulation games, which reside on their own secure webservers, and are under their control at all times. It is not possible to install these games on any other servers – for example, on clients’ own web servers. Clients may access our simulations and games via standard, widely-used web browsers such as Internet Explorer, Firefox etc from anywhere in the world by using a standard URL which we will supply. Intellectual-Property Ownership and Use: No proprietary software is required to be physically installed on clients’ systems, and no ownership of software is transferred to clients. All Intellectual Property Rights of any business simulation, except Pre-existing Materials from clients, shall remain exclusively with Tycoon. Any Tycoon Systems simulation that is based on real-world events is only representational and not an accurate depiction of real-world events. Users should under no circumstances seek to imitate any game experience in real life. Privacy Considerations: In order to take advantage of the full capabilities of the simulation and to receive e-mailed information and announcements, Tycoon may require information about the users. Any communications made through the simulation may be monitored by Tycoon's personnel, with the consent of the client. We respect the users privacy and we will, of course, endeavour to take care of any information supplied to us. We reserve the right to use "cookies," which are small computer files we would thereby transfer to your computer's hard drive to allow us to monitor website usage. The users have the ability to accept or decline cookies, but if users choose to decline cookies, performance of the simulation might be adversely affected. No Warranty: The simulation, including any content or information contained within it and any linked website, is provided "as is" and "as available." TO THE FULLEST EXTENT PERMITTED BY LAW, Tycoon EXPRESSLY DISCLAIMS ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NON- INFRINGEMENT. Limitation of Liability: Tycoon shall have no liability for the deletion of any communications or information collected, maintained or transmitted by the simulation or the failure to store any information, including personalized settings. Jurisdiction and Choice of Law: All claims regarding the simulation shall be governed according to the laws of the State of Delaware, United States of America, without regard to its conflicts of law principles. Any claim or action arising under this agreement shall be subject to the exclusive jurisdiction of courts in Delaware, United States of America. Complete Agreement: This agreement constitutes the entire agreement between the User and Tycoon with respect of use of simulations owned by Tycoon Systems Inc.. If any provision of this agreement is found to be unenforceable, the other provisions shall still remain in full force and effect. Copyright © 2011 Tycoon Systems Inc
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Retail Banking SinglePlayer Business Simulation Thank You!
