Dimension 2 - Assessing Management

Question 1

Required skills for company to be successful

Answer 1

1) Technical - ie. engineering, accounting,
2) Organizational - How does management organize the core competencies
3) Management - What is the management style that blends the technical knowledge and the organizational structure

Question 2

Management styles exhibited by your customer affect two important issues:

Answer 2

• How they make decisions – about you as a collaborative advisor, your company and the products and services that you are offering
• How interpersonal skills affects relationships.

Question 3

Assessing Management using the following control points

Answer 3

1) Board of Directors - You need to understand the role of your customer’s board and ascertain how helpful they could be in protecting your institution’s interests.
2) Auditors - Are they truly independent and qualified to conduct the audit? Be especially vigilant in requesting and examining the auditor’s management letter
3) History
4) Inspection and Licensing - outside agency or group that must perform inspections or audits is a good source for information
5) Social Environment - Being with a customer in a social setting often provides an environment in which information is disclosed

Question 4

Questions to consider when evaluating the relationship between management and owners include:

Answer 4

• Are the owners involved in the business? If the owners are involved in the day-to-day operation of the business, and are qualified to be so, this is generally a success factor.
• Are the owners willing to commit additional personal financial resources to the company? If the owners are willing and able to invest more money, this is a success factor. However, the bank cannot rely on such additional investment potential without a legally enforceable commitment.
• Does the bank have any prior experience with the owner’s group ? Favorable prior experience with the owners is a success factor.

For privately held companies, you should analyze who the owners are and how likely they are to stay as owners through the company’s business cycle.

For publicly held companies, it is important to determine the mix of ownership and control by individuals, institutional investors and management.