Citigroup

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Citigroup
Risks and Opportunities
Citigroup, one of the greatest commercial banks in the world has experienced tumultuous times in its efforts to diversify. It was the first bank to invest into diverse consumer banking services. An ardent innovative company was the first to venture into savings accounts that had compound interests, as well as the 24-hour ATM system. However, such opportunities are accompanied by a variety of risks. For instance, the rise of the “financial supermarket” concept almost rendered the Citigroup bankrupt. The concept of merging a variety of financial services in one large bank initially presented itself as an investment opportunity. Insurance brokers, stock brokers, and savings account were merged together with an aim of fostering “cross-selling opportunities” ADDIN CSL_CITATION { “citationItems” : [ { “id” : “ITEM-1”, “itemData” : { “ISBN” : “053875107X”, “ISSN” : “0955808X”, “abstract” : “This leading strategy text presents the complexities of strategic management through up-to-date scholarship and hands-on applications. Highly respected authors Charles Hill and Gareth Jones integrate cutting-edge research on topics including corporate performance, governance, strategic leadership, technology, and business ethics through both theory and cases. Based on real-world practices and current thinking in the field, the Ninth Edition of Strategic Management features an increased emphasis on the changing global economy and its role in strategic management.

The high-quality case study program contains 30 cases covering small, medium, and large companies of varying backgrounds. All cases are available in the main student text or the core case text.”, “author” : [ { “dropping-particle” : “”, “family” : “Hill”, “given” : “Charles W L”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” }, { “dropping-particle” : “”, “family” : “Jones”, “given” : “Gareth R.”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” } ], “container-title” : “Strategic Management An Integrated Approach”, “id” : “ITEM-1”, “issued” : { “date-parts” : [ [ “2007” ] ] }, “number-of-pages” : “524”, “title” : “Strategic management: An integrated approach”, “type” : “book” }, “uris” : [ “http://www.mendeley.com/documents/?uuid=03290536-1d56-4e6b-8a31-f57926cc14f4” ] } ], “mendeley” : { “formattedCitation” : “(Hill and Jones)”, “manualFormatting” : “(Hill and Jones 343)”, “plainTextFormattedCitation” : “(Hill and Jones)”, “previouslyFormattedCitation” : “(Hill and Jones)” }, “properties” : { }, “schema” : “https://github.com/citation-style-language/schema/raw/master/csl-citation.json” }(Hill and Jones 343). This financial opportunity enabled cut operational costs by consolidating different services such as billing, IT, and customer service. However, such a lucrative opportunity turned out to be a nightmare (a great risk), when Citicorp merged with the Travelers group. As opposed to the preconceived opportunity of cross-selling, various divisions between Citi and Travelers started battling to safeguard their interests. The savings that were to be realized by consolidating backroom operations also became costly to meet. A lucrative opportunity turned out to be a great financial risk to the Citigroup.
To consolidate their crumbling financial situation, Citi took a risk in investing subprime loans. These loans were disguised as mortgage-backed securities or the collateralized debt obligations (CDOs). This turned to be the worst financial investment risk that the bank had made. Their loose lending policies of the adjustable-rate mortgages coupled with the fast decline of housing prices in the US put the company in one of the worst financial situations in its history ADDIN CSL_CITATION { “citationItems” : [ { “id” : “ITEM-1”, “itemData” : { “ISBN” : “053875107X”, “ISSN” : “0955808X”, “abstract” : “This leading strategy text presents the complexities of strategic management through up-to-date scholarship and hands-on applications. Highly respected authors Charles Hill and Gareth Jones integrate cutting-edge research on topics including corporate performance, governance, strategic leadership, technology, and business ethics through both theory and cases. Based on real-world practices and current thinking in the field, the Ninth Edition of Strategic Management features an increased emphasis on the changing global economy and its role in strategic management. The high-quality case study program contains 30 cases covering small, medium, and large companies of varying backgrounds. All cases are available in the main student text or the core case text.”, “author” : [ { “dropping-particle” : “”, “family” : “Hill”, “given” : “Charles W L”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” }, { “dropping-particle” : “”, “family” : “Jones”, “given” : “Gareth R.”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” } ], “container-title” : “Strategic Management An Integrated Approach”, “id” : “ITEM-1”, “issued” : { “date-parts” : [ [ “2007” ] ] }, “number-of-pages” : “524”, “title” : “Strategic management: An integrated approach”, “type” : “book” }, “uris” : [ “http://www.mendeley.com/documents/?uuid=03290536-1d56-4e6b-8a31-f57926cc14f4” ] } ], “mendeley” : { “formattedCitation” : “(Hill and Jones)”, “manualFormatting” : “(Hill and Jones 343)”, “plainTextFormattedCitation” : “(Hill and Jones)”, “previouslyFormattedCitation” : “(Hill and Jones)” }, “properties” : { }, “schema” : “https://github.com/citation-style-language/schema/raw/master/csl-citation.json” }(Hill and Jones 343). The company had invested in assets whose value was fast declining. In the end, Citi accrued losses amounting to billions of dollars. Its stock price also fell to the lowest it had been for over a decade. The whole saga put a stain on the financial supermarket concept. If not for the restructuring, government bailout, as well as equity and shares’ sales, Citigroup might not be existing right now.
Ethical Considerations
Honesty is one of the ethical consideration that leaders should keep in mind when running company operations such as the diversification of financial investments. For instance, when the Citigroup CEO Charles O. Prince III was sourcing for information about the subprime loans it was wrong for Thomas Maheras to promise him that everything was just fine when in the real sense the company was plummeting deep into financial losses ADDIN CSL_CITATION { “citationItems” : [ { “id” : “ITEM-1”, “itemData” : { “ISBN” : “053875107X”, “ISSN” : “0955808X”, “abstract” : “This leading strategy text presents the complexities of strategic management through up-to-date scholarship and hands-on applications. Highly respected authors Charles Hill and Gareth Jones integrate cutting-edge research on topics including corporate performance, governance, strategic leadership, technology, and business ethics through both theory and cases. Based on real-world practices and current thinking in the field, the Ninth Edition of Strategic Management features an increased emphasis on the changing global economy and its role in strategic management. The high-quality case study program contains 30 cases covering small, medium, and large companies of varying backgrounds. All cases are available in the main student text or the core case text.”, “author” : [ { “dropping-particle” : “”, “family” : “Hill”, “given” : “Charles W L”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” }, { “dropping-particle” : “”, “family” : “Jones”, “given” : “Gareth R.”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” } ], “container-title” : “Strategic Management An Integrated Approach”, “id” : “ITEM-1”, “issued” : { “date-parts” : [ [ “2007” ] ] }, “number-of-pages” : “524”, “title” : “Strategic management: An integrated approach”, “type” : “book” }, “uris” : [ “http://www.mendeley.com/documents/?uuid=03290536-1d56-4e6b-8a31-f57926cc14f4” ] } ], “mendeley” : { “formattedCitation” : “(Hill and Jones)”, “manualFormatting” : “(Hill and Jones 343)”, “plainTextFormattedCitation” : “(Hill and Jones)”, “previouslyFormattedCitation” : “(Hill and Jones)” }, “properties” : { }, “schema” : “https://github.com/citation-style-language/schema/raw/master/csl-citation.json” }(Hill and Jones 343). The withholding of information significantly exposed the company to serious problems.
Accountability is another important ethical consideration for leaders. In his honest opinion, Lynn Turner, former securities, and Exchange chief accounted that Citi was way too big and lacked the right controls for the guys that undertook risks on the company’s behalf ADDIN CSL_CITATION { “citationItems” : [ { “id” : “ITEM-1”, “itemData” : { “ISBN” : “053875107X”, “ISSN” : “0955808X”, “abstract” : “This leading strategy text presents the complexities of strategic management through up-to-date scholarship and hands-on applications. Highly respected authors Charles Hill and Gareth Jones integrate cutting-edge research on topics including corporate performance, governance, strategic leadership, technology, and business ethics through both theory and cases. Based on real-world practices and current thinking in the field, the Ninth Edition of Strategic Management features an increased emphasis on the changing global economy and its role in strategic management. The high-quality case study program contains 30 cases covering small, medium, and large companies of varying backgrounds. All cases are available in the main student text or the core case text.”, “author” : [ { “dropping-particle” : “”, “family” : “Hill”, “given” : “Charles W L”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” }, { “dropping-particle” : “”, “family” : “Jones”, “given” : “Gareth R.”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” } ], “container-title” : “Strategic Management An Integrated Approach”, “id” : “ITEM-1”, “issued” : { “date-parts” : [ [ “2007” ] ] }, “number-of-pages” : “524”, “title” : “Strategic management: An integrated approach”, “type” : “book” }, “uris” : [ “http://www.mendeley.com/documents/?uuid=03290536-1d56-4e6b-8a31-f57926cc14f4” ] } ], “mendeley” : { “formattedCitation” : “(Hill and Jones)”, “manualFormatting” : “(Hill and Jones 344)”, “plainTextFormattedCitation” : “(Hill and Jones)”, “previouslyFormattedCitation” : “(Hill and Jones)” }, “properties” : { }, “schema” : “https://github.com/citation-style-language/schema/raw/master/csl-citation.json” }(Hill and Jones 344). Such lack of accountability significantly precipitated the challenges that Citi faced.
Finally, leaders should also declare their interests in business in order to alleviate the challenges of conflicts of interest. The amalgamation of business between the Citi and Travelers created conflicts of interest from the onset of their partnership ADDIN CSL_CITATION { “citationItems” : [ { “id” : “ITEM-1”, “itemData” : { “ISBN” : “053875107X”, “ISSN” : “0955808X”, “abstract” : “This leading strategy text presents the complexities of strategic management through up-to-date scholarship and hands-on applications. Highly respected authors Charles Hill and Gareth Jones integrate cutting-edge research on topics including corporate performance, governance, strategic leadership, technology, and business ethics through both theory and cases. Based on real-world practices and current thinking in the field, the Ninth Edition of Strategic Management features an increased emphasis on the changing global economy and its role in strategic management. The high-quality case study program contains 30 cases covering small, medium, and large companies of varying backgrounds. All cases are available in the main student text or the core case text.”, “author” : [ { “dropping-particle” : “”, “family” : “Hill”, “given” : “Charles W L”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” }, { “dropping-particle” : “”, “family” : “Jones”, “given” : “Gareth R.”, “non-dropping-particle” : “”, “parse-names” : false, “suffix” : “” } ], “container-title” : “Strategic Management An Integrated Approach”, “id” : “ITEM-1”, “issued” : { “date-parts” : [ [ “2007” ] ] }, “number-of-pages” : “524”, “title” : “Strategic management: An integrated approach”, “type” : “book” }, “uris” : [ “http://www.mendeley.com/documents/?uuid=03290536-1d56-4e6b-8a31-f57926cc14f4” ] } ], “mendeley” : { “formattedCitation” : “(Hill and Jones)”, “manualFormatting” : “(Hill and Jones 344)”, “plainTextFormattedCitation” : “(Hill and Jones)”, “previouslyFormattedCitation” : “(Hill and Jones)” }, “properties” : { }, “schema” : “https://github.com/citation-style-language/schema/raw/master/csl-citation.json” }(Hill and Jones 344). This rendered them incapable of gauging the risks of some financial investments. The leaders in both groups were busy battling to protect their turfs at the expense of their financial investments.
Work CitedADDIN Mendeley Bibliography CSL_BIBLIOGRAPHY
Hill, Charles W. L., and Gareth R. Jones. “Strategic Management: An Integrated Approach.” Strategic Management An Integrated Approach, 2007, pp. 302-304, http://books.google.com.co/books?id=0588ekqiqQAC&printsec=frontcover&hl=es&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false.