Case: Affinity Plus (A) Harvard Case Solution & Analysis

Case: Affinity Plus (A) Case Solution 

What is the main difference between a credit union (as Affinity Plus) and commercial banks?

There are some major differences determined below between the Commercial bank and Credit Unions:

Core Objective:

            The core objective of the commercial bank is to become an industry leader by making huge profits and reducing the operational costing. Whereas, the credit unions are totally different from the commercial bank because the credit unions tends to maximize the benefits for the depositors and members.

Organizational Structure:

            The organizational structure of the commercial bank is based on proper hierarchy and different departments like treasury and risk management. However, in the case of credit unions, the whole responsibility for the execution revolves around the board assembly which is not in a commercial bank.

Ownership:

            The credit unions are owned by the members that means the union is controlled by the mutually understanding of member and there is no external involvement in the union. As far as Commercial bank is concerned, traditionally the bank is listed on the stock exchange and the shares are owned publicly.

Taxation:

            The credit unions are not subject to be taxed and they are exempted from the taxation rule of the US Government because the unions do not have the core objective to make profits. In the case of Commercial banks, they are heavily profitable organizations which is why they have to face large corporation tax annually.

Describe the control system of Affinity Plus before the transition towards the new strategy?

There are some issues determined which describe the control environment of the Affinity plus as given below:

Less Integration:

            The departments of the union are less integrated with each other that leads towards many problems. The departments do not share the relevant information between each other for value creation. (integration, 2006)

Weak Operations:

            The credit unions are not focusing on their core activities and jumping in many activities. Therefore, the operation has become more difficult to trace the issue and problems, which have to be addressed.

Less effective Senior Management:

            The senior management of the union failed to make a better control environment within the union, and that the management should adopt the strategy for making controls strict with in the union.

Input from Employee:

            The senior management should accept the decision made by lower level employee who may cause serious problem to the union as the employee has no idea for the risks associated with the decision.

Was the control system well aligned with the characteristics of Affinity Plus (being a credit union)?

            The control system before the new strategy is not aligned with the union’s characteristics as the union is a financial institution and financial institutions have concerns over the risk management.

The current weak controls provide the employee to take high risk decisions which would lead towards volatility in the cash flow and revenue. Tight controls and policies are implemented within the financial institution to minimize the risk of variations in cash flows.

Describe the new strategy. Describe the new management control system (i.e., describe the different components that together make a comprehensive control system).

 From the centralized structure of the union, the senior management realized that the decentralized decision making by employee has made the union more progressive and prosperous. This new strategic shift has formulated new policies and guidelines to empower the employees and better decision making process can be formed.  Many factors make the control environment of the union effective and efficient, and some of them are described below:.....................

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