Until 2007, CrossRock was seen by insiders, customers and many in the wider financialcommunity as a successful financial services company offering mortgage products to the United Kingdom market and providing a portfolio of savings products. Initially, like other traditional building societies, CrossRock relied on its saving products to fund much of its lending but over time, it started to source more and more of its funding through wholesale borrowing on capital markets, bonds and securitized loans. These new sources of funding provided a platform for expansion and the development of a new profitable business model that involved lending higher risk mortgages product (loans of more than 100% of the property value) and making these loans available to a wider customer base, including some customers who, by industry standards, would not have been judged as able to afford the repayments. While property value continued to increase, this business model was very successful and CrossRock continue to expand.Customers were attracted by the more than 100% mortgages because they provided surplus funds they could use to furnish their new properties of for some other purpose, such as the purchase of a new car. Those in CrossRock who are responsible for managing the agenda for change appeared to focus their attention on opportunities for generating profit and failed to pay much attention to potential threats.There are a number of clients that were unhappywith the qualityof services provided by CrossRock. Some of the problem seems because of: The shortage of staff: There has been a high increase in demand for loans andthe need for finding the new portfolios of deposits. The style of the management: The company stylewas top down command and control. This was effective on the past but less effective now. The top down approach has a negativeimpact on motivation, performance of employees. The structure of the management: The number of executives has not increasedin line with the business. The ineffective management information system: The information system is not online and not up to date. Adopting SWOT approach might have provided a diagnostic framework that would have helped those caught up in the runaway success of the business be alert to potential threats alongside the opportunities that appeared to dominate their thinking. Some sign of the potential threats were there but they appeared to have little impact on the thinking of those leadingthe business. These included an increase in consumer debt and the possibility that this was affecting the CrossRock customerdemographic more than that of most other high streetlenders, associated concernsabout affordability, and concerns about the futuregrowth of propertyvalues. Questions. Explain the steps in diagnosing CrossRock problems. What approaches can be used in the information gathering technique in CrossRock? Assess the CrossRock case by using SWOT analysis.
Case Study 1: CrossRock
Until 2007, CrossRock was seen by insiders, customers and many in the wider financialcommunity as a successful financial services company offering mortgage products to the United Kingdom market and providing a portfolio of savings products. Initially, like other traditional building societies, CrossRock relied on its saving products to fund much of its lending but over time, it started to source more and more of its funding through wholesale borrowing on capital markets, bonds and securitized loans. These new sources of funding provided a platform for expansion and the development of a new profitable business model that involved lending higher risk mortgages product (loans of more than 100% of the property value) and making these loans available to a wider customer base, including some customers who, by industry standards, would not have been judged as able to afford the repayments.
While property value continued to increase, this business model was very successful and CrossRock continue to expand.Customers were attracted by the more than 100% mortgages because they provided surplus funds they could use to furnish their new properties of for some other purpose, such as the purchase of a new car. Those in CrossRock who are responsible for managing the agenda for change appeared to focus their attention on opportunities for generating profit and failed to pay much attention to potential threats.There are a number of clients that were unhappywith the qualityof services provided by CrossRock. Some of the problem seems because of:
- The shortage of staff: There has been a high increase in demand for loans andthe need for finding the new portfolios of deposits.
- The style of the management: The company stylewas top down command and control. This was effective on the past but less effective now. The top down approach has a negativeimpact on motivation, performance of employees.
- The structure of the management: The number of executives has not increasedin line with the business.
- The ineffective management information system: The information system is not online and not up to date.
Adopting SWOT approach might have provided a diagnostic framework that would have helped those caught up in the runaway success of the business be alert to potential threats alongside the opportunities that appeared to dominate their thinking. Some sign of the potential threats were there but they appeared to have little impact on the thinking of those leadingthe business. These included an increase in consumer debt and the possibility that this was affecting the CrossRock customerdemographic
more than that of most other high streetlenders, associated concernsabout affordability, and concerns about the futuregrowth of propertyvalues.
Questions.
- Explain the steps in diagnosing CrossRock problems.
- What approaches can be used in the information gathering technique in CrossRock?
- Assess the CrossRock case by using SWOT analysis.
- Explain the intervention strategy that can be used to improve the plan change of CrossRock company.
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