The Bank of America: Case Study

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Introduction

The Bank of America’s actions and strategic decisions during the financial crisis in 2007-2008 put several questions, whether the Bank’s board adequately managed capital and acquisitions. The issue is that after the crisis, the Bank underwent several investigations, which displayed fraud in acquisitions, making some of the strategic decisions inadequate and harmful regarding stakeholders’ interests.

As a result, the new management was appointed to resolve the pending issues and develop the latest risk management and control tools to avoid identical mistakes made during the crisis. Therefore, the Bank of America became on the verge of crucial change interventions; however, the solutions for them are not evident due to the importance of immediate financial recovery.

Problems and Issues

The primary issue for the Bank is that during the crisis, it invested funds in acquisitions, which were not only non-feasible but also financially devastating. Moreover, the latest deals caused managerial corruption, as some seniors gained substantial payment bonuses despite the poor performance of both their institutions and the Bank (Rothaermel & Burt, 2012). As a result, the Bank of America lost almost $40 billion on such acquisitions, making stakeholders outraged by top-management decisions.

Moreover, the problem with overvalued packages and bonuses for top executives remained unchanged, as even during financial losses, CEOs and senior managers were paid enormous sums for their decisions. In this case, the Bank decided to review and change its bonuses and benefits for CEOs not only due to the performance issues but also due to the pressure from the Government and shareholders.

SWOT Analysis

Strengths

The prominent strengths of the Bank are that it managed to invest funds in profitable institutions and businesses. Such an acquisition strategy supported the Bank’s growth margins and capital gains. Until the 2007-2008 crisis, the Bank was the leading financial institution, with subsidiaries, investments, and resources across the globe (Rothaermel & Burt, 2012). The new strategy undertakes such an approach and heavily relies on the Bank’s competencies and opportunities to gain profits under any circumstances.

Weaknesses

The Bank’s weakness is identical to any large corporation, as remuneration packages for CEOs are enormous and not supported by any performance benchmarks or accomplishments. As a result, the Bank devotes significant sums for benefits and salaries, which are paid despite the institution’s performance or financial health (Rothaermel & Burt, 2012). Another problem within the Bank is that the CEOs are less likely to change the situation due to the direct impact of interventions on their salaries and well-being within the Board. In this case, the inflexibility in decisions makes any changes challenging events, which postpones quality outcomes in the organization’s actions and performance.

Opportunities

The conducted investigations after the 2007-2008 crisis showed the Bank of America several problematic fields, which should be addressed to improve the financial health of the organization. In this case, the Bank has an opportunity to integrate the performance-based incentive system for top management (Rothaermel & Burt, 2012). As a result, stakeholders will obtain a tool to assess and control CEOs’ benefits and salaries.

What is more, the second opportunity is based on the new assessment systems and models developed for the external market analysis. The crisis has shown that any acquisition requires more in-depth and in-breadth analysis and approaches to make any market activity profitable for the Bank. The Bank of America can pioneer the field and create a robust model for investment analysis during stable and crisis economic times.

Threats

The primary threat for the organization is the lack of flexibility in the decision-making process. As a result, the Bank can repeat its failures and undergo new investigations and financial devastations (Rothaermel & Burt, 2012). The latest acquisition should be beneficial and approved by the shareholders, while the failures or poor decisions will initiate management changes or the Bank closure.

Recommendations

HYIP stands for “High yield investment programs,” that is, high-yield investment programs. Investing in HYIP does not mean a guarantee of winnings, but it does mean that the winnings can be quite high. Earning in HYIP is easy, but not fast. But the profits can be hundreds of times higher than the amount initially invested in HYIP. Therefore, a bank, having a certain amount, can make a profit, but also a surplus. HYIP does not provide such warranties. But the advantage is many times higher than the “start-up capital,” which is not to say about any interest on the deposit. The Bank can earn thousands on a conditional $ 10 here.

There are several options for HYIP investments:

  1. Long HYIP – up to 15% per month. Convenient for those who prefer a stable, albeit small income.
  2. Medium HYIP – from 16% to 60% per month. For those who like to take risks. Such funds are much more common than first-class funds. Attract high-interest rates and potential threats to customers. Typically, second-class funds are financial pyramids. And if a person finds himself at the beginning of the development of the pyramid and leaves it in time, it can make a considerable profit.
  3. Fast HYIP – from 60% per month. This option is only suitable for organizers of such programs, but not for participants. By investing in Fast HYIP, the participants will see neither interest nor start-up capital. It is necessary to study the ratings of HYIP companies to avoid unsuccessful investments. And if the fund is blacklisted, then it is not essential to work with it.

The recommended one is the Long HYIP, as the Bank can attract capital and launch the prolonged program to keep clients within the system. What is more, the Long HYIP has fewer risks and losses for all parties so that the Bank can raise capital in the shortest possible period, while the interest payment will be postponed for a year or two. In this case, the Bank gets time to increase profitability and financial health to cover liabilities in front of clients and HYIP investors.

References

Rothaermel, F. T., & Burt, C. (2012). Bank of America (in 2010) and the New Financial Landscape. Harvard Business Review, 1–26. McGraw-Hill Education. Web.

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BusinessEssay. 2022. "The Bank of America: Case Study." November 20, 2022. https://business-essay.com/the-bank-of-america-case-study/.

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BusinessEssay. "The Bank of America: Case Study." November 20, 2022. https://business-essay.com/the-bank-of-america-case-study/.