BANRISK - International Edition Overview

The educational materials are divided into three sections: Stanford Players’ Manual, Executive Edition, BanRisk Readings and Case Studies. The first two are pre-simulation study material and the BanRisk material is for use during the simulation exercise.

I). Stanford Players’ Manual, Executive Edition
The preparatory materials provide an in-depth analysis of the starting position in the simulation; these materials teach participants how to complete a sources and uses forecast and cover in detail the mechanics and ground rules of the simulation. Minimum study time is fifteen hours. (130 pages)
II). BanRisk Readings
The BanRisk Readings provide financial theories and information on specific applications in the Stanford Game. This material expands on and supplements content from the Players’ Manual. (57 pages)
III). Case Studies
These analytical exercises are the backbone of the program. Each is a step-by-step guide to either monitoring performance or applying financial theories to the operation of the bank. They are essential for organizing and evaluating the feedback provided by the computer model. (138 pages)

A brief review of the content of these sections follows.

ANNOTATED REVIEW OF EDUCATIONAL MATERIALS

Stanford Players’ Manual, Executive Edition, International
Fundamentals of Bank Profitability - Explains why profit is important. The Profitability Model demonstrates how key profit variables of depository institutions function and how they can be managed and controlled.
Managing Your Bank - Discusses the banking environment in the simulation and bank strategies: retail and wholesale.
An Overview of Your Bank - Explains the financial position of the banks at the beginning of the program using the Bank Profitability Model from Depository Institutions Today.
The Year 1, Quarter 4 Position - Explains in detail the data presented in the computer printout using as an example the actual printout of the opening position of the bank.
The Regulatory Environment - Discusses government regulations found in the simulation, including required capital adequacy and other capital constraints, reserves, and pledged securities. Explains how stock price is set by the computer model.
Preparing Page One of the Decision Form - Explains each of the decision variables on page one of the decision form: commercial loans, expenses and allocations, allocations of officer time, CD purchases, and capital structure. Shows how to fill in the form.
Preparing Page Two of the Decision Form - Explains each of the decision variables on page two of the decision form which covers securities transactions.
The Next Quarter: Period 2.1 - Discusses the changes that occurred in the bank from period 1.4 to 2.1 as a result of the management decisions made at the end of period 1.4.
Sources and Uses -   Explains the purpose of the sources and uses forecast and shows how to complete a sources and uses form, using information from the computer printout for periods 1.4 and 2.1.
Value Planning and management - Defines the economic framework and presents a simplified version of the valuation model. The variables are explained and a detailed illustration is presented using the information from the computer printouts. Students are shown how the model is used to evaluate their banks performance and as a tool for strategic management financial decisions.
Glossary and Ratios to Measure Performance - Defines some of the financial terms used during the program. Although primarily intended to help non-financial participants, the glossary also clarifies some of the more complex concepts.


BanRisk READINGS
Marketing - Discusses how banks should allocate resources in order to develop the most profitable lines of business and why the financial services industry has become more aware of customer needs.
Securities Management - Explains how to manage the securities portfolio by minimizing taxes, assessing arbitrage opportunities, and establishing profitable maturity schedules. If a team manages its securities portfolio aggressively, it can meet regulatory requirements, maintain an optional liquidity position, and possibly add to operating profits.
Loan Management - Examines the trade-off between increasing market share and decreasing profit margins to help teams establish realistic growth and profit objectives.
Liability Management - Presents several techniques to evaluate the real costs associated with both core deposits and purchased funds. This reading emphasizes the need to match assets and liabilities of similar maturities and to calculate both the average and marginal spreads between their returns and costs.
Interest Rate Risk & Gap Management - Explains traditional gap, duration weighted gap, and other alternatives to manage Interest Rate Risk in the Stanford Game. In particular, managing the exposure with the futures contracts feature of the game is discussed in detail.
Capital Management - Explores capital issues and provides information for determining the type and quantity of capital to raise and the appropriate cost to achieve desired growth objectives. Capital management is the most complex issue in the program because it is intertwined with all of the previous sections.
ROE Model - Discusses in depth how to analyze bank performance and set objectives using the traditional return on equity model.

CASE STUDIES
The Case Studies are a series of twenty one exercises that participants use each decision period to analyze the computer reports, to make their management decisions, and to forecast the possible results of those decisions. About half of the studies cover forecasting and the other half profitability.
Management Areas - Helps a team organize and divide the workload evenly between its members. Identifies the most important management concerns and assigns to each team member responsibilities for analysis of some specific accounts.
Quarter-By-Quarter Decision Objectives - Explains the main objectives for each quarter of the game so that teams know how to pace themselves through the simulation in order to remain competitive.
Guide for the First Team Meeting - Describes what each team must cover during a decision meeting and shows in the Decision Chronology a typical team's decision-making process.
General Analysis of Loans and Deposits - Five case studies covering 1). commercial loans, 2). commercial demand deposits, 3). consumer demand deposits, 4). money market savings, and 5). retail loans. Teams use these studies to arrange significant data on the loans and deposits of competing banks into an easily intelligible format and to evaluate the effects of specific decisions on different loan and deposit related accounts.
Money Market Savings Accounts - Shows how to compute the various expenses associated with money market accounts, so participants can calculate cost of funds and determine which resources are best for generating a quantity of funds at the lowest possible "real" cost.
Public Deposit Accounts - Analyses the profitability of public deposits (both time and demand) in view of their related expenses and, especially, their restrictive regulatory requirements.
Commercial and Consumer Checking Accounts - Analyses overhead expenses, direct costs, and other non-interest expenses associated with demand deposits in order to calculate the cost of funds.
Average Cost of Funds - Calculates the total interest and non-interest costs associated with the bank's liabilities. Teams use the average cost of funds to help determine the value and return on earning assets necessary for specific levels of profitability. They can then examine the profitability of funding additional assets with purchased funds.
Commercial Loan Accounts - Establishes the effective, or "real," rate of return earned on each type of loan by subtracting specific direct overhead and bad debt expenses from the gross interest rate. Teams can use the effective rate of return in conjunction with the average cost of funds to determine the average real interest income.
Service Charges - Analyzes the profitability of different service charges and their effect on demand deposit balances. Service charges are an important generator of earnings for a BanRisk bank; net service charge revenue is generally 40% of the bank's earnings.
Pension Activities - Examines how trust activities affect specific account balances and shows how to determine their profitability.
Forecasting Bank Income - Provides a step-by-step guide to creating a pro forma income statement. This case study incorporates the sources and uses statement with all of the other case studies. It helps participants realize how each of their decisions affects profitability.
Capital Adequacy - Discusses methods for monitoring and projecting capital requirements. Teams can then determine a proper asset mix, the type and amount of capital they need to raise, and the optimal level of dividends to pay.
Bank Performance and Objectives - Shows how to manage the bank and set objectives using the traditional ROE model.
Charting Interest Rates - Shows how to project interest rates. Teams use the projections to formulate investment, lending, and funding strategies.
Non-Interest Expenses: The Expense Multiplier - Creates an expense allocation system for all of the major operating expenses: salaries and benefits, other expenses, occupancy and business development. Teams can then determine the relative expenses and profit of any area of the bank.
Economic Value Planning - shows how to measure performance and use economic value for strategic decisions.