Case Study: Chemical Bank * Sunil Rabertson Chikkala
PGXPM11

1) Describe the due bill controversy and how do you resolve it?

Below Four divisions of Chemical Bank involved in Due bill controversy: * Treasury Group * Metropolitan Division * Trust and Investment Division * Finance Division
Treasury Group was responsible for investing Due Bill funds in greater interest generating markets and for trading in secondary market. Metro Division sells Due bills to customer; Trust & Investment division involved in setting up Due bills accounts and in providing Data processing services. Finance division was responsible for Cost and profit allocation between divisions.
There were two reasons led to conflict between …show more content…

My approach to solve the problem is mentioned steps below:
Step 1: Analyze the facts of current system: a) Profit and Loss statement of T-Bill:

Analysis: * Treasury division is sole beneficiary of T-Bill and Metro division & T&I divisions are supporting divisions. T&I cost completely allocated to Metro division. * Complete Fee revenue is going to Treasury division, though metro division is selling T-Bills to majority of customers. * Increase in volume of T-Bills sales would increase profitability of Treasury division where as it will increase loss to Metro division.

b) Performance appraisal and Incentives:
Analysis:
* Treasury group’s incentive system was closely tied to profit performance. Bonus opportunity of Trader could be as high as 200% - 300% of Salary. * In Metro division, Bonuses and raises were 95% determined by performance under goal system. *