AF436
Management Control Systems
Assignment One

Name: Pramendra K Nair
ID # S91672510
Due Date: 16th June 2015

AF436
MANAGEMENT CONTROL SYSTEMS
ASSIGNMENT ONE
CASE: Haengbok Bancorp
A small national wide Korean Bank with local customers and Company took advantage of financial crisis and open its similar business in US
Question One Haengbok’s Management control systems the systems advantages and disadvantages
1. Action Control
A) Current system of loan application process * If loan is more than one million it is approved by Mr Kim a senior manager from Seoul, Korea * For loans ranging from 1 – 5 million dollars the loan is approved by branch committee * Loan which is more than 5 million is approved the credit committee in Korea * Application is reviewed and scrutinize
Advantage
* This double approval reduces the risk for loans * This system gives time for worldwide trend in banking sector
Disadvantage
* Time consuming takes long to approve loan * Two most experience managers in branch committee there is no independent representative * Less involvement of branch manager in credit committee headquarters in Korea can make a wrong decision as they may not know the US market * Managers will try process loan application for less than 5 million * Rejected loans can have negative morale

2. Results Control

A) Mini Profit Centers * The loan that is generated from each profit center the interest is credited to that particular center * Cost for facilitating the loan expenses are charged to that particular center * It is measure of Accounting control
Advantage
* This system encourages ownership and responsibility by branch managers * Gives freedom to branch managers to make decisions * More accurate and understanding
Disadvantage
* Conflict of interest as the