Term Paper On Financial Operation management Assignment

Table of Content

Title Page

1. Introduction ………………………………………………………………………… 2
2. General profile of CBO ………………………………………………………… 3
2.1 Service delivered by CBO ………………………………………………. 4
3. The role of operation manager in CBO ……………………………………. 13
4. Decision and activities of operation manager …………………………… 16
5. Technology used in delivery service ………………………………………… 16
6. Decision Made In Planning the Product/Service Delivery by CBO. 16
7. Total quality management in CBO …………………………………………. 18
8. The forecasting, Inventory management and Scheduling ………… 18
9. Indication of successful operation and its problem …………………. 19
10. Referance ……………………………………………………………………. 21

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 Term Paper On Financial Operation management Assignment

1. Introduction

Operations Management explores the way organizations produce and distribute goods and
services. Everything that we wear, eat, sit on, use or read comes to us courtesy of the operations
managers who organized its production and distribution. Goods such as automobiles, airplanes,
computers and houses, must be produced, as do the services provided by hospitals, ski resorts,
and banks. (Terry Hill 2005) It's the job of an operations manager to make sure these activities
occur when and how they are planned.

This explanation reflects the essential nature of operations management: it is the central activity
in organizing things. Operations Management is the systematic development and control of the
processes that transform inputs into goods and services. The operations function comprises a
significant percentage of the employees and physical assets in most organizations. Operations
Managers are concerned with each step in providing a product or service. They determine what
should go into an operating system, such as equipment, labour, facilities, materials, energy, and
information, to produce the output. Operations Managers are also responsible for critical
activities such as materials management, capacity planning, purchasing, scheduling and quality.
(Terry Hill 2005)

The importance of operations management has increased dramatically in recent years.

Significant competition, shorter product and service life cycles, better educated and quality-
conscious consumers, and the capabilities of new technology have placed pressures on the
operations function to improve productivity while providing a broader array of high-quality
products and services.
An organization that carries out a transformation process to add valve is facilitating good (e.g.
make a cake). In many cases though, there may be no facilitating good refer to these cases as a
pure service (Meridith & Shafer, 2002) as in the case of Banking under discussion here in The
service providing by Cooperative Bank Of Oromia.

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 Term Paper On Financial Operation management Assignment

2. GENERAL PROFILE OF COOPERATIVE BANK OF OROMIA

Establishment
Cooperative Bank of Oromia (S.C.) was registered commercially on October 29, 2004 in
accordance with article 304 of Commercial Code of Ethiopia. It was established in line with
proclamation no. 84/1994 with authorized capital of Birr 300 million. It started operation on
8th march 2005, with paid up share capital of birr 112 million.

Ownership
Cooperative
 Primary Cooperatives
 Cooperatives Union
 Cooperatives Federation
Non-Cooperative
 Organizations and Associations
 Individuals
Mission
 We root our foundation in communities to provide banking solutions that create greater
customer experience with emphasis to cooperatives and agro-based businesses through
proper use of human resource and up-to-date technologies to maximize stakeholders’
value.
Vision
 To be the leading private bank in Ethiopia by 2025.
CBO Values
 Integrity
 Customer Satisfaction
 Learning Organization
 Teamwork
 Cost Consciousness
 Concern for Community
Salient Features
 Social and Cultural values oriented services
 First bank of its kind in the country
 Broad ownership base and diversified ownership structure
 Give priority to the unbanked society

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Objectives
 To promote saving culture and create access to loans
 To maximize shareholder's value
Corporate Governance
Our corporate governance reveals on how the Board has functioned and the structures of
governance. The Bank functions under a governance framework that enables the Board to
discharge its role of providing oversight and strategic counsel with its responsibility to ensure
the Bank’s compliance with regulatory requirements and acceptable risk. The Bank’s compliance
with regulatory requirements and acceptable risk.
Shareholders’ Meeting
Shareholders’ meetings duly convened and held in line with the Bank’s Articles of Association
and existing statutory and regulatory frameworks. It is conducted through a fair and transparent
process and also serves as a medium for promoting interaction between Shareholders, the
Board, and Management.

2.1 Service Delivered By CBO

2.1.1 Electronic bank service

 Mobile and SMS Banking

Mobile and SMS banking allow you to conduct financial transaction using a mobile device like
mobile phone or tablet via mobile banking Apps. Perform online banking using your smart
phone or other mobile devices. Services available:-

 Online Banking /Internet Banking/

Using electronic payment system conducts a range of financial transactions through website.
Execute a bunch of financial transactions at CBO on line via the internet. CBO online services :-
 Search for balance
 transaction history
 Acquire e-statements
 Order new statements
 Transfer funds
 Pay bills
 Receive bills online

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 Card Banking
CBO provides ATM card linked to saving / checking account of the customer. CBO card is
convenient for your life style. Let you bank virtually, All the time, 24 hours a day, 7 days a week.

It also enable you perform financial transaction, in a public space through computerized telecom
device, point of sale /POS/ machine. Fast cash withdrawal, Balance enquiry, Fund transfer and
Payment …

2.1.2 Interest free bank service Customers' Account

 Wadiah Saving Account: - It is an agreement between the Customer and CBO to

keep their deposit in the Bank’s custody. It allows easy access for withdrawals whenever
needed.
 Labbaik Saving Account: - is a safe keeping account to be deposited regularly for
Hajj and Umrah. The purpose of traveling to Meca Medina, the deposited amount to be
available on demand.
 Wadiah Demand Deposit/Current Account: - is an account which is regarded as
trusts or safe keeping and offers the depositors’ safety of their money against the bank’s
guarantee to return their funds on demand and is a non-interest bearing account.
 Mudharabah Unrestricted Investment Account: - is a fund that will be placed in
the Bank general pool of Shariah compliant banking activities. In return, the account
holder will be entitled to an agreed percentage share of investment income or
proportionally bears the loss of capital.
 Mudharabah Restricted Investment Account: - is a fund that will be specifically
utilized to a particular project of the account holder choice. In return, the account
holder will be entitled to an agreed percentage share of the investments income or
proportionally bears the loss of capital.
 Wadiah special Accounts: - is a safekeeping account operated by cheque

Financing
 Murabaha Financing: - A contract of promise to sell and to buy commodity,
machinery, vehicle etc on agreed profit added to the cost (mark-up).
 Ijaraha Financing: - is a form of financing applicable to financing and operating
leases of properties.

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 Salam: - is a sale whereby the seller undertakes to supply some specific goods to the
buyer at a future date in exchange of an advanced price fully paid at spot. Salam is used
to finance agricultural like goods.
 Istisna: - Sales transaction concluded before the commodity came into existence. CBO
shall act as a manufacturer or constructor to undertake house construction, plant,
power station, roads projects etc as per specification.

Investment
 Mudharaba Investment: - A partnership between CBO and eligible customer
(entrepreneur), profit and loss shared as per the agreed profit sharing ratio.
 Musharaka Investment: - It is a joint ownership of property or equipment or
commercial enterprise. Partner shall share profit as per the agreed ratio while losses are
shared in proportion to capital contribution of partner.
 Diminishing Musharakah: - is a form of co-ownership in which two or more persons
(i.e., the bank and the client) share the ownership of a tangible asset in an agreed
proportion and one of the co-owners/client undertakes to buy in periodic installments
the proportionate share of the other co-owner/bank until
Kafala

KAFALA (LETTER OF GUARANTEE FACILITY):-Kafala is a written promise by the

bank to compensate (pay sum of money) to the beneficiary (local or foreign) in the
event that the obligor fails to honour his/her/its obligations in accordance with the
terms and conditions of the guarantee/agreement/contract. Types of Kafala/Letters
of Guarantee offered by CBO:- Bid Bond, Performance Bond, Advance Payment
Guarantee, Retention Payment Guarantee, Letters of Indemnity for Missing
Documents and Customs Duty Guarantee.

Trade Service
 Wakalah Letter of Credit : - written undertaking by a bank given to the seller at a
request and/ or the instructions of the buyer under wakala contract, to make payment
or to accept and pay bills of exchange (Draft) drawn by the seller up to a stated sum of
money within a prescribed time limit and against stipulated documents provided that
the terms and conditions of the credit are complied with.

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 Murabaha Import Letter of Credit : - is a contract whereby CBO buys goods for the
customer (applicant) and the customer agrees to later buy the goods from the CBO
through a resale at a mark-up price.
 Musharaka Letter of Credit: - is a contract whereby the value of the letter of credit
issued by CBO and the profits of the partnership transaction are shared between CBO
and the customer based on an agreed ratio.
 Wakala Export Letter of Credit: - is a condition where the exporter appoints CBO
as his/her agent to collect receivables on his/her behalf.
 Wakala Documentary Collection (Wakala Cash Against Document - CAD):
- It is type of transaction by which importer and exporter conclude a contract,
accordingly the exporter deliver documents to the importer through his/her bank to
buyer bank through which, the title for purchased goods is released to the buyer after
the total sale price is collected in full.
 Wakala Advance Payment : - a transaction in which an importer makes payment for
items to be imported prior to the shipment of goods. The importer must trust that the
supplier will ship the product on time and that the goods will be as their agreement
because it creates a lot of risk factors for the importers.
 Wakala Consignment Basis Payment (for Export) : - It is a transaction method
in which the local exporter (a consignor) exports the goods to the foreign importer (a
trustee) who pays (remit) the exporter only as and when the goods are sold.
Other Products and Services
 Halal Card: - It is debit card which is integrated with interest free banking services,
especially with wadia saving accounts. It can be used on CBO POS for shopping and
settlement. It can be used on any Bank’s ATM 24/7.
Other Services :- E-banking, Agent and Mobile Banking, Ijarah Financing, Zakat collection
and Administration accounts and Different types of Mudaraba accounts
2.1.3 Domestic banking service
Major types of domestic/local deposit product accounts are:
I. Saving Account
A. Ordinary Saving Account :- Features:
 It is an interest bearing deposit account
 The minimum balance to open the account is Birr 50.00;
 withdrawn by properly filling a withdrawal slip;
 perated by a passbook and an ATM-Card;

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B. Sinqe Women’s Saving Account;- Features:-

 Tailored for women aged 30 years and above;
 opened individually;
 Accompanied by separately branded debit cards;
 Zero Minimum deposit requirements for opening the account;
 Enjoy higher interest rate and other benefits attached to the product.
C. Youth Savings Account;- Features :-
 It is an account for male and female youth in the age group 15-29 years;
 Zero minimum deposit requirements;
 It is accompanied by debit card;
 It has no transaction fee and free account maintenance;
 Gain higher interest rate compared to ordinary saving account.
D. Gamme-Junior Account :- Feature:-
 Saving Account for children aged 0-15 years in the name of the child;
 Administered by parents/guardian until the child becomes able to do so;
 Opened and operated by the parents jointly, or by the parent or guardian, or solely by
themselves (as the case may be);
 Birth certificate or any evidentiary document issued by pertinent organ needed;
 If the parent/guardian becomes incapable to exercise their power of guardianship for
various reasons, another guardian is appointed by the law;
 Payment is enabled to the junior when he/she attains the age of youth.
E. Special Saving Account Features:-
 Interest bearing account operated by a cheque;
 It is account opened for prominent customers of branch;
 Opened or operated by literate customers only;
 The customer should not be in delinquent list;
 No passbook is required for such accounts;
II. Demand Deposit Account
A. Ordinary Demand Deposit Account
 It is current or checking account which is a non-interest bearing;
 It is opened or operated by literate customers only;
 The minimum amount required by the bank to open for individual trader is birr 500.00
and for organizations/companies Birr 1,000.00 ;
 The account opening customer should not be in the blacklist;

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 No restrictions on the number and amount of deposits & withdrawals;

B. Special Demand Deposit
 It is a checking account which bears interest less than the minimum interest rate of SA
set by the NBE(determined by the bank);
 All its features & advantages are the same with ordinary demand deposit account except
the above mentioned one;
C. ECX Related Accounts
 Special Pay-in or Pay-Out account for the members of the ECX to facilitate the trading of
Commodity at ECX;
 Opening request is lodged by the ECX through an account opening facilitation letter to
the bank.

III. Fixed Time Deposit

 Received for a fixed period of time with negotiable interest rate (normally higher than
the prevailing saving interest rate);
 certificate of deposit(CD) is issued;
 Withdrawal is not allowed prior to the maturity date;
 withdrawn before due date forfeits the higher interest rate;
 Can be renewed for a further period;
 Interest is calculated only for the duration of the certificate,
 No interest will accrue after expiry;

2.1.4 Foreign Currency Account Service

A. Non-Resident Transferable FCY Accounts (NRT FCY)
 Maintained in foreign currency and
 Can be transferred abroad without obtaining foreign exchange permit;
B. Non-Resident Transferable Birr Account (NRT)
 Account maintained in Birr
 Funds can be transferred abroad in foreign currency without the obtaining foreign
exchange permit
 All sources deposits should be in foreign currency;
C. Non-Resident Non-Transferable Birr Account (NRNT)
 Account opened to meet their local expenses;
 The account is designated as '' Non-Transferable Birr Account''
 All sources for deposits should be in foreign currency;

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D.Foreign Exchange Retention Accounts

 Accounts opened for exporters and recipients of inward FCY remittance (Foreign
Currency retention A & B accounts)
E. Foreign Currency accounts/Diaspora Account
 Foreign currency Account opened in the name of Ethiopian and foreign nationals of
Ethiopian origin.
2.1.5 Local Money Transfer
Making use of its nationwide branch network and state of technology, CBO renders fast and
reliable local money transfer service. Among various modes of remitting funds from one spot to
the other.
CBO Effecting:
 Mail Transfer:- Telegraphic or Telephone transfers
 Local Draft:- Cashier payment order(CPO)
2.5 Loans and Advances
Loans and Advances:- Overdraft Facility Allow customers to draw beyond the deposits of
their current accounts, for a viable and ongoing business.
Overdrawal;- The right to withdraw a specified amount of fund over the Overdraft limit as
working capital.
Merchandise Loan Facility:- A credit facility provided against merchandise or documentary
evidence as a collateral for short term. Pledge or collateral, Negotiable warehouse receipt for
goods in warehouse , Original Railway Receipts, Truck-way bills and Airway bills
Import Letter of Credit Facility:- A facility provided to importers, on payment of a certain
percentage of the value of the document while opening a Letter of Credit.
Pre-Shipment Export Credit Facility:- A Facility extended for expenses until the time of
shipment: Purchase of raw materials, processing, Warehousing, Packing and transporting and
other
Revolving Export Credit Facility:- An advance extended to exporters to bridge their
temporary working capital requirement upon presentation of all valid and acceptable export
documents, except bill of loading.
Letter of Guarantee Facility:- A written promises by the bank as compensation to the
beneficiary in the event that the obligor fails to honour his/her/its obligations, in accordance
with the terms and conditions of the guarantee/agreement/contract . Types of Letters of
Guarantee rendered:- Bid Bond, Performance Bond, Advance payment Guarantee, Suppliers’

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Credit Guarantee(Trade Credit Guarantee), Retention Payment Guarantee and Customs Duty
Guarantee,
Import Letter of Credit Settlement Loan:-A loan rendered by converting the outstanding
import letter of credit document’s value either to a merchandise loan facility or a term loan .
Term Loan :- Types of Term Loan :- Short-Term, Medium-term and Long-term
Agricultural Term Loan;-A loan rendered for purchase of agricultural inputs and
Agricultural Investment.
Motor Vehicle Loan:-Loan provided for the purchase of new motor vehicles for borrowers in
business sectors.
Construction Machinery Loan :-A loan delivered for the purchase of new construction
machinery.
Equipment/Machinery Lease Financing :-Available for either of the parties to the lessee
agreement:
 Equipment/Machinery lease financing for the lessee
 Equipment/Machinery lease financing for the lessor.
2.1.6 International banking service
2.1.6.1 Money Transfer :-
INCOMING TRANSFER THROUGH AGENTS
Incoming Transfers, Handling incoming money transfers from abroad through CBO’s
International Money transfer Organizations for further credit to our customer account or
payment in cash to the customer. i.e. Western Union, MoneyGram, Dahabshiil, X-press, RIA,
Trans Fast etc. Inward Transfers could be sent through Swift, Personal or Bank Checks and
Remittance Service Providers.
OUTGOING TRANSFER (TELELEGRAPHICTRANSFERS)
Outgoing Transfer Payment processed to individuals or organizations aboard upon the request
of the Bank’s customers. Such transfers are used to effect payment for imports, tuition fees,
membership fees, consultancy fees, medical bills, hotel booking, etc. Transfers can be made
either through Swift or through Foreign Bank Draft. Foreign exchange permit is required to
make outgoing transfers.
2.1.6.2 Export
EXPORT BY LETTER OF CREDIT :- /Documentary Credit/An export documentary letter of
credit is a document whereby CBO Exporter buyer instructs their bank to pay our customers,
assuming that the agreed conditions specified in the original documentary credit, are met. It is
an internationally accepted method of settling trade payments. Rules and guidelines are

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governed by the International Chamber of Commerce (ICC).

Export-payment available by sight/negotiation/acceptance of bills.
*If approved by the National Bank of Ethiopia
EXPORT BY CASH AGAINST DOCUMENT:- /Documentary Collection/A payment
arrangement in which an exporter instructs CBO to hand over shipping and title documents to
the importer when the importer fully pays the accompanying bill of exchange or draft.
EXPORT BY ADVANCE PAYMENT:-/Advance Payment/Advance payment: is a method
through which CBO customer /seller/ receives payment from a buyer prior to shipment or the
agreed upon goods or rendering the agreed upon service. Export-Payment through bank
transfers, traveler cheques, cash (as long as it is declared).
EXPORT ON CONSIGNMENT: - Consignment basis payment It is a method of payment in
which the title to the goods remains with the CBO customer /seller/ until an agent (distributor)
in foreign country sells them. Payment is made to the seller if and when the agent (distributor)
sells the goods.
Export is applicable to perishable items: fruits, flowers, meat, molasses, etc as approved by the
National Bank of Ethiopia
2.1.6.2 Import
IMPORT BY LETTER OF CREDIT/Documentary Credit/An import Letter of Credit is an
unconditional undertaking, given by CBO at the request of our customer (the Applicant or
Importer) to pay the Beneficiary (or Supplier) against stipulated documents, provided all the
terms and conditions in the Letter of Credit are complied with. Import-available by sight
payment/negotiation payment/deferred payment*/acceptance payment*
IMPORT BY CASH AGAINST DOCUMENT:- /Documentary Collection/Documentary
collection is a method through which banks handle a seller's commercial documents with or
without financial documents in accordance with instructions received from the seller in order to
deliver the documents to buyer (importer) against payment and/or acceptance or against other
terms and conditions.
IMPORT BY ADVANCE PAYMENT:- Advance payment: is a method through which a seller
receives payment from a buyer prior to shipment or the agreed upon goods or rendering the
agreed upon service. Import-Payment though bank transfers
2.1.6.3 Foreign Remittance
CBO receives money sent from all over the world through its SWIFT Code
CBORETAA and 16 international money transfer agents. The bank delivers foreign
remittance on its 250 branches distributed throughout the country.

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1. The Role of Operations Manager In CBO Bank

 Carries out administrative and accounting duties in a financial institution by
organizing and coordinating banking services.

 Involves managing his/her bank’s operations team to deliver effective

financial services to clients.
 It is responsible for ensuring outstanding customer relations and high sales,
as well as imbibing the bank’s service culture in all staff members through
personal coaching and granting of bonuses and other incentives to motivate
staff.
 In order to achieve best results in due time, need to delegate duties to various
team members, giving them specific tasks to accomplish for the overall
success of banking operations.
 Involves carrying out assessment of the activities and performances of the
banking staff by evaluating transaction reports and accounts balance for
accuracy and clarity.
 The operations manager, who is directly answerable to the head of banking
services, is also required as part to ensure that the laid down goals and
objectives of the company are maintained by all staff.
 It is also expected to give useful suggestions to the management on how to
improve on the bank’s operation.
 They have exhibit high level of competence and confidence in the handling of
all financial issues encountered on the job.
 They rely on their professional judgment in making financial decisions with
the approval of the head of banking services and the management.
 It is also involved in community development activities to increase awareness
of their bank’s presence to the community members and the general public.
 It is also provide mentorship to members of the operations team by observing
their daily activities and assisting them in solving complicated issues arising
from errors in operations.

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 It is responsible for setting up the work flow process for banking operations,
and for taking necessary measures to provide the needed support for smooth
operations.
 It also ensure policies and procedures of the company are followed correctly to avoid
risks; and also ensure that the credibility of the company is upheld by enforcing
professional standard of operating in staff members

2. The Decision and Activities of Operation Manager in Overseeing the Service

process In Service Company . The Strategic Decision made By Operation Manager
of CBO

1. Improve the Digital Customer Experience

‘’ As consumers increasingly make decisions based on the ease with which they can interact with
their financial institution, competition around the customer experience is giving rise to new
roles and titles within the banking industry.” So operational manager make a decision
expanding both digital and mobile engagement. In addition to applying resources towards
improving the customer experience, institutions will need to determine how they will measure
success. To date, there is a wide variance in methods used, including measurements around
satisfaction, retention, loyalty, engagement and/or some form of revenue metric.

2. Enhance Data Analytics Capabilities

Customer insight and data analytics is at the foundation of virtually every retail banking trend in
the coming year. CBO operation manager should removing friction from the customer journey,
to improving multichannel delivery and exploring the use of open APIs, data is the fuel that will
power these initiatives.
Despite the vast amount of data available to financial institutions, most organizations are having
a difficult time determining what data will have an impact and how to harness the full potential
of insight collected.

3. Reduce Operating Costs

The operation manager of the CBO done all types of organization found the reduction of costs to
be the third most important priority, large national banks and community banks ranked this
higher than other types of organizations .

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4. Increase Investment in Innovation

While investing in innovation was the fourth most mentioned priority by bank institutions, the
frequency of reducing operating costs emphasis on improving the customer experience. where
the proportion of banks with an innovation strategy increased.
The areas where banks are increasing innovation investment are customer service/experience
(84%)

5. Meet Regulatory and Compliance Requirements

CBO have begun a shift towards a more proactive approach to regulatory strategy – establishing
a stronger link to business strategy.
By identifying connection points between organization regulatory and business strategies –
instead of managing regulatory strategy as a side activity – bank can discover ways to achieve
common objectives more efficiently and align compliance activities with bank broader goals.”
This strategy creates a win-win, answering compliance issues while improving business
performance

6. Update or Replace Components of the Core Operating System

Now more than ever, there is a need to organize each financial institution around customer data,
and then to leverage that data through the cloud to mobile devices and apps. The only way to
achieve this is to completely rip out the old systems and replace them with a new core banking
system that can support the bank, and the customers.

7. Recruit and Retrain Talent

The banking industry is changing quickly, with a requirement to meet the needs of a digital
consumer. Unfortunately, most legacy bankers, who have long established careers, are not
familiar with many of the nuances of the digital banking consumer. There is a need for a new
wave of digitally aware and technology adept employee by CBO.

8. Improve Business Processes

As mentioned earlier, installing digital banking technology to improve front and back office
operations will not lead to optimal results unless the routine underlying processes that are being
automated are first closely examined and streamlined. Although many organizations have been
successful in automating applications, fewer have achieved high levels of automation in middle-
and back-office processes.
Many organizations have embraced lean process redesign. More needs to be done to achieve
completely paperless processes, improved workflow tools, and automated task management.

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Going beyond just converting paper to digital, organizations need to rethink all steps to
maximize and optimize process improvement.

9. Enhance Security and Authentication

For financial institutions, the key component of improving the digital customer experience is to
improve the simplicity of banking. One of the challenges around simplification has been the
password authentication process needed to access mobile banking. Combining the need to
improve the security of accessing accounts, with a desire for greater ease of use, is a difficult
balancing act.

3. Technology Used In Delivering Service In Efficient and Cost-Effective Manner

In CBO

In order to simplify the customer service the CBO used various types of technology to deliver
service in efficient and cost effective manner the following technologies are applied in the bank.
Mobile and SMS Banking:- Mobile and SMS banking allow you to conduct financial
transaction using a mobile device like mobile phone or tablet via mobile banking Apps. Perform
online banking using your smart phone or other mobile devices.

Online Banking /Internet Banking/:- Using electronic payment system conducts a range of
financial transactions through website. Execute a bunch of financial transactions at CBO on line
via the internet. CBO online services:- Search for balance, transaction history, Acquire e-
statements, Order new statements, Transfer funds and Pay bills, Receive bills online
Card Banking:- CBO provides ATM card linked to saving / checking account of the customer.
CBO card is convenient for your life style. Let you bank virtually, All the time, 24 hours a day, 7
days a week. It also enable you perform financial transaction, in a public space through
computerized telecom device, point of sale /POS/ machine:- Fast cash withdrawal, Balance
enquiry, Fund transfer and Payment …

4. Decision Made In Planning the Product/Service Delivery by CBO

 To ensure the long term financial sustainability of the bank
 To effectively monitor and report identified fraud
 To ensure the continued efficiency of financial services
 To maintain an effective and well-maintained service
 Develop and improve service mechanism
 Define service outcome effectiveness

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5. Total Quality Management and Outsourcing to Provide Value to

Customer
TQM implications in Cooperative Bank of Oromia
The Cooperative Bank of Oromia has maintained good progress with the advent of new
service technologies; value added services, and creation of new banks. this may help the
managers of the service organizations focus on the following implication:
• To focus on understanding the needs of the customers and strive to provide the product and
services that fully meets the same in order to survive in this highly competitive industry.
• To pay attention on different banking service quality and continuously improve them for
customer satisfaction and retention.

• To update themselves in using different quality improvement tools and techniques in the bank
to gain competitive advantage.

TQM implementation in Cooperative Bank of Oromia

TQM approach in the cooperative bank of oromia is a recent trend and is showing better
performance after its implementation., which is about total customer service and continuous
customer satisfaction, is applicable to almost all banks branch where the customer is treated as
king. In fact, customers in service industries, especially in the banking, are rather more sensitive
to quality and delivery of service than their manufacturing Therefore, adoption of TQM program
in the cooperative bank of oromia may be one of the best alternatives that care about improved
service quality and higher customer satisfaction together with retaining its customers. In
cooperative bank of oromia the level of implementation of TQM practices in three important
levels of TQM factors are:

Automated/technology service quality: Automated service quality in CBO the customer’s

overall evaluation of the excellence of services provided through electronic networks such as
the internet, ATM, and telephone banking. Customer evaluation of automated service
option and their intention to use a particular option are directly affected by their perception of
the attributes associated with that option. The overall customer perception of automated service
quality can be established through the quality of every automated delivery channel in the banks.
The need for technology to support superior service quality is viewed as CBO very important
factor for managing total quality in the bank.
Online/internet/e-service quality: The concept of e-service emerged from the growth of the
internet and information systems. The growth in internet-based services has changed the way

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that banks and customers interact. E-service is conceptualized as an interactive information

service that provides a means to organizations that can build its service offerings and develop a
competitive advantage. The basic reason behind development of online services was the cost
reduction and to delight customers through automation
Customer service quality: as we know that Customers, whether at the retail or corporate
level have always been important for banks. CBO believe that Customer satisfaction is highly
related with service quality as service quality improves the probability of customer
satisfaction this results in commitment, intent to stay (customer retention), creation of a
mutually rewarding relationship (bond) between the service provider and the user, increased
customer tolerance for service and positive word-of-mouth advertising about the organization.
Banks now know that delivering quality service to customer is essential for success and survival
in today’s service.

6. The CBO Forecasting, Inventory Management and Scheduling

Forecasting:
Banks today are faced with a variety of issues that need to be addressed swiftly and
simultaneously. As more banks enter the retail banking space, there are two issues that come to
the fore: increased competition and an influx of large amounts of data (technology
advanced). This data can be used to understand banking business better and forecast ways in
which to counter competition.
Funding allocations, inventory planning and scheduling, are all based on predictions for the
future CBO. The more accurate the forecasts, the better the decisions, so forecasting is vital.
Lately, the bank have been using forecasting for ATM management to check the optimal amount
of cash in the machines to guard against theft. Forecasting is also being used in stock
predictions. Even call centers are using these to predict attrition trends.
Forecasting is becoming increasingly important because this offers prediction of revenues and
allows for better planning exercises.
Our bank has software that is the fastest and most analytically advanced large scale-forecasting
program in the market. This helps transform transactional data into time-series formats,
automatically selects the time-series models that best explain the historical data, optimizes all
model parameters and generates large volumes of forecasts.
Inventory Management:-
Inventory control and management is one importance of operations management that CBO
highly uses in its operations. Managing and controlling the inventory of the company is very

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critical. Innovative methods, such as Just-in-Time inventory control, are some of the major
instruments used by the company to save costs and move products and services to customers
more quickly. That is Daily cash inventory management, Quarterly and yearly Auditing
Generally Inventory managers responsibility includes knowing what to stock, how to position
and present each product, and how to replenish inventory. Forecasting product trends and
understanding current inventory management technology are also important.
Banks do not produce physical goods; instead, they borrow and lend funds. ... Given the nature
of a banks business, its balance sheet does not contain inventories, typical accounts payable and
accounts inventories, making calculating working capital an impractical endeavor.
Scheduling :
In contrast to manufacturing industries, workforce scheduling in the service industries has to
adapt itself to a fluctuating customer demand, which in practice is often based on non-
homogeneous Poisson customer arrival processes. In practice, the CBO adapting the number of
tellers or operators to the demand process can be done through an internal pool of flexible
workers. As the assignment of tellers and the hiring of operators depend so strongly on
anticipated customer demand,
In services, it is customers who are being scheduled. As a result, waiting time becomes much
more critical. While manufacturing orders don't mind waiting in line or waiting in inventory,
real customers do mind. Some of the scheduling applications for better services are to meet the
needs of a bank’s customers and employees. So the banks in reasons why banks need to
invest in a queuing and scheduling solution.
Customers can set up appointments: - Implementing a scheduling solution allows
customers to pick the best time for them to meet with the bank team member without having to
wait in line. This means that customers will be better prepared and ready for their meeting,
which means a more productive meeting for the bank.
Avoid missing paperwork: - When customers come without all the necessary paperwork it is
a waste of time for everyone involved. These instances will leave customers frustrated and
feeling that they did not receive clear communication about the paperwork required. With
appointment scheduling software, it can be a rather simple process to query customers whether
they have all the necessary paperwork before scheduling an appointment.
Customers know how long they will have to wait: - Communicating real-time wait times
to your customers allows them to choose when to visit your location or which location to visit if
you have multiple locations.

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7 Indication of Successful Operation and its Problems On;

Customer satisfaction:
It is one of the most important factors that determine the success or failure of an organization. It
is true case for CBO too. Customer satisfaction is one of the most important goals that CBO
strive to achieve each day. Ones the customer are happy, they would like to visit the bank again
and again. This is very important for the successful and sustainable operations of the bank.
Forecasting
To handle the increasing variety and complexity of managerial forecasting problems, many
forecasting techniques have been developed in CBO. Each has its special use, and care must be
taken to select the correct technique for a particular application. The manager as well as the
forecaster has a role to play in technique selection; and the better they understand the range of
forecasting possibilities, the more likely it is that a bank forecasting efforts will bear fruit.
it allows them to plan financing, However, there are three problems with relying on forecasts in
CBO:

 The data is always going to be old. Historical data is all we have to go on, and there is no
guarantee that the conditions in the past will continue in the future.
 It is impossible to factor in unique or unexpected events, or externalities. Assumptions
are dangerous, such as the assumptions that banks were properly screening borrowers
prior to the subprime meltdown. And black swan events have become more common as
our dependence on forecasts has grown.
 Forecasts can't integrate their own impact. By having forecasts, accurate or inaccurate,
the actions of businesses are influenced by a factor that can't be included as a variable.

Inventory Management

In CBO Cash Inventory Management under Deterministic and Stochastic Demand

Organizations need cash to meet their liquidity needs. The bank inventor or checks and
electronic transactions, an amount of cash does not have to be in physical currency, but may
correspond only to a value in an account that has been set up for this purpose. To meet short-
term liquidity needs, cash must be held in a riskless form, where its value does not fluctuate and
is available on demand. Treasury bills and checking accounts are considered riskless. Cash not
needed to meet short-term liquidity needs can be invested in risky assets whereby it may earn
higher returns, but its value may be subject to significant fluctuations and uncertainty, and

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could become wholly or partially unrecoverable. Based on this the bank inventor and control
their cash.

Capacity planning

The CBO to a forward-looking activity which monitors the skill sets and effective resource
capacity of the organization. The process of forecasting system and environment utilization and
workloads and then developing plans to ensure that the system and environment will be able to
support anticipated performance demands of the banks. As the discipline the bank
appropriately assign skilled worker used in collection of statistical and modeling techniques to
calculate, and sometimes guesstimate, resource consumption at a future date, and probably in a
different bank.
CBO use capacity planning in their bank to optimize our utilization of resources without causing
any redundancies.

Location:
A CBO mobile service provides to customers on the go. This type of service is flexible and can
operate from a variety of locations. A bank operating in this manner benefits from low overhead
costs and having the ability to provide convenient customer service. Opening their center near
location to their customer and variety of service product ATM , online all these help the bank to
retain their customer.

Reference:-

 Cooperative Bank of Oromia Profile.

 Interview to the bank manager based on the assignment question
 Assessing google

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