Among the future risks associated with the acquisition of ABI by FAFS is the assumption of financial risks as a commercial bank. Suffice it to claim that by providing financial services to market participants through giving market knowledge, funding and enabling transactions, the corporation formed by the acquisition will be absorbing the financial risks associated with these service (Reed et al. , 2007). The fact that some banking activities lack direct balance sheet implications but still add to the financial risks that the combined banks might encounter.
Such services are the agency and advisory roles of management of trust and investment; facilitating contracts; regular underwriting; and securitizing and servicing of loans. The management of the bank should follow the following sequence of steps to mitigate the financial risk: ensure standardized financial setting and reporting; establish minimum standards and qualifications for participation in transactions; formulate investment guidelines and strategies for binding of asset liability; and finally design incentive schemes to avoid debacles resulting from lack of incentive compatibility (Reed et al.
, 2007). The other risk is that of customer attrition. When two companies with different banking styles come together in an acquisition, a clash of objectives and aims endanger and negatively affect
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The management of the bank should ensure harmonization of personnel hiring and remuneration packages to ensure satisfaction and motivation of personnel absorbed from both sides of the acquisition deal. Furthermore, the risk of customer attrition has considerable likelihood of happening. Following the acquisition, ABI and FAFS are likely to experience customer attrition, as they will be faced with the challenge of successfully retaining the potential value of their transactions and other services, or preventing the loss of consumers that usually follows the completion of an acquisition deal (Altunbas & Marques, 2004).
As such, the management should ensure that the customers are able to access their accounts and money and carry out transactions as usual without delays or inconveniences. In addition, transferring or linking of customers’ accounts with the acquiring bank should be done promptly and transaction charges should be reduced to maintain the existing and encourage potential customers. Measuring Project Risks
Having weighed the perceived risks in the previous section, this section surveys the various financial and non-financial project indicators that would be appropriate to measure the performance and status of Project Integra. This evaluation aims at correlating the particular integration and transaction-related operations with their likelihood of delivering more benefits to all shareholders in the deal (Kelly & Cook, 2004). Three hard key indicators of the acquisition deal will be evaluated to assess the performance and status of Project Integra.
These are synergy evaluation; integration project; and due diligence. To start with, synergy evaluation should begin the soonest possible in the pre-acquisition phase. This will involve very detailed working and analysis by the project managers from both sides to confirm the deliverability of the synergy assumptions while providing reassurance that the projected benefits will be robust (Kelly & Cook, 2004). This is a financial indicator as it involves revenue enhancement and reduction of direct operational costs.
The next indicator, integration project compatibility, is key to Project Integra’s performance and status as it determines the level of compatibility of ABI and FAFS to indicate how the combined business will achieve stability to preserve and even improve the current value of banking services and ensure that the acquisition works better for both the companies and the shareholders. This is a non-financial indicator whose objective benchmark predicts acquisition performance and status will be more successful if the approach to integration is prepared well before signing of the deal (Mishra et al. , 2005).
The other indicator of performance and status is due diligence. This evaluation approach comprises a host of investigative techniques to systematically evaluate all factors impacting on the value of the project (Mishra et al. , 2005). The techniques applied here are market reviews, management competency assessment and risks assessments (Kelly & Cook, 2004). This will enhance scrutiny of Project Integra to determine its current and potential level of success. With the project risk having been measured using the various indicators discussed above, the section below will describe the project closure approach for ABI.