Financial Analysis Management

– Budgetary planning & Control System

Suraj Rathi (Executive MBA ID: L0012DOJA0312)

Business now a days running in highly volatile environment and becoming a dicey game especially when it comes to a banking industry which is directly exposed to the external environment of the business, hence there should be a systematic way for managers to prepare a detailed plans for running business successfully and efficiently. This study compromises Budgetary Control System implemented for one of the biggest player in the banking industry, the Lloyds Banking Group. This study will take us through the problems and limitations of budgetary system and their remedies to fix them and will learn how to plan and estimate them well in advance.

1

Contents

1. INTRODUCTION...............................................................................................................................................3

2. BUDGET, BUDGETING AND BUDGETARY CONTROL...................................................................4

2.1. ESSENTIALS AND OBJECTIVES OF BUDGETARY CONTROL SYSTEM......................................................52.2. CLASSIFICATION OF BUDGETS ACCORDING TO FUNCTION................................................6

3. OVERVIEW OF THE ORGANISATION - LLOYDS BANKING GROUP......................................6

3.1. VISION, GOALS & PURPOSE OF WHOLESALE BANKING UNIT:.............................................................74. PLANNING, BUDGETING & FORECASTING (PB&F).....................................................................9

5. LONG TERM PLANNING AND BUDGETING - AT LLOYDS BANK..........................................10

5.1. REVENUE PROJECTIONS - AT WHOLESALE BANKING...................................................................12

6. ANNUAL REPORT - WHOLESALE BANKING AND MARKETS (WBM):...............................17

6.1. DATA SYNTHESIS OF FINANCIAL REPORT:............................................................................................20

7. KEY ISSUES & RECOMMENDATIONS................................................................................................22

7.1. CONTEXT:................................................................................................................................................227.2. KEY ISSUES:........................................................................................................................................237.3. OBSERVATIONS:................................................................................................................................237.4. RECOMMENDATIONS:......................................................................................................................24

8. REFERENCES..................................................................................................................................................26

9. APPENDIX........................................................................................................................................................26

2

Introduction

The study for implementing the budgetary control system has been carried out with the help of primary data which is collected by direct interaction with the various stakeholders of finance department including some executives of the company and secondary data that has been procured from the annual finance reports, manuals docs and banks publications published for the investors of the company.

Scope of the study:

Due to limitations to the sources of the data and other relevant confidential information of the organization, the study has been carried out only in "Wholesale Banking" department of the Lloyds Banking Group; also study was not possible to carry out at micro level for all sub units of this division. The study is limited for 5 years period of i.e. from 2012-2016, However historical data since year 2010 has also been considered to understand the pattern of the statistics.

BUDGET, BUDGETING AND BUDGETARY CONTROL

3

Budget is a financial and quantitative statement prepared for a defined period of time to achieve its predetermined objective. Typically it includes all income and expenditure capital. To achieve a successful and efficient management system one has to accomplish the objective of the enterprise keeping an eye on vision. Efficiency is achieved by a systematic planning and maintaining the control of budget. Hence budgeting is an integral part of management for setting its realistic goals and targets.

Budgeting is the process of planning all financial resources to and from an entity for some period of time. It serves as a guideline for allocation of all expected required future resources to the business for its projects, related functions, responsibilities for the specified time periods.

Meaning of budgetary control“The establishment of budgets relating the responsibility ofexecutives to

the requirements of a policy, and the continuous comparison of actual with budgeted results, either to secure by individual action the objectives of that policy, or to provide a basis for its revision.”

(Chartered Institute of Management Accountants)

The process of achieving micro level or departmental budgets with respect to the responsibilities and the requirements of executives' policy, and tracking and monitoring of actual outcomes with budgeted results, should liable to revisions if required time to time basis, after preparing the budgets, when it comes to actual results the comparison of actual figures budgeted figures enable the management to work out on the discrepancies and take timely remedial actions.

Essentials and Objectives of Budgetary Control System Budgeting i.e. the process of preparing the budget, is

base of budgetary control, Distribution of budgets pertaining to each function

4

to all the relevant section within organization. Management has to keep collecting actual data pertaining to budgeted activities and monitoring continuous comparison of actual performance with budgeted performance. Initiation of corrective action to ensure that actual performance is in line with budgeted performance and revision of budgets if required in case of unforeseen developments

Below are the primary objectives of budgetary control system:-

1. PLANNING:

Planning is required to ensure efficient use of their resources. It starts with defining the higher level aims and objectives followed by strategies for achieving the desired targets. Budget drives strategies to be followed by the originations.

2. CO-ORDINATION:

It is managerial functions which links all the internal and external departments of the business directly or indirectly and becomes integrated one view. Executives communicate across all departments to bring the company as one entity. It helps to identify strength and weaknesses in the organization.

3. COMMUNICATIONS:

Every individual of the organization must be aware of the objectives, performances and policies of the organizations. They must possess a clear understanding of their roles in the organizations goals.

4. CONTROLS AND PERFORMANCE EVALUTION:

Control ensured by continuous comparison of budgeted performance with actual performance, the variances are pointed out so that corrective action can be taken. Budgets, from the performance evaluation point of view can achieve realistic estimates of the expected performance.

5

CLASSIFICATION OF BUDGETS ACCORDING TO FUNCTION

I. Functional or operating budget:These budgets consider the costs and expenditure on departmental

level or at functional level to. Total number of such budgets depends on the size and nature of the business. For this study paper “Wholesale Banking” is one of the function of the entity or say department of the Lloyds Banking group.

II. MASTER BUDGETS:It is summery of entire budget incorporating functional or unit bases

budgets. All the micro level operational budgets are integrated into the master budget for the purpose of the top level management.

In our current study when we talk about Lloyds Banking group as a whole it will be a master level budget.

OVERVIEW OF THE ORGANISATION - Lloyds Banking Group Lloyds Banking Group is among the top10 banks on the globe and the

biggest ever bank of the UK. It was produced by the merger of Lloyds TSB and the Halifax banking

group HBOS, The combined group, with around 145,000 staff and 3,000 branches

controls around a third of UK's mortgages and a quarter of all savings. The government owns 43.4% of Lloyds Banking Group, 36% are owned

by Lloyds TSB shareholders and 20% by HBOS shareholders.

From managerial point of view it is structured in its banking unit and sub units as below-

6

The Wholesale division serves in excess of a million businesses, ranging from start-ups and small enterprises to global corporations, with a range of propositions fully segmented according to customer need. The division comprises Corporate Markets, Treasury and Trading, and Asset Finance

WHOLESALE STRATEGY & PLANNINGVision, Goals & Purpose of Wholesale Banking Unit:

Lloyds Banking Group

Retail Banking

InsuranceBanking

WholesaleBanking

(Our Study Scope)

Wealth & International

7

The vision for Wholesale Finance is to be recognized for putting effective insight and control into heart of a winning business.  We have identified five goals to help us achieve this vision:

Best in class information World class efficiency and effectiveness Valued business partnering Robust standards of control Exceptional people capability

Proposition

Financial Capital plus Intellectual Capital drives Relationship Capital

The creation of WBM has provided with an opportunity to harness the Group’s unique position, this is achieved by being a customer-centric, stable and agile business.

Group and thus the LBG be recognised for putting effective insight & control into the heart of a winning businessWhat is vision

of Wholesale Unit?

What are goals?

What to do on role basis?

Balanced Scorecard Objectives:People Finance Building the Business Customer Risk

We avail opportunities to

improve the efficiency &

effectiveness of services provided to stakeholders

We are proactive in providing the

right level of business support and challenge to achieve strategic & tactical goals & we are valued for our knowledge &

advice.

We maintain standards &

controls over the management of

Financial & Regulatory

Reporting risk throughout the organisation

We provide timely, relevant,

consistent & accurate

information and insight to all our

stakeholders

We consistently attract, develop and retain highly capable people

who are energised & motivated to

make a difference

WHOLESALE FINANCE STRATEGIC OBJECTIVES

What needs to do across Wholesale Finance?

World class efficiency and effectiveness

Valued business partnering

Robust standards of control

Best in class information

Exceptional people capability

8

PLANNING, BUDGETING & FORECASTING (PB&F)

The objective of the Planning Budgeting & Forecasting (PB&F) is to deliver PB&F capability to the Group, Divisions and Business Units across the enlarged Group, this involves

Delivering the first cut group consolidated budget for year end result Determining the group forecast, plan and budgeting process and

timetable Ensure consistency of the forecasting timeline and ensuring that there

were no conflicts of delivery deadlines.

Accountability or roles in PB&F of the top executives is shown in below chart.

PB&F team is headed by James Oliver and his team undertakes a range of activities including:  

Providing financial support and controls to the Wholesale Finance Director and Group Executive Director through the planning life cycle

Delivering the Divisions five years Medium Term Plan, overarching Divisional strategy along with the business unit supporting strategies

Analyzing the impact of alternative strategies and scenarios on the Division

Key Deliverables:  

9

Preparing the Medium Term Plan, Annual Budget, Quarterly Forecasts, as well as monthly ‘Latest View’ updates for the Division

Co-ordination (in conjunction with Divisional Risk) the Divisional Stress Testing analysis

Strategy tem head is Robin Von Schmidt his team supports Truett Tate, Wholesale Group Executive Director, and his Managing Directors in four key areas:  

Strategy Development / Execution Developing mechanisms to monitor execution of divisional strategy Working with Business Units and the other internal/ external

stakeholders to build and refine fact-based strategies at Business Unit and overall Divisional level

Planning   team is responsibilities: Constructing and delivering the Division’s Quarterly Reviews which are

then presented to members of the Group Executive Team Integrating divisional strategy with the planning and finance cycles Synthesizing key messages, financials and strategic thinking from

competitors results with the aim of supporting strategic thinking Delivering insight from the analysis of financial and market data to

challenge and inform strategic decision making Driving requirements for the evolution of management reporting 

LONG TERM PLANNING AND BUDGETING - at Lloyds Bank

Approach used here is at first "Top-Down Budgeting" the same has been cascaded and later at next stage same has been negotiated with their to the peers following "Top-Down Budgeting" approach hence forming two way approach of budgeting.

To support the 2012 Budget finalisation and 2013-16 plan finalisation for local reporting purposes, Divisions/ Functions are asked to carry out a Cascade process on all of the 2012-16 years.

This will enable Divisions and Functions to push down all outstanding high-level overlays and challenges taken during the plan for the years 2012-2016 to a more granular level

CASCADE PROCESS:

The Cascade will be managed by Divisions/ Functions directly in B&F, subject to total checks detailed below-

10

Known high-level overlays/ challenges to be cascaded:

Economic Assumptions Overlay to Business Unit and below. Data needs to be rolled down to the BU/ Cost centre level to align with the relevant Base plan reporting level. The Economic Overlay also needs to be refined and fazed to be monthly for year 2012 and Half-Yearly for 2013-16.

Income and Cost Stretches and any other changes from the original submission they also need to align costs between various units considering the relevant stretches to investment Again, these need to be phased as in the Q3; monthly in 2012, and Half-Yearly in 2013-16.

Beginning of Budget Cascade

Group Planning to identify potential changes required by divisions.

Cascade Divisions to make required changes including those highlighted by Group Planning & to cascade the Overlay to Legal Entity

Post Cascade Validation by Group Planning of Final Legal entity split, including attestation by Divisions

11

Constraints & Rules to be applied to the Cascade:

No change to Group and Divisional overall results by year. The only allowed exception to change Divisional results will come from the CTC rerun updates, which will be added at the end of the process.

Re-phasing for all 4 years must remain within each year (i.e no switches between years). As in the Q3, Phasing should be Monthly for 2012 and Half-Yearly for 2013-15.

REVENUE PROJECTIONS - at Wholesale Banking

For Wholesale division the projections (Apr.12) point to £270-486m uplift by 2016, plus c.£80m of protected revenues, before additional FX benefits for Wholesale Markets.

Annual run-rate Revenue Benefit achieved from 2016, £m

Note- Large, Major and FI are further sub divisions of the Wholesale department and at various functions they are sub divided into Liquidity, Payments etc (first column of the table).

Group has an additional estimate of generation of £5-10bn of high-quality liabilities and revenue protection of c.£80m and c.£3bn liabilities.

Large Major FI Total

Liquidity

Payments

CB-TB

W&I / Comm.

Trade

Cards

2 - 4

6 - 11

47 - 77

40 - 79

8 - 15

15 - 39

109 - 229

4 - 15

3 - 10

25 - 47

44 - 109

58 - 116

13 - 29

46 - 97

199 - 415

71

59 - 128

23 - 45

6 - 8 43 - 85 10 - 35

14 - 22

19 - 32 3 - 11 1 - 2

270 - 486

350“Most Realistic” / Target

12

Diagram: Revenue uplift vs. Investment capability delivery

Category 2010 2011 2012 2013 2014 2015 2016(£m) Revenue Up-

LiftRevenue Up-

LiftRevenue Up-

LiftRevenue Up-

LiftRevenue Up-

LiftRevenue Up-

LiftRevenue Up-

Lift

Large 126.8 - 126.8 - 127.7 0.9 129.8 2.1 134.3 4.5 138.9 4.6 147.7 8.8

Major 27.0 - 27.0 - 30.5 3.5 41.2 10.7 57.2 16.0 75.0 17.8 98.2 23.2

FI 37.1 - 37.1 - 37.9 0.8 40.4 2.5 45.0 4.6 49.1 4.1 53.3 4.2

Total 190.9 - 190.9 - 196.1 5.2 211.4 15.3 236.5 25.1 263.0 26.5 299.1 36.1

TOTAL UPLIFT 2012-2016 : 108.2

A low level micro budget is prepared at the end line to achieve the specific budget requirement and study variances these may be linked to a respective cost centre.

Budget 2012 TBT (A Wholesale Banking project) - Total Direct Costs

13

Note- Please refer the Appendix1 for the corresponding cost centre mapping.

TBT FINANCIAL UPDATE February 2012

For studying how variances should be dealt with actual outcomes of the budgets and spending, let us consider a TBT project which is a part of Wholesale banking unit and very critical in terms of its IT capabilities.

TBT Programme Financ ialsFebruary 2012

£'m Actual Budget Var Actual Budget Var Budget PY 2011 Actuals

Profit & Loss

Total Income - 1.6 (1.6) 1.1 2.7 (1.6) 39.3 4.2

Operating Expenses - excl. Dep'n & Revex (0.1) (0.4) 0.3 (0.1) (0.8) 0.7 (9.7) (2.4)

Depreciation Costs - - - - - - (3.4) -

Investment Costs (Revex) - excl Dep'n (2.7) (1.1) (1.5) (5.7) (1.7) (4.0) (14.8) (6.6)

Total Operating Expenses (2.7) (1.5) (1.2) (5.8) (2.5) (3.3) (27.9) (9.0)

Impairment - - - - - - - -

Profit Before Tax (2.7) 0.1 (2.8) (4.8) 0.1 (4.9) 11.3 (4.8)

Below the Line - - - - - - - -

Other Metrics

Investment - Capex (1.96) (2.1) 0.1 (2.0) (3.2) 1.2 (27.5) -

Actual Budget var Actual Budget var Bud '12 Bud Prj't

GSI Project FTEs (#) 61 90 29 61 90 29 107 107

GSI BAU FTEs (#) 10 32 22 10 32 22 80 80

Total FTEs (#) 71 122 51 71 122 51 187 187

Month Year To Date Full Year

Dec 2012Year to date 2012 Project to date

KEY HIGHLIGHTS – YTD

Income:£1.1M YTD, achieved on Trade initiatives, £2.7m adverse to budget, due to timing variance. Still on track to deliver FY uplift target of £39.3m.

14

Opex: £0.1m YTD, £0.7m favourable to budget, driven by delayed recruitment of staff (£0.3m) & timing variance on non-staff costs (£0.4m)

Revex:Gross spend: £7.7m YTD, £2.8m adverse to budget. Project phasing and mix has changed since the original budget and the project is currently tracking inline with approved CMU budget of £28.3m.Capitalisation (£2.0m) YTD, £1.2m adverse to budget, expect a catch up next month. SWC assumption applied of 65% per Divisional guidance.

GROSS INVESTMENT COSTS – 12 MONTH VIEW

19.3

8.8

28.1 29.0 31.9

60.9

33.2

51.0

84.2

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

IT Business Total

£m

FY 2012 Gross Investment Spend

CMU

Budget

LV

-

2.0

4.0

6.0

8.0

10.0

12.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

£m

Phased FY 2012 Gross Investment Spend

LV

Budget

Actuals

CMU

Key Highlights

15

For FY2012 LV £84m, £23m higher than Budget, it reflects a number of additional projects originally assumed to be funded elsewhere.

Additional costs for Wholesale Operations £5m, & Global Payments £7m

Further refinements being made to LV for next review with SWG YTD Actuals currently running below phased CMU approved budget

and LV, although expect this to be a timing difference only

ANNUAL REPORT - Wholesale Banking and Markets (WBM):

16

17

18

Data Synthesis of Financial Report:

Current ratio = Current assets 970546 = 1.050429027Current liabilities 923952

19

The ideal current ratio i.e. the ability of company to pay its short-term obligations is “2:1” but it depends on the industry, here in banking if it is maintained near one it is supposed to have good fundamentals.

Acid test ratio =Monetary current assets

607220 = 0.65719864Current liabilities 923952

Profit: Before tax was £828 million compared to £2,514 million in 2010Total income decreased 38 per cent- Net interest income decreased by 25 per cent- Other income decreased by 48 per cent

Cost: Operating expenses decreased by 16 per cent, from further savings from the Software Integration programme, lower operating lease depreciation, lower bonus accruals and other ongoing cost management actions to mitigate the impact of inflationary increases. This was partially offset by continued investment in customer facing

The impairment charge: It is decreased by 29 per centThe impairment charge decreased by £1,163 million, or 29 per cent, to £2,901 million reflecting a sustained decrease since the peak in 2009.The core impairment charge was £741 million, compared to £576 million in 2010. The increase is attributable to a few specific large cases reflecting the nature of impairments in a Wholesale portfolio

Fair value unwinds: It is also decreased by 29 per cent where as assets decreased by 18 per cent.

Other Findings:Customer deposits excluding repos were 2 per cent higher.Assets decreased by 18 per cent, (25 per cent excluding reverse repos), reflecting the targeted reduction in the non-core balance sheet by £35 billion. Although net lending to core customers (excluding reverse repos) reduced by £9 billionRisk-weighted assets decreased by £32.3 billion, or 16 per cent, to £163.8 billion, primarily reflecting balance sheet reductions and run down in other non-core asset portfolios, as well as the impact of changes in the risk profile, partially offset by Basel regulatory changes to market risk. Non-core risk-weighted assets represent £24.7 billion, or 76 per cent, of this reduction.

Strategic focus & Progress against strategic initiatives: In 2011 Wholesale reduced non-core assets by £35 billion significantly contributing towards the reduction of the Group’s wholesale funding requirement. Whilst this has meant the loss of associated income, it has resulted in a material improvement in the profile of the Group’s balance

20

sheet, both in terms of risk and absolute size. Further, in total, these asset sales were in line with the net book value. In 2012, the focus will be on strengthening the franchise in those businesses that generate sustainable, predictable returns on equity at the level targeted by the Group Strategic Review while continuing to reduce non core assets in a capital efficient way.

Investing in customer franchise:The Strategic Review conducted in May, confirmed wholesale’s commitment to meet more fully the range of needs of Wholesale’s customer base. In 2011, product capability has been enhanced through the further development of our debt capital markets business and the implementation

Lloyds Banking Group partnership with London 2012 saw the successful processing of card settlements for Olympic and Paralympic Games ticketing and Transaction Banking also launched the UK’s first contactless prepaid cards for corporate use, with a special range of Visa London 2012 Olympic and Paralympic Games themed Cards.

KEY ISSUES & RECOMMENDATIONS

Context:

Revenue Forecast to spend 11.8m with only 3.2m remaining budget for this

quarter. YTD spending of £13.4m - Burn rate for last June £5.2m Internal revenue forecast is £1.6m (160 people) per month. We

don’t have this internal capacity – plans need to be reviewed KSOR Steering Group will focus on Purchase Orders and their

status and importance to our priorities in 2013 Still £130k of generic resources in plans If we need to slow down projects we will make the right decisions Software Capitalisation (SWC) being finalised with Finance to

utilise Capital opportunity and create a bigger remaining revenue budget.

Capital Spend YTD has risen from £1.6m to £6.1m. Further large POs expected in next two months to hit forecasted

year end of £15.8m. There is a £3.2m opportunity on capital which could be used by

SWC.

21

Additional Risks Ideally we would mobilise 2013 projects – This would cause an

impact of £0.25m (est. Internal Rev) but SD Projects do not have the capacity to mobilise.

Teradata LTSB capacity negotiated deal that has increased costs by £500k capital with no budget and no reference to the portfolio governance.

KEY ISSUES:

Over allocated (number of one-off unplanned items) and therefore over forecasting budget (revenue driven)

Can not approve anymore project spend. Forecasts predicting overspend of £5.4m to portfolio budget Slowing of projects required according to forecast for revenue Slowing the projects will impact 2013 portfolio. The software project, E-Mail Journaling – Lack of budget transfer

from the department of GF&S (£1.5m cash) adding to budget challenge

OBSERVATIONS:

£7.648m revenue spend (increase by £4.7m Mar – Email Journaling, Unix, Storage, Fix on Fail Networks, Teradata, Vulnerability)

£0.377 capital spend (increase by £0.25m Mar but adjusted by £1m credit/net -£0.633m)

Significant increase in capital spend forecasted April c£5m (Teradata & Storage)

£1.5m seed money currently funded from KSOR pending formalisation of Security Programme funding

£0.125m seed money currently funded from KSOR for Transformation activity pending GIC decision

New requirements - £8.8m added to Portfolio (Attachmate £6.8m/Video Conferencing £1m/SD Protection Programme £1m)

Do-ability challenge complete to end of change freeze period Do-ability challenge being undertaken against planned

activity/demand Q4 expected to reduce Non production activity planned during change freeze for projects

without waivers

January - April 2012 BEN Actual & Forecast

 January - April 2012 BEN May - August 2012 September - December 2012

22

Actual & Forecast (Change Freeze) BEN Forecast BEN Forecast

  Internal External Capital Total Internal External Capital Total Internal External Capital Total Total

Business Management Function

0.473 0.048 -0.698 -0.177 0.898 0.001 0.000 0.899 0.048 0.000 0.000 0.048 0.770

Data Centre 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Service Operations 0.257 0.057 0.000 0.314 0.060 0.000 0.000 0.060 0.001 0.000 0.000 0.001 0.376

Technical Management (Distributed)

0.896 1.856 0.251 3.004 0.168 0.000 0.000 0.168 0.487 0.801 1.393 2.682 5.853

Technical Management (Enterprise)

2.686 4.993 5.025 12.704 1.197 0.493 0.209 1.899 1.140 1.575 0.800 3.515 18.119

Technical Management (Networks)

0.269 0.470 0.012 0.751 0.131 0.000 0.000 0.131 0.097 0.000 0.000 0.097 0.979

Total 4.582 7.424 4.591 16.596 2.454 0.494 0.209 3.157 1.774 2.377 2.193 6.343 26.096

Planned projects                         20.484

RECOMMENDATIONS:

To prioritise the business running risk a Risk-Ranking system should always be used while analysing and finalising the budget. Now were ever the projects are running out of budget they have been allocated with the priority as per their risk to running the business, hence gaining better control over the budgetary system as-

Critical review of projects and status of planned purchase orders resulting in:

o Confidence in forecasto Control of purchase orders enabling us to deliver to budgeto Defined position on software capitalisation o Action plan to deliver portfolio to budget

Mobilise Red/Black risks for 2013 now – Constraint is software projects do not have capacity and has to get first priority.

KSOR Portfolio Budget Q3F (Million)

£25.0 £20.0 £45.0  

23

Risk Ranking

Indicative Budget(Gross) 2012 Running

TotalRevenue  Capital Total14 – 16 £0.0 £0.0 £0.0 £0.013 £3.7 £2.3 £6.1 £6.112 £12.3 £12.5 £24.8 £30.911 £1.0 £0.9 £1.8 £32.710 £1.3 £1.1 £2.4 £35.19 £7.4 £16.3 £23.7 £58.88 £13.0 £5.2 £18.2 £77.07 £5.7 £14.1 £19.8 £96.86 £4.0 £0.1 £4.1 £100.95 £5.5 £2.8 £8.3 £109.24 £2.9 £3.7 £6.5 £115.83 £0.3 £4.1 £4.4 £120.22 £0.2 £0.4 £0.5 £120.71 £0.3 £0.2 £0.5 £121.3Synergy £0.3 £0.0 £0.3 £121.6TBC £16.7 £7.5 £24.1 £145.7Total £74.6 £71.0 £145.7 £145.7

In case of KSOR projects, the portfolio comprises of£42.5m for risk mitigation and £2.5m service improvement

Mobilise Red Risks – Subject to SD Projects capacity

Clarify which projects will form part of Technical Transformation

Portfolio team and SD projects have clear view of projects expected to rollover – Impact of any slow down of spend orunder spend in 2012 would change that position

Current disparity Forecast vs Budget (£20.5m) due to planned projects not yet initiated/forecasted in BEN (App 2)

Challenge further reduced budget by £1m. Replacement branch no longer funded by KSOR.

In this way with the help of Risk Ranking system by assigning a risk index to each entity of budget (shown in various colour coding), we can gain efficient use of resources and can be dealt with one of the most common yet important issues – i.e. “running out or budget”

24

Though the risk element is associated with every business, the risk can be reduced and efficient use of resources is achieved by implementing a “time machine” called as budgetary control system, this will literally bring the business to the future if implemented systematically.

REFERENCES

Publications:

Arnold, John and Turnley, Stuart (1996): “Accounting for Management Decisions” (3rd Ed.):  Prentice Hall Europe.

 Johnson, Gerry and Scholes, Kevin (1993): “Exploring Corporate Strategy” (3rd Ed.):  Prentice Hall.

Higgins, R. (2007), Analysis for Financial Management, ISE Edition, McGraw Hil Education

Websites :

http://www.lse.co.uk

www.londonstockexchange.com

http://www.lloydsbankwholesale.com/

http://www.lloydsbankinggroup.com/

APPENDIX

1. Cost Centre Mapping:

Cost Centre Cost Head M_140990 Total Staff Direct CostsM_142560 Equipment MaintenanceM_142620 Other Equipment CostsM_148400 Depreciation – otherM_142990 Total Equipment CostsM_144380 StationeryM_144490 Total Other CostsM_144520 Travel & EntertainmentM_144590 External data processingM_144650 CommunicationsM_144900 Total Other Direct CostsM_144990 Direct Costs

25