Cesim Bank is a browser-based bank management simulation game developed to facilitate understanding of the front and back office operations of a bank, and their interaction in a competitive environment, and to help cultivate a holistic and fact-based management culture, develop analytical skills, and create awareness about the current banking operating environment.
Below is a non-exhaustive list of banking and business concepts that participants will practice by playing the bank simulation game.
If you are wondering whether this bank simulator game is right for your course or training program, have a look at this list to get a general overview of the concepts present within the game.
1. Risk management
All businesses face a great many different types of risk and banking is no different. There are also risk management issues that are very specific to the banking industry alone as well as the all too familiar fact that systematic negligence to proper risk controls can have seriously adverse effects on the economy. Our simulation incorporates a host of risk related topics ranging from operational risk and customer credit profiles to solvency risk regulation and interest rate risk management. In fact, most of the decisions in our banking simulator game are somehow linked to one or more of the risk metrics we follow and report to participants.
2. Bank solvency regulation
One of the ways in which the banking industry greatly differs from others is the typical amount of equity on their balance sheet and the associated international solvency regulation. This is also a core topic that students should immerse themselves in if they wish to develop their competence in the field. The banks in our simulation, much like their real world counterpart, operate with very little equity on their balance sheet, and the regulators keep an eye on their operations. The Cesim Bank simulation incorporates the key concepts of Basel regulations such as risk weighted assets and mandatory thresholds for different items of capital as well as numerous decisions that can be adjusted to address these issues.
3. Bank specific financial ratios and terminology
Finance has its own jargon and there is no escape from that. Tier 1 capital, cost to income ratio, risk weighted assets, net interest margin, rate sensitive liabilities, minimum reserves, Basel III, loan loss reserve and net charge offs are just some of the terms students should be master and in our banking simulation these terms are introduced to the participants in the correct context complete with the formulas for calculating them.
4. Structure of bank financial statements
Banking also comes with a very different set of financial statements that students need to be able to navigate through to form a reliable estimate of their fair value. The most notable difference comes from the fact that for banks lending and borrowing is part of their core business and not so much a financing cost that appears on the income statement after operating profit. The financial statements of our simulation banks introduce the participants to the world of net interest incomes, non-interest incomes, provisions for loan losses, reserves, core deposits and managed liabilities.
5. Bank funding peculiarities
Banks much like most other companies use a wide variety of different funding sources. However, banks have access to central bank funding, they typically rely on short term funding such as demand deposits and interbank funds for long term investments such as mortgages, routinely borrow money from other banks and the most basic form of bank funding, customer deposits, is actually a product the bank sells to its customer base. All of these concepts are readily present in our simulation.
6. Interaction with central bank
Another core topic in banking is the interaction with the central bank. While other industries are normally excluded from central bank operations, banks deposit their minimum and excess reserves there as well as use the central bank as a lender-of-last-resort. In our simulation, a certain fraction of short term liabilities must be deposited at the central bank in every round, and in case the simulation banks are not able to satisfy their funding needs by tapping the interbank market, they must seek funding from the central bank.
7. Pricing of loans and deposits
Banks buy and sell money. This involves a process of seeking funding from multitude of different sources as well as pricing loans to different customer profiles. Both of these topics are integral to our banking simulation; we have multiple customer segments and deposit and loan products. Some of the issues that need to be kept in mind when deciding at what price to buy and sell include competitors' current pricing, liquidity risk preferences, marketing strategy, marginal cost of capital, expansion plans, credit impairment patterns, customer risk profiles and expected economic development.
8. Stakeholder thinking
The preferred winning criterion in our banking simulation is the cumulative total shareholder return which emphasizes a very clear shareholder perspective. However, we report a host of data to help the participants understand how all the different little elements make up the whole and how trade offs and disputes can arise between different stakeholders as well as to help the instructors bring attention to topics such as employee and customer satisfaction.
9. Interaction of customer facing and support operations
One of the great things about a simulation is the ability to present holistic systems and the interaction of individual elements in a larger system to the simulation participants. Banking in total incorporates a huge array of customer facing front office operations and a set of core back office operations that support customer processes. In our banking simulation we have retail, SME and corporate banking modules as well as supportive functions such as systems, risk, personnel and treasury management. While learning the peculiarities of these different silos is a valuable endeavor, a real banker needs to understand that before the loan papers are inked, a lot of functional areas of the bank have had their hands on the process, and understanding these interactions is crucial for success.
10. Identification of growth opportunities and value drivers
Our banking simulation includes, especially when implemented in its most expansive configuration, several customer segments, several product types, several different services and several support functions all of which impact each other. In order to steer this enterprise towards growth and profitability a lot of analysis has to be carried out in order to find out which trade-offs are most worthwhile and which ones just needlessly amplify risks. The banks can increase staffing, lower prices, increase marketing expenditures, launch new products, form partnerships, put more of the bank's capital at risk, specialize by developing product expertise, reserve more hours for sales training, work to improve bank image or use any of the other means available to seek growth and new avenues for profit all the while worrying if their competitors will rush to the exact same direction.
All of this is wrapped up in an unparalleled teamwork exercise package that is highly modular meaning that you are able to hit your learning goals with that much more precision.
What are some of the most difficult concepts to teach to students about banking and finance? Do you have ideas on how we could take the next step with our banking management simulation? Please let us know about your thoughts.
