Citibank Indonesia

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How does the Citibank budgeting process work? Is this a Participative process? Citibank applies two management processes to control its international branches: sovereign risk limits review and operating budget review. Its budgeting process is a bottom-up. Although it starts from the headquarters’ instructions which guide the timing, format and issues needed to be addressed, budgeting is not obliged to attain specific targets. The corporation’s long-term goals are shared. Some international branches such as Indonesia, however, often establish their own targets since they traditionally excel the corporation’s goal. Like the sovereign risk limits setting process, the country managers seem to have responsibility to modify their goals based on a better understanding of their own branches about the economic conditions and political relations. A revenue budget is the usual starting point for the operating budget because many costs depend on the bank’s operations which generate the revenue. Therefore, the accurate projection about major customer account is needed for banks. In Citibank, once the operating managers receive the budget instructions, they prepare forecasts of the major account relationships and discuss about the forecast until it is able to be reconciled with their target profits. Then costs are considered. According to the budgeting process above and Mr. Mistri, Indonesia’s country manager, Citibank is implementing participative budgeting process. Every level of managers is involved in budget review process and lower management level leads more revision than higher levels do. This is partly because managers’ incentive compensation is closely combined with budget-related performance. This compensation scheme brings more participation of lower-level managers and the participation creates more commitment and accountability toward the budget.

What challenges does Mistri face, and what options are available to him? Citibank’s manager at corporate...
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