Use strategic thinking to outline a recommended alternative for Franklin Raines to use in deciding the strategic direction of Fannie Mae. It is 1998 and you are about to take over as CEO of Fannie Mae. Use the two cases on Fannie Mae in the Course Documents (Fannie Mae A and Fannie Mae B abbreviated) for background on Fannie Mae. Exactly how should Franklin Raines proceeded in terms of strategy development what subsequent implementation steps should he have adopted. The Strategic Audit process should be applied in outline form (see course documents). Put yourself in the 1998 timeframe and draw on the concepts and ideas of the classical strategists i.e. Sun Tzu, Clausewitz etc.Case is in Course Documents.
MGT 553 Ethics Case
Current Situation: Fannie Mae grew rapidly into the largest firm in the U.S. housing finance system and a major global financial institution. The Enterprise achieved double-digit growth in earnings per common share (EPS) for 15 straight years and leveraged its extraordinary financial success into enormous political influence. That financial and political success gave rise to a corporate culture at Fannie Mae in which senior management promoted the Enterprise as one of the lowest-risk financial institutions in the world and as “best in class” in terms of risk management, financial reporting, internal control, and corporate governance. Vision:
* Strict adherence to accounting rules "in an effort to reflect fluctuations in profit and maintain adequate risk controls * Accounting transactions and controls are transparent in all material aspects and comply with the Generally accepted accounting standards (GAAP) * Bonus targets are reached by not manipulating the accounting systems. * Refit its business model into something publicly useful, consistently profitable, and politically sustainable and corporate culture. Mission:
* Fannie Mae an image of the Enterprise as one of the lowest-risk financial institutions in the world and as “best in class” in terms of risk management, financial reporting, internal control, and corporate governance. * Fannie Mae exists to serve America’s families and the housing market. Assisting working families by having access to mortgage credit to buy homes they can afford over the long term or that they can secure quality rental housing . * Fannie Mae profit growth and hit announced targets for earnings per share precisely each quarter though achievements of appropriate accounting and proper earnings management * Promote values that are consistent with responsibility, accountability, and integrity. * Create a liquid and reliable secondary market for residential mortgages * Strategic and Financial Objectives
* Increase compliance by ensuring that Fannie Mae accounting policies and practices comply with Generally acceptable accounting principles * Strengthen policies on internal controls, financial reporting and corporate governance * Increase more caution on interest rate risks, by making accurate forecast and make less favorable interest rate assumptions, thus preventing economic losses. * Increase Board of Directors contribution in decision making by ensuring that they are sufficiently informed and act independently of its chairperson and other Senior Executives, by excising requisite oversight over the Enterprise operations. * Strengthen policy controls around the annual incentive plan where the focus on should be on controlling risk rather than increasing earnings Financial Objectives
* Increase investments in accounting systems, computer systems, other infrastructure, and staffing to support a sound internal control system, proper accounting, and GAAP-consistent financial reporting by 15% * To lead the Enterprise into a new era of growth in business volumes and profits by challenging senior management and employees to double EPS in five years by 20% by proper disclosure....
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