American Express: Integrating Risk into Corporate Strategy

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Case Details:

Case Code : BSTA059
Case Length : 14 Pages
Period : 2004
Organization : American Express
Pub Date : 2004
Teaching Note :Not Available
Countries : Global
Industry : Financial Services

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

Overview of Risks

Amex believed in a conservative approach to risk management. It had reduced the percentage of high-yield holdings from approximately 12 percent to 6 percent as a result of its ongoing portfolio rebalancing...

Liquidity and Capital Management

Amex realised allocating capital to its growing businesses with a return on risk-adjusted equity in excess of their cost of capital was necessary to build shareholder value. The company's philosophy was to retain sufficient earnings to enable it to meet its growth objectives, and, to the extent capital exceeded investment opportunities, return excess capital to shareholders...

Amex TRS

For TRS' charge card and fixed rate lending products, interest rate exposure was managed by shifting the mix of funding toward fixed rate debt and through interest rate swaps that effectively fixed TRS' interest expense...

Amex Financial Advisers

American Express Financial Advisors' net income increased to $632 million in 2002 from $52 million in 2001, a 95 percent decline from 2000. Included in the 2001 results were restructuring charges of $107 million ($70 million after-tax) and one-time costs of $11 million ($8 million after-tax) directly related to the September 11th terrorist attacks...

Amex Bank

Amex Bank reported a net income of $80 million in 2002, compared with a net loss of $13 million in 2001. Results in 2001 included, restructuring charges of $96 million ($65 million after-tax)...

Exhibits

Exhibit I: Amex: Geographic Revenue
Exhibit II: Amex: Information of all Three Operating Segments as on December 31, 2002
Exhibit III: Amex: Consolidated Highlights
Exhibit IV: Amex TRS: Results of Operations
Exhibit V: Amex TRS: Selected Statistical Information
Exhibit VI: Amex TRS: Liquidity and Capital Resources
Exhibit VII: American Express Financial Advisors: Results of Operations
Exhibit VIII: Amex Financial Advisors: Selected Statistical Information
Exhibit IX: Amex Financial Advisors: Liquidity and Capital Resources
Exhibit X: Amex Bank: Results of Operations
Exhibit XI: Amex Bank: Selected Statistical Information
Exhibit XII: Amex Bank: Liquidity and capital Resources

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