Political Risks

Bangladesh is prone to social instability and this has been reflected in its poor short-term
political risk index score of 60.0 out of 100 in the Global political index. The ensuing verbal
showdown between the ruling Awami League and opposition Bangladesh National Party
could escalate into protests and violence. Standard Chartered Bank could face high social
instability as the both political parties have a tendency to mobilize their supporters on the
streets by means of a mass demonstration and this has been reflected in the past.

In Bangladesh, the bank itself can suffer from other political challenges like frequent social
strikes, terrorist threats, poor-quality infrastructure, and under-performing financial system,
public sector inefficiency inadequate exploitation of the countrys natural resources, limited
availability of capital and population growth (even though it has slowed down considerably
in the recent years). Thus, these factors can have a very negative impact to the banking
industry in the operating country. The political context in Bangladesh is fragile,
vulnerabilities stem from strong polarization between the two-main political partys high
terrorism risk and a difficult geopolitical context.

Economic Risks

Bangladesh ranks 17 out of 190 economies in the Doing Business 2017 survey. It is almost
the lowest in the world for getting electricity and enforcing contracts. Corporate insolvency
resolution framework is also poor which is a vital risk for any operating or potential
international banks. In the recent years, the inflation as measured by consumer price index
went up by 0.17 percentage points to 5.57 percent on point to point basis this year. Though
inflation pressure came from banking with a higher contribution in the second half of the
fiscal year according to the quarterly review of the countrys macroeconomic health. The
banking sectors are remained entrenched in high no-performing loans and uneven interest rate
spreads, reflecting the inadequacy of competition and contestability. Regulatory capital to
risk-weighted assets were just 7.5%, placing banks in some risk in the event of significant
defaults. There is less access of foreign customers into banking sectors due to strict economic
policy regulations which is a vital negative factor impacting international banks in
Bangladesh.

The per capital income of Bangladeshi residents are comparatively low to other Asian
countries which can cause slow banking growth. In addition, the financial sector is also weak
and credit risk is elevated.
 Competitive Risks

There is a noticeable high competition among the competitors of SCB. A high amount of
competition is observed in the banking sector of Bangladesh. There are more than 50
commercial banks in Bangladesh that fights for their own share of market which is an
important risk to take care of. The national banks have the highest banking network in
Bangladesh. They compete against the banks with their low cost of operation and government
support. Again, Standard Chartered Bank is the largest multinational banking network in
Bangladesh that has its network in many metropolitans of Bangladesh. Because of the easy
entrants there are and would be other international banks that may also take part in the
competition and they could be aggressive in nature. This high intensity of competition can
make SCBs sustainability difficult in the long run. Thus, with the various new and upcoming
banks pose a significant threat to Standard Chartered Bank. SCB has to be aware of its
potential competitors.

The launch of premiere banking by its core competitor HSBC poses a strong risk on SCBs
premium customer group and SCB is at a condition where it has to launch even better
products so the risk of substitutes is quite high in Bangladesh Banking Industry.

Operational Risk

In the recent employee survey in the bank itself SCB it has been found that the employees of
SCB lacks with the commitment of superior and also pretty dissatisfied being an employee in
the organization as SCB tends to hire contract workers more. As it is a very harmful risk SCB
is not overlooking because it is causing the damage to service quality as a whole. Here the
risk of getting leaked of the internal information of SCB to its potential and incumbent
competitors is very high. Most of the Bangladeshi employees working in SCB have a
tendency to leave the organization as a result SCB can be facing potential losses due to
human errors and absence. Human caused errors can be done willingly or unconsciously.

Despite of having a full information technology based system of database SCB has all of the
important datas or information on its own server which allows hackers to crack its web and
hack the very essential data or information on the other side due to having backdated IT
equipment comparing to other international banks SCB is risking itself by tending itself to
potential losses due to system failures and programming errors even it can cause potential
losses due to improper information processing, leaking or hacking of information and
inaccuracy of data processing.