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This case was a real-life situation faced by the author. Names were changed, so students would not know that the author was the protagonist. The case had been developed over several years as a capstone to the capital budgeting section of an MBA finance course and an advanced undergraduate course.

Trey and Lauren Gallo were considering the purchase of a vacation condo that also generated rental income. The current owners were willing to sell at a lowball offer of $605,000 as the pandemic entered its 13th month. The Gallos felt they needed to act fast to get this deal. However, the risks were extraordinary, as the pandemic had reduced rental income by 50% and borders had just recently closed. The case provides all data needed to compute rental revenues, capital expenditure, operational expenditures and financing costs. Students are expected to compute the NPV and IRR of free cashflows. Students will compute and evaluate the cost of capital using the condo’s projected debt structure, a choice of several proxy betas and a project risk premium. The case also uses extensive sensitivity analysis. This case differs from corporate capital budgeting problems because it evaluates both levered and unlevered cashflows, and the cashflows include savings from personal use. The case has been successfully used in MBA finance courses and advanced undergraduate finance courses. The case can be used as a capstone case for capital budgeting or a comprehensive exam in undergraduate, MBA and executive programs. The case questions can also be spread throughout a course to cover the topics of financial statement forecasting, free cash flows, capital budgeting, cost of capital and sensitivity analysis.

Earlier versions of this case have been used in an advanced undergraduate corporate finance course and MBA finance courses. The case is generally used as a capstone to the material on capital budgeting. Students should have already covered material on financial statements, loan cashflows, levered and unlevered cashflows, CAPM, proxy betas, weighted average cost of capital, NPV and IRR. This case is also appropriate for courses in real estate finance and personal finance.

In November 2005 Fidelity Homestead, a savings bank in Louisiana, began noticing suspicious charges from Mexico and southern California on its customers' credit cards. More than a year later, an audit revealed peculiarities in the credit card data in the computer systems of TJX Companies, the parent company of more than 2,600 discount fashion and home accessories retail stores in the United States, Canada, and Europe.

The U.S. Secret Service, the U.S. Justice Department, and the Royal Canadian Mounted Police found that hackers had penetrated TJX's systems in mid-2005, accessing information that dated as far back as 2003. TJX had violated industry security standards by failing to update its in-store wireless networks and by storing credit card numbers and expiration dates without adequate encryption. When TJX announced the intrusion in January 2007, it admitted that hackers had compromised nearly 46 million debit and credit card numbers, the largest-ever data breach in the United States.

After analyzing and discussing the case, students should be able to:

• Understand imbedded operational risks

• Analyze how operational risk decisions are made in a firm

• Understand the challenges in the electronic payment transmission process, which relies on each participant in the process to operate best-in-class safety systems to ensure the safety of the entire process

• Recognize the sophistication of IT security threats

Understand imbedded operational risks

Analyze how operational risk decisions are made in a firm

Understand the challenges in the electronic payment transmission process, which relies on each participant in the process to operate best-in-class safety systems to ensure the safety of the entire process

Recognize the sophistication of IT security threats

After studying and analysing this case, students would be able to evaluate and understand the importance and need of an infrastructure sector in a country, its inherent risks and scope of infrastructure investment and financing in India – National Infrastructure Pipeline and the important role of Non-Banking Finance Company’s (NBFC) vis-à-vis banks in infrastructure financing in India; critically analyse and recommend alternative decisions in a business problem situation using multi-criteria decision analysis, which is a tool used for business portfolio analysis; understand and evaluate the corporate portfolio management (CPM) tools used for an optimum portfolio mix to turn around companies; identify and suggest an optimum portfolio mix to turn around a finance company using CPM assessment applied to Pidun matrix; and recommend operational and strategic levers for successful turnaround implementation by using the integrated canvas on turnaround.

On 10 May 2020, in New Delhi, India, J. Ray took charge as a full-time director of an Indian Non-Banking Finance Company – Infrastructure Finance Company (NBFC-IFC). The NBFC-IFC of the Indian Government extended long-term financial assistance to infrastructure projects in India. During the financial year (FY) 2017–2018 till FY 2019–2020, the company suffered substantial losses to the tune of US$13.7bn, with profitability experiencing a notable decline – return on assets at a negligible 0.11% and return on equity of only 0.68%.

The NBFC-IFC had a declining yield on advances at 7.05%, net interest margins (NIMs) of 2.08% against a high cost of borrowing at 7.66%, a declining loan book (by 4.35%) of US$336.27bn and a fast-deteriorating asset quality with highest ever non-performing assets (NPAs) at 19.70% of its loan book. Such financial parameters, compared with that of the industry average of banks and finance companies, meant that the NBFC-IFC Ray had taken over was fast bleeding and was on the brink of being declared a sick company. In comparison, private and other government players had profitable and much healthier financials, and Ray felt that there was a need for improvement. To make things worse, Ray got to know that the Indian Government was in the final stages of setting up a new development finance institution focused on long-term infrastructure financing in India. Ray realized the question was not only of the NBFC-IFC remaining relevant but also of its existence in the fast-evolving sector. Ray wondered what could his his integrated canvas be for a turnaround strategy that could include effective management of an optimal portfolio mix.

With a healthy capital-to-risk (weighted) assets ratio of 30.85% and a satisfactorily improved net worth of US$103.1bn, in the given Reserve Bank of India regulatory provisions for the NBFC-IFC including restrictive exposure norms and NBFC-IFC’s operational mandate prescribed by the Indian Government, Ray had to shift the product and sectorial investment of the NBFC-IFC to reduce the NPAs, increase loan book size and improve the yield of advances and its NIM to effectively turn around the company’s profitability. Ray realized that he needed his team to evaluate and select a product and sector strategy for this change.

The present case of financing investment in infrastructure is interesting for implementation in developing economies because a lack of infrastructure is a common problem and there is a necessity of achieving a more developed infrastructure system to support accelerated economic growth in these countries. This case can be used in elective courses on corporate finance strategy and corporate portfolio management for infrastructure finance companies. This case can be taught in elective courses in post-graduate and MBA programs. This case can also be included in management development programs (MDP), executive MBA programs and executive-level courses that have subjects such as corporate finance strategy, corporate portfolio management and strategy management that focus on turnaround strategies including portfolio management for banks and finance companies.

Teaching notes are available for educators only.

CSS 11: Strategy.

In April 2012, JPMorgan Chase & Company was struggling with large losses that had the potential to damage the reputation of the company, of its Chairman, Jamie Dimon, and of its Chief Investment Officer, Ina Drew. The losses arose from large credit derivative trades in the London office that Dimon described as “bad strategy … badly executed … poorly monitored”.

In March 2007 C. James Prieur, CEO of insurance provider Conseco, was faced with a crisis. The front page of the New York Times featured a story on the grieving family of an elderly woman who had faithfully paid for her Conseco long-term care (LTC) policy, only to find that it would not pay her claims. Her family had to pay for her care (until her recent death), which unfortunately resulted in the loss of the family business. The family was now very publicly pursuing litigation. For a company that depended on thousands of employees, investors, and independent agents who sold the insurance plans, this reputational risk was a serious threat. On top of this immediate crisis, all signs in the industry were pointing to the fact that the LTC business itself was not viable, yet over the years Conseco had acquired a number of LTC insurance providers. Students are asked to analyze not only what Prieur’s priorities should be in addressing the immediate crisis but also the risks inherent in the LTC industry and how this might affect Conseco’s success as a business moving forward

After reading and analyzing the case, students will be able to:

• Analyze the risks in the long-term care insurance industry

• Distinguish the various types of risk that caused a company’s crisis and recognize the potential for contagion

• Brainstorm how the risks faced by Conseco could have been avoided or better contained

• Recommend the first steps C. James Prieur and the Conseco leadership team should take to rectify the New York Times article crisis

Analyze the risks in the long-term care insurance industry

Distinguish the various types of risk that caused a company’s crisis and recognize the potential for contagion

Brainstorm how the risks faced by Conseco could have been avoided or better contained

Recommend the first steps C. James Prieur and the Conseco leadership team should take to rectify the New York Times article crisis

This case will enable students to: understand reasons for mergers and acquisitions (M&A); identify and explain the risks associated with M&A and corresponding risk mitigation approaches; and decision-making on postmerger integrations.

The case discusses the integration dilemma around ChocoTravel’s M&A of Aviata. Both are among the largest online travel agencies in Kazakhstan. The acquisition of Aviata was not the first M&A deal for ChocoFamily – the Holding Company of ChocoTravel; however, it was the largest one. By combining their operations, ChocoTravel and Aviata together could capture 70% of the market share and become the market leader. Although the M&A had high potential toward superior business performance, it had significant risks. Threats of integration failures often make M&As fail. The management of ChocoTravel, therefore, had to consider several factors that could act as potential threats to post-M&A integration. First, each company had its own operating model and corporate culture. Second, both brands, ChocoTravel and Aviata, were well established and recognized in the market; each of them had its own loyal clients. Taking into account low switching costs to customers, the CEO of the new joint company needed to decide whether to integrate ChocoTravel and Aviata or keep them separate or even discontinue one. So, the important thing was not to disrupt operations and lose customers while introducing the post-M&A integration strategy. This case focuses on the challenges of post M&A integration.

The case targets last year’s bachelor’s students, Master of Business Administration/Master of Science students as part of the business strategy, marketing and branding and M&A classes. It allows students to have a broad in-class discussion and apply knowledge to make strategic management decisions in postmerger integration situations.

Teaching notes are available for educators only.

CSS 11: Strategy.

The case is suitable for use in the topics related to the functions and roles of Islamic pawn-broking and the Islamic risk management framework.

The case is designed for undergraduate and postgraduate students taking courses in Islamic Banking, Islamic Finance and Risk Management for Islamic Banking Institutions.

This case is meant to explain the mechanics of pawn-broking (Ar-Rahnu) in Islam as well as to understand the risk management of Ar-Rahnu in the bank. Ar-Rahnu is discussed, in general, from the perspective of muamalat and then is related to the financing service offered through Ar-Rahnu scheme at Al-Qamari Bank Berhad (a disguised bank). Ar-Rahnu means making an asset as a security or collateral for a debt. The collateral will be used to settle the debt when the debtor is in default. It may also be known as borrowing with either collateral or pawn-broking. In Al-Qamari Bank Berhad, gold and jewellery are the subject of collateral for Ar-Rahnu. In return, customers will get the cash based on the margin of loan with regards to the current market value of gold/jewellery as determined by the bank. The operation of Ar-Rahnu is discussed in Exhibit 1, while the risk management of Ar-Rahnu is discussed in Exhibit 2.

The learning outcomes include: to identify a problem and issue related to Ar-Rahnu; to evaluate the modus operandi of Ar-Rahnu; to analyze the risk management practices of Ar-Rahnu; and to develop decision criteria on whether Ar-Rahnu in Al-Qamari bank is Shariah-compliant or not.

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After completion of the case study, the students will be able to understand the different risks associated with a business, focusing on price risk and the importance of price risk management in business; understand and evaluate the products available for hedging price risk through exchange-traded derivatives in the Indian scenario; and understand and evaluate the different strategies for price risk management through exchange-traded derivatives in the Indian scenario.

The case study pertains to a small business, M/s Sethi Jewellers. The enterprise is being run by Shri Charan Jeet Sethi and his son Tejinder Sethi. The business is located in Jain Bazar, Jammu, UT, in Northern India. The business was started in 1972 by Charan Jeet’s father. They deal in a wide range of jewelry products and are well-established jewelers known for selling quality ornaments. Tejinder (MBA in marketing) was instrumental in revamping his business recently. Under his leadership, the business has experienced rapid transformation. The business has grown from a one-room shop fully managed by Tejinder’s grandfather to a multistory showroom with several artisans, sales staff and security persons. Through his e-store, Tejinder has a bulk order from a client where the client requires him to accept the order with a small token at the current price and deliver the final product three months from now. Tejinder is in a dilemma about accepting or rejecting the large order. Second, if he accepts, should he buy the entire gold now or wait to buy it later at a lower price? He is also considering hedging the price risk through exchange-traded derivatives. However, he is not entirely sure, as he has a few apprehensions regarding the same, and he is also not fully aware of the process and the instruments he has to use for hedging the price risk on the exchange.

The case study is aimed to cater to undergraduate, postgraduate and MBA students in the field of finance. This case study can be used for students interested in commodity derivatives, risk management and market microstructure.

Teaching notes are available for educators only.

CSS 1: Accounting and finance.

Delhi Jal Board (DJB) is about to launch the first of three pilot Public Private Partnership (PPP) projects to improve water supply in Delhi. The case describes the past history of such projects and the design of new pilot projects, especially the terms of the concession agreements. This provides an opportunity for assessing the PPP Concession agreement in terms of incentivizing performance and simultaneously maintaining flexibility given project uncertainties.

The case introduces student to basic understanding of banking sector in Tanzania as well as the strategies and struggle to raise capital through shareholders’ funds. Application of Banking theory and Pecking order theory is evidenced from the case. The case outlines why the bank struggled to raise capital and what triggers the capital raising strategies. It also give students an opportunity to think about applicable theories of capital structure and bank capital, and strategies the bank could use to rescue its capital crunch in the future.

The case provides details of how the Capital Community Bank (CCB) raised its capital through strategic financial engineering which enabled it to raise the minimum regulatory capital required to be licensed as a financial institution unit, to a regional financial institution, to a fully fledged commercial bank. The bank started with a paid up capital of TZS 472.3m in 2002, involving four Local Government Authorities and individual investors. Capital raised to TZS 31.3bn in 2014 and down to TZS 20.6bn at the end of 2016. The minimum regulatory capital required is TZS 15bn, while paid up capital was 16.9bn. With the change of the management team in 2017, the bank is looking for avenues to raise further capital to meet the regulatory limits and continue to survive as a commercial bank, given dramatic changes in the banking sector in Tanzania.

The case is suitable for third year students in Bachelor of Commerce/Economics specializing in banking/financial services. It also suits postgraduate/master's students seeking a Postgraduate Diploma or Master of Business Administration in financial institutions/banking course.

Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

CSS 1: Accounting and Finance.