Why Is a SWOT Analysis a Useful Tool for Financial Institutions?
In financial terms, a SWOT analysis stands for strengths, weaknesses, opportunities and threats. This type of analysis is useful for small and large financial institutions alike because it breaks down important issues, especially in the planning stage.
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Strengths
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To determine a financial institution's strengths, it is important to list several questions that need to be answered. This list can include questions such as, "What makes you better than your competitor?" or "Why are you unique?"
Weaknesses
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As is the case with strengths, businesses or individuals must honestly answer questions relating to the weaknesses of the business. These questions can include, "In what area can you improve?"
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Opportunities
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The opportunities section of a SWOT analysis relates to the potential for future success for the institution. Again, it is important to ask questions for this section. A potential question could be, "How can your business expand in the next three to five years?"
Threats
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The SWOT analysis threats section is the opposite side of the opportunities section. Here, you must ask questions relating to negative change, such as, "How many skilled employees will you lose to retirement in the next five years?"
Conclusion
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A SWOT analysis during the planning stages of a financial decision is a useful way to making a wise business decision. The strengths of the plan should outweigh the weaknesses, just as the opportunities should outweigh the threats. This is particularly important for financial institutions, whose fortunes rest on their ability to succeed in a highly competitive sector of the free market and whose decision-making impact takes a relatively long time to produce results.
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References
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