In other cases, nevertheless, firms enter fresh business lines, expand into novel distribution channels or extend into fresh markets. When going beyond the limits of the firm's existing business model, effective management typically put into consideration the new product in the context of the company's strategic plan (Stanford2011). .
Besides considering the commodity's strategic fit with the firm, successful management consider the institution's customer base. In precise, the firm evaluates the novel commodity from a fairness point of view. First and foremost, they evaluate the existing clients in terms of whether they really need the product. The management also ensures that the risks, features, terms and condition of the item are conspicuously and clearly explained (Choo 2002). Effective leadership should ensure that fees and penalties are structured in a way that even the unsophisticated, unsuspecting or vulnerable consumers would not experience financial problems. If the prospective commodity appears to be an excellent fit with the firm and its clients, only then does successful leadership delve into the more technical aspects of the given decision. .
It is usually tempting to concentrate disproportionately on the merits of a fresh commodity and less on the probable risks. For this reason, it might be recommendable to first evaluate the risks of a proposed fresh commodity before emphasizing on the gains. Successful management teams reviews the risks and costs of the product very extensively, focusing at all threat dimensions across the firm. While a product may seem to fit into a specific risk niche, the interconnectedness of the different aspects of the given target population cannot be ignored. For instance, internet or mobile banking can not only generate a number of operational threats but also lead to escalated liquidity, compliance and reputational risks. New home equity commodities may permit consumers to lock in section of their non-fixed –rate line of credit at a constant rate but can also cause increased credit or sensitivity risk (Stanford2011).
