Management of Financial Institutions
Introduction
Managing a business in a changing environmental is not an easy task. In fact, many organizations fail to follow the flow of the market because of their reluctance to change their organization. It doesn’t mean that the structure of the organization should be changed but there is a reaction that every organization understands. The changes in the market are a manifestation that the environment is changing and thus the organizations should follow those changes with the aim not to lose their customers. However, in financial markets, where both service and products are playing, the changes seem to be essential. In the midst of the challenges and opportunities led by the global competition, changes in the business organization can be the most classical example. The aim of each organization to gain the advantages against their competitors and earn the market share is the most basic definition of success. However, the global competition do not only affects the business movements, part of it influences the ability of the business leaders to provide the most desirable technology and information system. With the unanimous agreement of the business community, another round of war will be seen in the information systems.
In order to investigate the current status of managing the financial institutions, the paper will examine the changes and financial environment in the financial institutions like HSBC. In order to perform this aim, the paper will tackle the major factors such as the environment and technology used in HSBC’s information system. With the use of the relevant business models, the paper can analyze the challenges and opportunities answered by the information system being implemented. And because of the continuous effort of the organization in creating an effective information system, the paper also seeks to address the enhancements in decision making process through the use of the information system.
HSBC
“To be global” is part of the organization’s aim in performing within the financial industry. HSBC or previously known as the Hong Kong & Shanghai Banking Corporation brought the management skills in the financial industry in a higher level (HSBC Holdings Plc, 2009). The management of HSBC in catching the changes in the market environment made them possible to perform the international business. Through the application of the management methods like the integration and coordination of the management skills across the borders, the success of the organization is nevertheless at hand. Part of the capabilities of the management is to emphasize the current methods in corporate advertising in which the business analyst that the HSBC is capable of. The statement of the organization “never underestimate the importance of local knowledge” fueled the other local organizations because it simply imply that a local presence, local roots and local services, combined with international reach and large-scale resources, which can be brought to bear for both global and local customers’ benefit. The organization particularly emphasize the importance of local knowledge and expertise within international trade (Segal-Horn, 2006).
Macroeconomic Environment
However, in order to examine the environment of the organization, the PEST analysis has been taken to determine the current performance of the organization.
Political Aspects
HSBC, as a banking institution and an international organization, is naturally under the protection by the regulations and policies formulated by different government in the countries where they are operating. However, its entry might not be that easy that is why it needs to adjust some of its organizational strategy. In addition, the success of the organization in the foreign countries can be traced through their abilities to adhere to the policies given by each government. This is important to ensure that company will be capable to conduct business operations in a successful and effective way. Furthermore, the company also formulates their own protection strategies against any governmental restrictions and limitations (Shreshtha, 2010).
Economic Aspect
As the known largest and competitive organization that performs around the world, the ‘face’ of the banking and finance industry has changed. HSBC is therefore, to have a stable and successful economic stability and become of the top competitor in the financing industry (HSBC Holdings Plc, 2009). Accordingly, despite of the international challengers that the organization encounter especially, in the international setting, the management appears to be strong making HSBC capable in facing the both the threats and opportunities. With the management, the organization can surpass and improve their current business status and together with the other industry, struggles and strives to create a better economic condition (Shreshtha, 2010).
Social Aspect
The firm’s international operation clearly states that the social aspect can greatly affect their management. HSBC in generally addresses the situation of the society in which they are operating and at the same time being affected by those changes. As an answer, the management allowed those changes to penetrate in their system and thus, using it influence to get hold on their consumers. For an instance, the consumers want the banking transaction be easy. This is by eliminating the production long lines and making services fast yet in with the consumers’ preferences. All of the changes can be opportunities for HSBC by producing different additional product options and ensuring that each society is given equal chances to take advantage of the resources given by the organization. In the continuation of the organization’s operation, the company adheres to having good reputation and relations in the society that they belong (Shreshtha, 2010).
Technological Aspect
Due to the influence of globalization along with the changes that it produces, the HSBC becomes more “in touch” with the technology. In addition, the emergence of information technology and internet affects every business sectors around the world and taking the advantage over this modern system processes makes an organization to adopt the changes and add it in their management operations. Actually, HSBC incorporated those technologies and can be described that the root of success is through driving the technologies towards its operations. For the past years, the firm is said to be effective because of its capability to use the offer of technologies in answering the changes within the society. HSBC adopts different IT/IS systems and used internet to reach their customer all over the world and to know the latest trends in the global business. Aside from these, the company also uses facilities which helps them improved their productions and operations (Shreshtha, 2010).
The Consequences of not Following the Changes
It is all true that if the organization did not follow the course of changes, there s a great chance that the organization will lose its consumers. For an obvious reason, the consumers and their never-ending wants and needs is a great for the organization. Generally, the purpose of the organization is to be profitable (except for those non-for-profit organizations) and the only way to do this is to offer that things that the consumers seeks. Therefore, if the organization intentionally did not seek ways to follow the industry trends, it competitors will surely emerge in the industry. However, the rate of success in following the changes is not that clear because there are requirements that the organization needs to recognize. But in spite of that, many organizations openly invites the changes not only to gather the competitiveness by also for the organizational growth. As a classical example in banking institutions, the people used to fall in line before making any necessary transactions and then they often describe the service in a slow movement. But with the adoption of the “online banking services”, the people can now access any transactions using the internet and can ensure that the transaction is secured without making any formal meeting with the teller. This is important for the busy people most likely in the business-type of cities (Sager & Taylor, 2008).
In addition, the international operation of the financial institution is important to strengthen the international relationships. For example, HSBC as an international financial institution have a very complex supply chains because of its connection in both private and public sectors. However, they can manage their operation because of acquiring the internet access wherein every client and every part of the world can transact. With this, it can reduce the gap that the language and differences created and makes the operation more predictable because of the awareness in its environment. Aside from losing the customers and reducing the chances for organizational growth, the market share and effectiveness are also affected by the resistance and reluctance of the organization changes. Although there are amount of money that can be invested in those changes, renewing the strategies seems to be the most important of management changes.
How to Respond
As taken from the background of HSBC, the financial institution truly created various changes. The use of the information system, nowadays, maybe not new in the business organizations because of the recognizable benefits that are gives to their operation. The collecting of information like the simple means of survey evolved and with that, the organizations can relate their business decisions. However, the changes in the information and seeking for the most appropriate service provider might be the basic question because the underpinning principle in this paper is to determine the application of the information system to the extent of the businesses success in operation and assuring that the products and services are best delivered and in quality. At some point, the information system became the most sophisticated approach of the organizations to analyze the most applicable business technique.
In addition, the management approach of HSBC in enhancing the local knowledge and capabilities promotes the idea that the local knowledge is not about the management skills but also the involvement of cultures. As an international organization, HSBC understands the differences of people not only in language but also in cultures and yet can answer their needs (Segal-Horn, 2006).
The Management
HSBC recognized the evident features that businesses based in the emerging market and is recognized towards their attention in providing the adequate solution for the needs of their customers. Because of the rapid changes in the environment and the arising competition of the leading firms, the result is the emphasis on the information race. Capturing the appropriate efforts towards customer information serves as the main aim of the company to support the profitable customer relationships.
In banking sector, the leaders believe that the central information system in indeed needed to provide the updates. The use of a specific technology or machine serves their credibility in providing quality service if the information is fresh and/or updated. The technologies that acquired by the organization are the kind of machines that enables the customer information transformation. However, the firms in the global competition are experiencing the non-technological challenges that lead to their failure in informative system. The organization, HSBC, recognize the changes in the tradition mainframe environments within the IT. The design of the mainframes is based on the theories of summarizing or averaging the information gathered. This practice in technology conserves time and is more efficient (McKean, 1999). The design of the electronic banking system of HSBC is called Hexagon which was designed specifically for corporations and is the largest private system (Gladwell, 2000). The advantage that it delivers in the organization is the ability to work with multi-bank balance and transaction, therefore, its capabilities can be more flexible that the other system. In the application of the system, for example, the accounts-receivable management services that streamline the collection process and improve cash flow. It can supply comprehensive information on receivables and details of intra-day cash positions (Platt, 2004).
Conclusion
Inspired by the examination of HSBC’s information system, if the organization all over the world, even not in financial sector, will use this kind of innovative approach, there is a possibility for the organizations to have a success even in overseas. However, the costs that the system might produce depend on the size and type of organization. In the long-term practice of the company in their information system, the powerful customer approach tremendously delivered the changes that lead to develop more efficient information system. All of the fruitful efforts significantly created impacts in the areas such as the marketing, sales, service, and customer-loyalty. Therefore, the processes towards the information system remain the central power of the firm, enabling them to participate in the global competition.
References:
Gladwell, M., (2000) The Tipping Point: How Little Things Can Make a Big Difference, Little Brown.
HSBC Holdings Plc. (2009) Sustainability Report [Online] Available at: http://www.hsbc.com/1/PA_1_1_S5/content/assets/sustainability/100528_sustainability_report_2009.pdf [Accessed 24 January 2011]
McKean, J., (1999) Information Masters: Secrets of the Customer Race, John Wiley & Sons.
Platt, G., (2004) World's Best Treasury Providers, Global Finance, 18(4):28+
Sager, M., & Taylor, M.P., (2008) Commercially Available Order Flow Data and Exchange Rate Movements: Caveat Emptor, Journal of Money, Credit & Banking, 40 (4):583+
Segal-Horn, S., (2006) International and Cross-Cultural Strategy, The Open University
Shreshtha, A., (2010) PEST Analysis on HSBC [Online] Available at: http://www.managementparadise.com/forums/principles-management-p-o-m/208719-pest-analysis-hsbc.html [Accessed 24 January 2011].
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