Strategies that HSBC Adopted to Suit the Changing Business Environment - Essay Example

 PROJECT PROPOSAL FORM INSTRUCTIONS 1. Remove this page before submitting your Proposal Template. These instructions will help your proposal to look organized, well-thought-out, and orderly. 2. Remember the key rules about Harvard citation style and presentation: (a) All fonts must be 12 (either Arial or Times New Roman are preferred); (b) All text must be left-justified (meaning you cannot have a straight right margin); (c) All references are to be in Harvard citation format (use the UWLV web site as your primary resource for determining proper form); (d) References are never indented or right-justified. 3. Do not add or change categories in this template. Your proposal must match this template precisely. 4. Present yourself as totally unbiased in all your writings and remember to write in the third person. RESEARCH PROJECT PROPOSAL FORM 1. Aims/objectives/Research Questions: Provide a brief introduction/context to your topic, state your aims, objectives and research questions (350-400 words) Introduction Risk has been defined as the level of exposure to uncertainties which an organization needs to effectively understand and manage to achieve its business objectives and to create value (Norrman & Jansson, 2004). An organization needs to be conscious of the probability of events likely to occur and the consequences of that event. As technologies have advanced so have the risks and hence close monitoring has become essential. This is particularly essential in the banking sector where the banks are responsible for bearing and managing risks on behalf of their clients (Sensarma & Jayadev, 2009). The banking sector globally has been undergoing turmoil globally and risk management becomes a critical issue. Banks are financial institutions and risk management is critical to their survival. They have to manage this through pooling of risks and selling their services as risk specialists. The financial performance of the bank depends upon the efficiency with which they manage risks. HSBC is one of the leading banks that have been able to sustain the financial recession and still maintain profits. They change their strategy as the situation demanded and limited the extension of credits to new clients. HSBC realized that the purchasing power of people had reduced and the immediate step that they took was to curb issuing new credit card (Poulter, 2009). This helped them build their financial standing and it also demonstrates that HSBC plays it safe and believes in old-fashioned banking virtues (Duncan, 2009). Research Aims and Objectives However, it would be of immense value to the financial sector and particularly to the banks in the emerging economies to investigate into the strategies that HSBC adopted to suit the changing business environment. This requires evaluating its risk management strategy. Hence, with the aim to investigate how banks manage risks in the interest of all the stakeholders, the objective of the study would be: To review the theoretical frameworks that banks apply in managing risks To evaluate why banks fail in managing risks To investigate the strategy adopted by HSBC in managing risks To evaluate the factors that influence management of risks in the banking sector Research Questions: Accordingly, the research questions would be: Do the bank executives have the appropriate knowledge of the risks involved in the sector? Is proper training provided to the employees in evaluating and managing risks? Is top management commitment and involvement available in managing risks? Are there any standards in the banking and financial sector which can guide the banks in managing risks? What are the causes of failure in managing risks? How can risks be mitigated? 2. Methodology: Explain how you are going to answer your research questions i.e. explain your methodology and methods (300-400 words) The research strategy depends upon the purpose of the research, the size of the sample, the time and the budget in hand. Since this is an exploratory study meant to benefit the banking sector in particular, a qualitative study has been envisaged. An in-depth analysis of the situation and the strategy is possible through the qualitative approach. As per the research onion the research strategy could vary from an experiment to a survey to a case study. This study adopts a single case study approach as information can be gathered through multiple sources. The case-study approach is the ideal methodology when in-depth investigation is essential. As multiple sources of data are used, case studies bring out different viewpoints (Tellis, 1997). The key feature in case study is not the method or the data but in understanding the process as they occur (Amaratunga, Baldry, Sashar & Norton, 2002). The documents enable an insight into the behaviour pattern and help discover unique features. It is thus proposed to conduct a single, intrinsic, exploratory study into the strategies and functioning of HSBC. The entire study would be based on integrative literature review and no primary data would be collected. This is because the management at the bank may not be willing to share their financial strategies and information. However, data can be obtained through their website, through journals, and research papers. Attempts would also be made to obtain data from financial journals to obtain detailed information on the profitability performance of HSBC. In addition current information on HSBC would also be taken from dailies. Secondary data has its own importance as they generate new understanding through reflection or knowledge integration (Feurer & Chaharbaghi, 1995). Efforts will be made to integrate the most recent information and literature from published sources would be used. 3. Brief Literature Review: Risks are uncertain future events and are linked to opportunity and upside (Chris, 1999) and they are expected to enhance the value of the firm and the shareholder wealth (Sensarma & Jayadev, 2009). To enhance shareholder wealth the management of underlying risks is important. Banks that are better risk managers are able to enhance shareholders’ value. The bank financial statements should be looked at from the risk management perspective, finds this study. Risk management capability of the banks is an important determinant of stock returns of banks. Credit Risk Management (CRM) differs in the way commercial banks operate in developing and developed economies. The environment (credit policies and strategies, quality of staff and technology) in which the bank operates is an important consideration for risk management to be successful (Richard, Chijoriga, Kaijage, Peterson & Bohman, 2008). Banking crisis arises due to excessive securitization, high leverage, extensive market trading, excessive dependence on short-term capital market funding and a bonus culture, all of which have been associated with lack of basic knowledge of banking risks and value drivers by the senior managers and the board members (Holland, 2010). Since it was considered a low-level function, risk management was left to internal auditors (Chris, 1999). A more dynamic approach to risk management is critical to delivering sustainable returns to the shareholders. If the management is aware of the importance of risk, greater sophistication in risk management is likely (Chris, 1999). JP Morgan and Canadian Imperial Bank of Commerce (CIBC) claim that enterprise risk management (ERM) have helped them create risk adjusted measures of business performance and this in turn has led to allocation of capital among their business more efficiently (Steven, 1998). However, the term ERM is ambiguous and banks are not clear on what it involves. While Steven calls risk management a “fad” as everyone wants to do it but do not know what exactly it is, Odit, Dookhan and Marylin (2011) claim that risk management is undoubtedly the cornerstone of prudent banking practices. Risk management without measurement is not feasible, says Chris and hence appropriate models need to be developed. Chris refers to 8-point plan risk architecture as the risk management framework as the management’s view of risks has evolved from the back-room to board room. Diversifying bank’s activities forms a part of the risk management practices (Odit, Dookhan & Marylin, 2011). Dedman and Robert-Tissot (2001) had warned of the perils of the extensive penetration of e-commerce technologies in the banking sector. Banks rf easily enter new markets, change the way operations are conducted, and even the way the records are recorded, all pose a threat to the sector, thereby calling for a review of the strategies. Claims can be reduced and losses controlled through effective measures, contend the authors. HSBC along with RBS were among the first banks to ration the issue of credit cards as they limited access to all forms of credit including land mortgage (Poulter, 2009). They have been accused of limiting competition thereby driving up the costs of borrowing but then any organization would first ensure the stakeholders’ interests. HSBC also delayed their upturn plans amidst the economic recession (Fleming, 2009) which suggests that they moved ahead with guarded steps. In fact HSBC had warned of the sub-prime crisis even before the magnanimity of the event could be experienced by others. In fact while all other banks needed government support and had to bailed out, HSBC registered solid profits (HSBC, 2009). It thus appears that while researchers and authors find that the banking sector lacks knowledge of the risks and risk management, very studies actually have probed into how banks manage risks. No specific case study has been found relating to management of risk by any particular banking group. Hence this study would be of great significance as HSBC is among those banks that have tried to keep its risks to the minimum level. However, the risk management strategy that they adopted needs to be reviewed and evaluated. Explain how your work fits into existing published work. Do this by locating and critically reviewing about 10-12sources of information (references) connected to the work you propose to do and show how your research aims/questions intend to fill any gap or extend knowledge. Refer to your research methods module and compare and contrast this information with what you intend to do and with your research approach. Approximately 8-10 of these references must be academic publications, from refereed journals which will be found in our online databases such as Ebsco. Do not use books in this section. Refer to examples in the workshops. (500-750 words) 4. Resources/Data access: Explain what resources you will need, what resources you have access to, and what access have you secured for the primary data (200-300 words) Resources require are only information from different sources and thus access to online library and subscriptions are essential. Efforts will be made to obtain library access through the university. Online access would facilitate research as it may not always be possible to go to library during their working hours. Online libraries enable work at one’s own convenience, time and pace. Since the research subject is such no primary data will be possible. Other resources required are laptop and internet connectivity, which are easily available. 5. Project Schedule Use the template below and fill in the due dates so that you and your supervisor can map out your journey. Allocate 4-6 weeks each for stages 1 and 3. The final draft must be given to your supervisor one month prior to the submission date. You are encouraged to meet with your supervisor after feedback at stages 1 and 3, and possibly stage 5. Steps Description Due date 1 Week-1-2: Area of interest identified 2 Weeks 3-4: Topic selected/form submitted 3 Weeks 4-5: Topic refined to develop dissertation proposal 10th November 2011 4 Weeks 5-8: Proposal written and submitted 14/11/2011 5 Stage 1: Chapters 1-3 completed 15/12/2011 6 Stage 2: Collection of data and information 21/12/2011 7 Stage 3: Chap 4 & 5 (Analysis, Discussion and conclusions) 31/12/2011 8 Stage 4: Writing up 7/1/2012 9 Stage 5: Final project draft prepared 10/1/2012 10 Submission of Project 15/1/2012 References Please make sure you only include sources you have cited above and that each source fully complies with Harvard referencing requirements. The references should include 8-10 journal sources. Amaratunga, D., Baldry, D., Sarshar, M. & Newton, R. (2002). Quantitative and Qualitative Research in the built environment: application of mixed research approach. Work Study, vol. 15, no. 1, pp. 17-31 Chris, C. (1999). How good are banks at managing business risk? Balance Sheet, vol. 8, no. 1, pp. 15 Dedman, R. & Robert-Tissot, S. (2001). RISK MANAGEMENT: WHERE BANKS FAIL. Balance Sheet, vol. 9, no. 2, pp. 16-19 Feurer, R. & Chaharbaghi, K. (1995). Researching strategy formulation and implementation in dynamic environments. Benchmarking for Quality Management & Technology, vol. 2, no. 4, pp. 15-26 Fleming, S. (2009). HSBC boss warns of second global economic downturn. Retrieved online 11 November 2011 from http://www.dailymail.co.uk/news/article-1218183/HSBC-boss-Michael-Geoghegan-warns-second-economic-downturn.html Holland, J. (2010). Banks, knowledge and crisis: a case of knowledge and learning failure. Journal of Financial Regulation and Compliance, vol. 18, no. 2, pp. 87-105 Odit, M.P., Dookhan, K. & Marylin, J.C. (2011). The Impact Of Risk Management And Portfolio Diversification On The Mauritian Banking Sector. International Journal of Management and Information Systems, vol. 15, no. 2, pp. 117 Poulter, S. (2009). RBS and HSBC become first British banks to ration credit cards to existing customers only. Retrieved online 11 November 2011 from http://www.dailymail.co.uk/news/article-1218269/RBS-HSBC-ration-credit-cards-new-customers-bid-minimise-risk.html Richard, E., Chijoriga, M., Kaijage, E., Peterson, C. & Bohman, H. (2008). Credit risk management system of a commercial bank in Tanzania. International Journal of Emerging Markets, vol. 3, no. 3, pp. 323-332 Sensarma, R. & Jayadev, M. (2009). Are bank stocks sensitive to risk management? The Journal of Risk Finance, vol. 10, no. 1, pp. 7-22 Steven, M. (1998). Risk management: Banks wager on enterprise systems. Bank Systems & Technology, vol. 35, no. 9, pp. 26 Tellis, W. (1997). Application of a Case Study Methodology. Retrieved online 11 November 2011 from http://www.nova.edu/ssss/QR/QR3-3/tellis2.html Read More