Issues with Finance in the Financial Industry

This article discusses the issues associated with finance in the financial industry. It covers topics such as cyber crime, regulatory compliance, artificial intelligence, and financial record keeping. The article also provides insights on how organizations can overcome these challenges and make effective financial decisions.

ACADEMIC AND
PROFESSIONAL AWARENESS

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................1
MAIN BODY...................................................................................................................................1
Finance.........................................................................................................................................1
Issues with finance ......................................................................................................................1
CONCLUSION ...............................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Finance is broad term which describes the activities associated leverage, banking, debt,
capital markets, investments and money. Finance basically represents the money management
and process of procuring funds needed. The finance encompasses creation, oversight, creation
and the study of banking, credit, money, assets, investments and liabilities which make the
financial system. Basic concepts of the finance originate from macro and microeconomics
theories. Along with several benefits there are also several issues associated with the finance that
could impact the smooth flow of operations or activities. Report will discuss the issues
associated with the finance.
MAIN BODY
Finance
It is defined as management of the money and involves activities like borrowings,
investing, budgeting, lending, borrowings, savings, budgeting and forecasting. Finance is mainly
divided in three parts which are personal, corporate and public finance. It confines with creation
and study of credit, banking, money, assets & liabilities and investments. Combination of all
these terms make up the financial system (HACIOGLU and Dincer, 2016). Term finance could
also be superseded by word exchange. It is also called exchange of the available resources or
also art of managing different resources.
Finance is essential for acquiring the physical resources that are important and required
for accomplishing the productive economic activities for carrying out the business functionalism.
Today finance is most essential natural function as well as inseparable part of the daily process.
At the same time have greater approach towards managing assets generated by business and
other liabilities having better organised fashion. It has become very important aspect of business
as of today. Financial planning helps to decide what to spend, how to spend, when and how
much to spend as availability of funds.
Issues with finance
Financial industry faces various issues that could impact the business operations
significantly. First and foremost issue in the finance industry is Cyber crime. Data breaches from
financial service companies have raised by 480% in the year 2017-2018. Each cyber attack could
cause millions of cost to the financial firms. Finance industry contains large information about
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the various financial resources which if hacked could cause the cause the companies to suffer
losses.
However it could be argued as the digital technology has made the financial industry
more advanced and faster. Finance industry have implemented various innovative solutions for
protecting the data (Narayan and Phan, 2019). The solutions are having block chain technology
as the foundation. Cyber crime could be reduced to great extent by implementing and designing
strong encrypted solutions that will protect the financial information.
Every one associated with the finance has to comply with some or the other regulatory
compliance measures. Regulatory compliances in the finance industry are high as compared with
other sectors. Ever changing statutory and regulatory environment lays challenge for the
financial institutions. This increases the work of corporates and professionals. Increased
compliance requirements increases the cost of companies and non- compliance leads to severe
penalties for the business.
On the other, it could be said that the compliance requirements have been increased for
protecting the people from losses and damages suffered by them due to organisations misusing
the finance. These compliance requirements lays strict control and monitor the actions of
corporates and financial institution and ensures that they comply with the stated rules (Khosa and
et.al., 2020). Every one has been aware of the different financial scams that occur every year
affecting the financial position of the interested people. The compliance procedures and
processes have been made much easier than before by establishing the processes like automated
audits, automated reported and process streamlining. Though the costs of complying with
regulations are high but they are essential for the safeguarding the interest of both corporations
and stakeholders.
Finance industry with the advancements in technology requires to upgrade with the
processes. Artificial intelligence has transformed every aspect of financial industry. The
automated wealth management, open banking and customer verifications. The artificial
intelligence processes stores large amount of customer information and data. The inaccurate
handling of these data could cause firm to suffer losses. It is a big challenge for the finance
industry to benefit from AI without becoming a victim of it (Baber, 2017). Professional with
inadequate knowledge could draw wrong results and conclusion for the financial decision to be
taken by the management.
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Handling of financial data using artificial intelligence is riskier and could cause serious
implications over the business. But at the same time it had made the process much faster.
Business organisations are making number of decisions using the artificial intelligence for the
expansion and growth. They analyse the financial options and routes through which costs could
be minimised. It is essential to move along with the developments to remain in the market. Data
solutions are helping the organisations to take various financial decisions that otherwise were
taking considerable time of management.
Another issue in finance industry is of maintaining financial records. Corporates and
financial institutes have to maintain bulk of records for compliance requirements. The financial
record keeping increases the cost of organisation (Bednarska-Olejniczak and Olejniczak, 2017).
However, it is essential for their future reference. These records enable them to review that any
error identified in future was not existing in previous years.
Ratio analysis of the financial statements
UNILEVER PLC
Particulars Formula 2020 2019
Profitability Ratios
Return on capital
employed
Net operating
profit/Employed
Capital
18.91% 23.90%
Employed Capital Total assets –
Current liabilities
43828 40961
(64806-20978) (61111-20150)
Net Income 8289 9788
Return on Equity Net Income /
Shareholder's
Equity
59.69% 80.78%
Net Income 8289 9788
Shareholder's Equity 13886 12117
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Gross profit margin Total Sales –
COGS/Total Sales
44.01% 43.57%
COS 29102 28769
Sales 51980 50982
Operating profit
margin
Operating Income/
Net Sales
27.69% 32.38%
Net Income 8289 9788
Revenues 29929.99 30225.68
Assets Turnover Sales / Net assets 374.33% 420.75%
Sales 51980 50982
Net assets 13886 12117
Liquidity Ratios
Current assets 16430 15478
Current liabilities 20978 20150
Inventory 4164 4301
Quick assets 12266 11177
Current ratio Current assets /
current liabilities
0.78 0.77
Quick ratio Current assets -
(stock + prepaid
expenses)
0.58 0.55
Efficiency Ratios
Inventory 4164 4301
Trade Receivables 6695 6482
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Trade Payables 0 0
Days 365 365
COS 29102 28769
Sales 51980 50982
Inventory days Inventory/COS*365 52.225 54.568
Debtor days Debtor/ Sales*365 47.01 46.41
Creditor days Creditor /
Sales*365
0.00 0.00
Gearing Ratio
Long-term debt 23566 23125
Shareholder's equity +
debt
37452 35242
Gearing Ratio 0.63 0.66
Finance industry is growing rapidly so are the issues associated with it. Organisations
operating in financial sector are required to overcome these issues for better operations and
services. It could be analysed that financial issues could affect the parties considerably of they
are not dealt actively by the organisations. Industries could not run without finance therefore it is
essential that ways are developed for overcoming the financial issues.
CONCLUSION
At the end it could be stated that finance is the lifeblood for all the sectors without which
organisations could not run successfully. There are various issues associated with the finance that
are increasing with growth and development. However, organisations have to develop the
processes and procedures that help them in overcoming these challenges adequately and make
effective decisions.
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REFERENCES
Books and Journals
HACIOGLU, U. and Dincer, H., 2016. MANAGERIAL ISSUES IN FINANCE AND BANKING.
SPRINGER INTERNATIONAL PU.
Narayan, P.K. and Phan, D.H.B., 2019. A survey of Islamic banking and finance literature:
Issues, challenges and future directions. Pacific-Basin Finance Journal. 53. pp.484-496.
Khosa, A., and et.al., 2020. Current issues in PhD supervision of accounting and finance
students: Evidence from Australia and New Zealand. The British Accounting
Review. 52(5). p.100874.
Baber, H., 2017. A comparative study of Islamic housing finance models and issues. Qualitative
Research in Financial Markets.
Bednarska-Olejniczak, D. and Olejniczak, J., 2017. Participatory budgeting in Poland–finance
and marketing selected issues.
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