Importance of Pestle Analysis for Royal Bank of Scotland

This article discusses the importance of carrying out a Pestle analysis for Royal Bank of Scotland. It explains how Pestle analysis helps in developing the bank by providing cost-effectiveness, deeper understanding, alertness development, and exploitation of opportunities. The article also explores the political, economic, social, technological, environmental, and legal factors that affect the bank.

BUSINESS ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Task 1...............................................................................................................................................3
Governance and structure of Royal Bank of Scotland.................................................................3
Task 2...............................................................................................................................................5
Importance of carrying out PESTLE analysis for Royal Bank of Scotland................................5
Task 3...............................................................................................................................................6
Pestle framework to analyse the external environment of Royal Bank of Scotland...................6
CONCLUSION................................................................................................................................9
REFERENCES................................................................................................................................1

INTRODUCTION
The factors involving internal and external factors like employees, customers needs and
expectations, supply and demand, management, clients, owners, suppliers, innovation in
technology, market trends, activities by government, social trends, economic changes, etc., and
how these factors effect the functioning of the company and its business environment and
situation.
The Royal Bank of Scotland group operated in UK and have the headquarters in Edinburgh, is
worlds the largest banking and financial service groups. The Pestle analysis and how it works to
help the bank in developing. Importance of Pestle analysis like cost-effectiveness, deeper
understanding, alertness development, exploit opportunities. Various factors like political
economical, social, technological, environmental and legal, which are effecting the Royal Bank
of Scotland in ways.
MAIN BODY
Task 1
Governance and structure of Royal Bank of Scotland
Organisational governance can be defined as system through which rules and regulations
in organisation are developed and implemented in pursuit of organisational objectives.
Governance of organisation also involves planning and implementing a framework through
which organisation is functioned and controlled (Maklan, Antonetti and Whitty, 2017). Royal
Bank of Scotland adopts the highest standards of governance of organisation, business integrity
and professionalism in all practices of organisation.
Royal Bank of Scotland is governed by its Board and Committees. In this board of Royal
Bank of Scotland is principle decision-maker and fulfils responsibility of leading and managing.
In this board approves strategy that is implemented in organisation and on the basis of strategy
implemented performance of the organisation is monitored. In order to govern organisation
formal schedule has been reserved for board that they discuss and these are those matters that are
specifically discussed by board only. These are matters that are key aspects of organisational
operations and affairs. This schedule is reviewed annually.

Governance of Royal Bank of Scotland is done through The Board, Audit Committee and Risk
Committee. The board is responsible for long-term success and growth of bank and also aims at
increasing value for shareholders of bank. In addition to this role of board also includes
providing leadership to company with application of framework for effective control and the
framework enables assessment and management of risk. Audit committee is responsible for
assistance of board for fulfilling its responsibility regarding accounting policies, internal control,
financial reporting functions, internal audit and external audit of Royal Bank of Scotland. In
addition to this, audit committee also undertake and assist board in risk assessment and
regulatory compliance (Bădiţoiu, Buglea and Munteanu, 2020). Audit committee in Royal Bank
of Scotland is also responsible for reviewing matters that are concerned with financial affairs of
the bank, regulatory compliance with reporting of finance and accounting of bank and internal
control. Risk Committee or Board Risk Committee provides oversight and advice to Board of
bank regarding current and future risk exposure for bank. Along with this risk committee also
undertake determination of risk appetite and tolerance by bank.
Organisational structure is concerned with structure of organisation in which roles and
responsibilities within organisation are organised. Organisation structure of organisation also
outlines reporting relationship within organisation and facilitates coordination within
organisation. On the basis of organisational structure direction of activities towards goal
achievement is also determined. There are different types of organisational structure and among
these types of organisational structure Royal Bank of Scotland follows Functional Organisational
structure. This is a structure of organisation in which hierarchy within organisation starts from
top most authority within organisation (Gaspary, Moura and Wegner, 2020). Hierarchy starts
from CEO and Chairman and other executive members who are responsible for managing all
important functions within organisation. These are also head of their respective departments or
functional area. Royal Bank of Scotland is managed through its executive members and members
include CEO, CFO (Chief Financial Officer) also responsible for leading financial department or
financial function within Royal Bank of Scotland. In addition to this, Chief Risk Officer,
Managing Director, HR Director, Head of Legal Governance and Data Protection, Managing
Director international retail and commercial banking, managing director institutional banking
and Chief Digital and Information Officer are also included in executive members of Royal Bank
of Scotland. These are head in different functional areas and lead their functional areas.

Functional organisational structure also later includes grouping employees on the basis of their
skills and they are placed at position within organisation which is according to their skills and
knowledge. For example- every individual who is skilled in finance function will be placed
within financial department where all other employees are also skilled in finance function. This
organisational structure of Royal Bank of Scotland allows it to gain utmost benefit of skills and
expertise of its employees (Bai and et.al., 2017). This is one of the simplest structures which can
be used and applied by large size organisations like Royal Bank of Scotland. In addition to this,
functional organisational structure also allows Royal Bank of Scotland to gain benefit by
elements like operational clarity. This is because everyone in organisation is aware of their role
and responsibilities. This clarity of operations also is helpful for speed of operations. However,
as Royal Bank of Scotland follows functional organisational structure it is very important that
adequate system is developed to avoid any potential miscommunication between different
organisational department and functions.
Task 2
Importance of carrying out PESTLE analysis for Royal Bank of Scotland
Pestle Analysis is acronym for political, economical, social, technological, environmental
and legal analysis. It is the basic analysis to do before implying any plan or even starting a
company. It ensures that the analysis in all the given factors is efficient and allow the
organization to have a look on all the macro factors. The internal factors can be corrected by
increasing the work force and maintaining a structural plan. But while looking for external
factors a Royal Bank of Scotland have to do Pestle analysis for its growth and development. It is
optional on how many times a company do Pestle analysis.
The importance of Pestle analysis for an organization are:
Cost Effectiveness
The analysis is cost effective as it only needs time and effort for the analysis. Nowadays
there are many programs that help the Royal Bank of Scotland by organizing input and feedback.
This helps in making the Pestle analysis more useful. The Pestle analysis can be done by an
individual or a team both give the same results (Doumpos, Hasan and et.al, 2017).
Deeper Understanding

Pestle analysis help in understanding the factors involving in the analysis in much easier
way. This helps the Royal Bank of Scotland to catch the error they are making and correct it
effectively. This enhances the development of the company at a fast pace.
Royal Bank of Scotland while thinking to develop a new product get a clear vision of how the
factors will affect and get a deeper understanding about some factors like consumer laws, new
technologies, trends, which will have a significant effect on the product in the market. The
analysis let you know if your company is working in good environment or what effect it will
cause while moving to some other place; will it be successful or a disaster for the company
(Rahman, Abedin and et.al, 2021).
Alertness Development
Royal Bank of Scotland will be able to check on the threats that will come with every
business present in the market. The analysis will provide with advance threat alert to the
company which is arising. This will allow the bank to look over the threat and prepare for it.
Royal Bank of Scotland can make strategical plans in advance to ensure the productivity and
growth. Innovations, development and trend can be considered a threat to many companies.
Exploit Opportunities
Pestle analysis give an opportunity to look into the external factors and understand how
the new change can be used as an opportunity for Royal Bank of Scotland. The external factors
like social and technological trends can be used to understand the focus of the consumer and how
to direct them towards their company. This can be beneficial as the bank can direct their users
into consumers and benefit from it before the competitors can do the same. In this way the
company can strengthen the business.
Task 3
Pestle framework to analyse the external environment of Royal Bank of Scotland
Political factors affecting the Royal Bank of Scotland PLC
Political factors have a great influence on the Royal Bank of Scotland as it is one of the
world's largest banking and financial services group. Government have imposed essential rules
and regulation to inspect the bank as the bank have high influence and power because it has huge
amount of savings of the UK public. The rules and policies may change with the changing
government to prioritize the development of different sectors. The political factor demands to
study the current situation of the country in political scenario (Ashraf, Shen and et.al, 2019).

The involvement of the government again and again is not considered good for the
performance of the bank, as stated by the critics and financial analysts. Currently the branches of
royal bank are present in different countries and all are facing some or the other political
tensions, such tensions can influence the performance to a great extent.
The protest from the worker unions, social/environment activists forms the basis of the
government policy making.
Economic factors effecting the Royal Bank of Scotland PLC
The developed plans makes its easier for the business environment to grow easily which
help the banks to grow up to its potential. Growth in the economical sectors influence the Royal
Bank of Scotland as it opens numerous opportunities for the bank.
Increased GDP shows that the consumers can pay high amounts for the given products in the
market. High GDP rate ensures the long term growth of the Royal Bank of Scotland
Large number of unemployment mean that there is sufficient availability of labour in the market
who are working at lower wages, operating in such situation can lower the cost of operations of
Royal Bank of Scotland (Sultan, Rzgar Ahmed and et.all, 2020).
The interest rate also effect the bank, if there is a high interest rate then this might increase the
investment and increase the growth if the Royal Bank of Scotland. The fluctuation in the local
currency can cause serious problems for the royal bank of the Scotland.
The current economic structure will affect the current practices of business for Royal Bank of
Scotland.(Moschella, Diodati and et.al, 2020)
Social factors effecting the Royal Bank of Scotland PLC
The demographic pattern changes like ageing population, migration trends and socio-
economic factors have their own importance in the Royal Bank of Scotland, studying the patterns
can help the bank to focus on the right part and develop the growth potential.
The power structure of many countries are altering due to the increasing inequality which has a
serious effect on the banking business of Scotland. The social factor demands to observe the high
or low power distance while entering the market (Belás, Smrcka and et.al, 2018).
The human resource and marketing plans in a traditional, patriarchal society with distinguished
gender roles will be different from the low gender stereotypes societies.

The online shopping is hiked due to the increased use of the mobile phones. The factor demands
to consider that the younger generation is more inclined in using the social media than the older
generation.
Technological factors effecting the Royal Bank of Scotland PLC
The collaboration with the customers is improved by developing new marketing techniques for
the new information and communication technologies. The influence of the social media in the
modern business environment is the key opportunity for the development. The bank uses the
social media as an opportunity to understand the technological trends to develop the marketing
business performance by developing online brand communities.
Royal bank keep an eye on the developing technology innovations to minimize the competition
barrier. The bank focus on the market where the technologies have not reached and the maturity
level can help. The bank can help in reaching to the developed technological innovation state for
developments (Haabazoka, 2018).
Banks tract micro and macro level investments made by the competitors to understand the
changes in the banking business and how this will affect the value chain and present cost
structure.
Nowadays new products are produced very fast and the supply of the products is getting even
easier, this pressurizes the Royal Bank of Scotland to develop new products at faster rate and
increase the flexibility of the product in the market and make strong business chain partners.
Environmental factors effecting the bank of Scotland PLC
The pollution and the technology are both growing together which encouraged the companies to
develop new ways to recycle and manage waste, in few countries waste management has become
a business. This make it necessary for the Royal Bank of Scotland to develop waste management
practices in the organizations found near urban areas.
Some countries are providing subsidies to encourage people to invest in the renewable
technologies, Royal Bank of Scotland takes it as an opportunity by investing in the renewable
technologies as it can be considered a good future investment and which help the bank in the
long term (Al-Hawary, Al-Hamwan and et.al, 2017).

There environmental regulation of the country related to the resources which are considered rare,
which species is considered endangered and whose excessive consumption can make a negative
impact from the media, environment protection groups, customers and public.
Legal factors effecting the Royal Bank of Scotland PLC
Providing the work force of the Royal Bank of Scotland with the secure work
environment is a moral requirement to follow. Royal Bank of Scotland follow strict rules for the
health and safety laws for the employees.
One of the important issue is of data protection due to the consumer privacy and security
concerns. To protect the consumers from fraud in marketing claims some laws are made where
to set a maximum price to ensure a specific quality standard.
Companies patent are valuable ideas and are protected by intellectual property regulations, in
case of leaking such information can cause the Royal Bank of Scotland to lose its position to the
market competitors.(Campbell, Cartwright and et.al, 2017)
CONCLUSION
Pestle analysis is important for the banking business in many ways, it gives analysis for various
external factors such as political, economical, social, technological, environmental and legal. The
factors give an overview of all the macro factors and the bank can study and make changes
accordingly. The given analysis is very helpful for development and growth of all the ferns and
banking businesses like Royal Bank of Scotland. The Pestle analysis is helpful as is cost-
effective, gives a deeper understanding in each factor, gives the company alerts about the threats,
helps the company in knowing the possible opportunities and how the company or the bank can
use it for their benefit and getting forward to their competitor in the market place.

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