International Financial Management and Dividend Distribution Policy of HSBC

This report critically analyzes the significance of international financial management and dividend distribution policy of HSBC. It also discusses the challenges faced by the organization in varied international financial markets. Additionally, the report examines the efficient market hypothesis theory and company approaches of appraising projects.

ASSIGNMENT 1

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
Critically analyse and examine the significance of international financial management to
HSBC...........................................................................................................................................3
Discussing challenges which organization may be experiencing in varied international
financial markets..........................................................................................................................3
Critically analyse organization's dividend distribution policy.....................................................4
Critically examine efficient market hypothesis theory in the context of HSBC operations........5
Critically evaluate company approaches of appraising projects..................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Internal financial management refers to effective management of finance in an global
business environment context, which include key practices like trading and money making, via
exchange of foreign currency. The current assignment will be based on HSBC, which falls under
the category of leading multinational corporations in the UK. The study will explain the
importance of international financial management to firm, and challenges which it may be
experienced. Furthermore, the report will also define that dividend distribution policy, efficient
market hypothesis theory and approaches of appraising projects, by the HSBC.
TASK
Critically analyse and examine the significance of international financial management to HSBC.
It can be critically evaluated that international financial management is quite essential for
those companies that operated their ventures from national to international level, which helps to
increase shareholders wealth successfully (Breuer and Ruiz de Vargas, 2021). In the context of
HSBC, global financial management is important because of varied reasons. For example, it may
support organization to reach desire outcomes in term of achieving strategic aims and objectives
as well as efficiency in all the markets. It can be said that international financial management
contribute to make a company productive and profitable in term of calculating exchange rates of
several currencies. The current concept is essential and beneficial because of more reasons such
as it may help to make good investment and financial decision that allow bank to obtain desire
results, without facing major issues.
Discussing challenges which organization may be experiencing in varied international financial
markets.
Financial management challenges-
In the recent time, it is quite challenging for an organization to run their venture in the
different international financial markets, because it creates the biggest challenge for them, such
as current one (Mosteanu and Faccia, 2020). It may put negative impact on their business
operations such as financial management in term of creating issue to exchange the currency,
appropriately, for which appropriate procedure, systems and other resources are required. This
form of problem, may put negative impact on venture growth and success in the varied global
financial markets as bank is accountable to manage the accounts of different customers, who
may belong to national and international markets.

Customers retention-
Another challenges that HSBC may be experiencing in international financial markets, is
current one. As it is challenging for organization to retain potential and profitable consumers, in
the world of business (Bora and Basistha, 2021). As the need and requirement of individual
buyer were rapidly changed, because of trend they may prefer to follow or buying behaviour that
impact decisions to utilize or purchase things. Thus, it is essential for bank and its management
to focus on retaining consumers, by developing key strategies and executing plans that play
important for to make company capable to sustain forever in the different international financial
markets. This challenge may create more issues for management in term of acquiring potential
target audience, along with retaining existing.
Increasing competition-
Along with above two, HSBC might be experienced another challenge while running
ventures into variety of international financial markets. In the financial markets, competition
level is increasing rapidly that create varied issues for those organizations such as chosen one, to
manage its performance and sustain business in the market appropriately. It may put a lot of
pressure upon management to focus on overcoming the adverse impact of this external factor,
that lead to decrease operational effectiveness or efficiency. The biggest reason behind
occurrence of this challenge is increasing demand of customers related to quality products and
satisfactory services, emergence of new market, requirement to increase profitability and global
expansion, through which organizations gain competitive advantages.
Critically analyse organization's dividend distribution policy
Dividend distribution is defined as equal distribution of profits or shares by the
organizations to its stakeholders, who are engaged in a venture success and growth in the current
competitive market (Habib and et.al., 2021). It can be said that dividend distribution policy of
HSBC is developing the principles of ascertain amounts that may be distributed to equity
stakeholder as dividend, who may enable firm to gain competitive advantages in varied manners.
The chosen bank is accelerating strategic plans and approaches for stakeholders payouts
as it may focus on international economy that may begin to emerge from the worst impact of a
major external factor such as pandemic. According to dividend distribution policy of HSBC,
management may now tend to meet target of paying out 40 to 55 percent of earning in dividends
in the recent time, more than the further time duration.

It can be critically examined that organization may focus on conducting practice of
dividend distribution according to policy, twice in a year that approximately covers 1.4. Its
premium tools may predict HSBC holdings with 79 percent accuracy. It can be said that dividend
distribution policy is quite effective in the context of organizational success in term of increasing
stock investment profits. Furthermore, this term is beneficial in term of HSBC success because
of providing an additional metric for fundamental analysis and elimination of overall portfolio
risks, which is essential for company to do that.
On the other hand, it can be critically examined that divided distribution policy is
ineffective in the context of HSBC in term of creating challenges. As firm may not be able to
changed the term when stakeholders adopted the same. It may consume a lot of time and efforts
of company, which is not possible to provide all the time, especially twice in a year, when firm
plan to implement policy and conduct practice related to that.
Critically examine efficient market hypothesis theory in the context of HSBC operations
Efficient marketing hypothesis theory determines that share prices leads to reflect all the
information. The EMH hypothesizes about the stock trade which is being presented at the fair
value on the exchange. The proponents of the EMH posit that the investors will get benefit
within investing under the low-cost passive portfolio. This theory is highly important in the
context of performing the HSBS operations. HSBC focuses in effective and efficiently manner in
order to ensure the deposit along with the loan market hypothesis (Gabaix and Koijen, 2021).
The belief of the efficient marketing hypothesis theory which is that share price reflects the
actual scenario has been used by HSBC. Decision in relation of providing funds to different
business organization has been taken in the context of this theory. The prices of the shares of
business is being reviewed and on the basis of that decision has been taken.
However, criticism in regards to efficient marketing hypothesis theory states that, current
stock price reflects the past data as well therefore, no form of technical analysis has been proven
ineffective in this case, that enables bank to take decision in regards to funding and investing.
The stocks of the investor are different and therefore, it is hard for bank to determine the actual
worth stock (Gifford, 2021). Thus, in this manner this impacts the decision making capability of
bank. In similar manner, HSBC faces the same issues in context of performing operations. The
hypothesis may lead to be proven wrong which creates the issues for HSBC.

Critically evaluate company approaches of appraising projects
Project appraisal has been determined as the analysation of the cost and benefits of the
proposed project within achieving the objective in order to judging the viability of the project.
The HSBC has adopted the approaches of appraising the project and those are-
Economic Appraisal- In this the bank takes major aspect in consideration and those are-
expected loss, expected profit and expected cost. Within enlisting the major factors analysation
is being done this is one of the approach adopted for appraising the project.
Financial Appraisal- The project appraisal includes the assessment of the fixed capital along
with the working capital requirements. HSBC analysis the major attributes in financial appraisal
and those are- NPV, CBR, IRR, Total cost, opportunity cost, other cost and return on investment
over the project (Keegan and Den Hartog, 2019).
Technical Appraisal- In this bank checks that whether the technical parameters are realistic and
technically feasible or not as it can lead to create direct impact over the operations of HSBC that
will be proven ineffective for the company.
Commercial Appraisal- The demand and the scope of the project is being determined in this
which helps in appropriate estimation, distribution and the advertisement of the scenario.
Legal Appraisal- In order to determine whether the project is satisfying the legal issues or not
this analysation has been done by HSBC. This analysation is highly important as it involves the
interference of government that can often leads to impact the operations of bank (Johansson,
2020).
CONCLUSION
From above discussion, it has been concluded that organizations has achieved its target
aims and objectives, either short, long or medium terms, in form of following the procedure of
international financial management. It has gained competitive advantages by considering the key
three challenges that company experienced in varied international financial markets.
Furthermore, by summing up above analysis, it has been summarized that implementation of
hypothesis theory and other IFM concepts helped bank to appraise its projects successfully and
appropriately.

REFERENCES
Books and journals
Bora, D. and Basistha, D., 2021. The outbreak of COVID‐19 pandemic and its impact on stock
market volatility: Evidence from a worst‐affected economy. Journal of Public Affairs.
21(4). p.e2623.
Breuer, W. and Ruiz de Vargas, S., 2021. Some key developments in international financial
management. Journal of Business Economics. 91(5). pp.595-615.
Gabaix, X. and Koijen, R.S., 2021. In search of the origins of financial fluctuations: The
inelastic markets hypothesis (No. w28967). National Bureau of Economic Research.
Gifford, E., 2021. Theory-driven methods for practical entrepreneurship: Hypothesis testing in
entrepreneurship education. Industry and Higher Education. 35(4). pp.497-504.
Habib, A and et.al., 2021. The Ownership Structure Influence on the Dividend Distribution
Policy: The Case of Listed French Family Firms. Journal of Leadership, Accountability
& Ethics.18(3).
Johansson, P.O., 2020. Project Appraisal in the Reformed EU ETS: Looking for Shortcuts.
Keegan, A. and Den Hartog, D., 2019. Doing it for themselves? P erformance appraisal in
project‐based organisations, the role of employees, and challenges to theory. Human
Resource Management Journal. 29(2). pp.217-237.
Mosteanu, N. R. and Faccia, A., 2020. Digital systems and new challenges of financial
management–FinTech, XBRL, blockchain and cryptocurrencies. Quality-Access to
Success Journal. 21(174). pp.159-166.

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