Accounting for Project Management

This assignment explores the intersection of accounting and project management. It delves into topics like strategic management accounting for value-driven projects, the role of sustainability accounting in project success, and the financial considerations involved in project financing through venture capital or public-private partnerships.

ACCOUNTING
PROJECT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
1 COMMERCIAL ANALYSIS.......................................................................................................3
Corporate History Of the Bank...................................................................................................3
Business Model Of the Bank.......................................................................................................4
Industry & Environmental Analysis............................................................................................5
2 LITERATURE REVIEW.............................................................................................................7
3 REPORT TO MANAGEMENT.................................................................................................10
(a) Identification Of Issues faced by the bank..........................................................................10
b) Evaluating the accountability of the banking operations of HSBC.......................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14
2

INTRODUCTION
The role of accounting has increased in the current market scenario where complexities
of the business raises its overall scope. HSBC has been selected in the project report in order to
define its internal efficiency in relation to the external market goals and the objectives. The
report is presented to highlight the commercial analysis of HSBC PLC that is having its
headquartering in London (UK). HSBC Plc is providing banking services on a large scale
globally. It is the sixth largest public company as per the data published by Forbes magazine
with the net worth of $2.67 trillion (US $). This project report is all about emphasis on the
commercial and internal analysis of the overall company. The business model will stress on the
external environment which is discussed in the overall report along with the analytic models. The
detailed analysis of various services provided by bank is being analyzed and presented in this
report.
1. COMMERCIAL ANALYSIS
Corporate history of the bank
The existence of this entity is due to the achievement of financial objectives to enhance
the growth of trade between Europe and China. The name of HSBC bank is named by the
founder. It is being named after its founding member, presently, HSBC is the largest financial
and banking service provider globally. It is listed on the London, Honk Kong, Bermuda stock
exchange. The shareholding of bank is being divided into 200000 shareholders spread in more
than 100 countries (Abor, 2017). The international network of the bank comprises 9500 offices
in 86 countries providing a wide range of financial services ranging from personal level to
corporate level customers.
HSBC started its operations in a British colony of HONK KONG in the year 1865 & was
formally incorporated as ''The Hong Kong & Shanghai Banking Corporation'' by an ordinance of
legislative council of Hong Kong on 14th August 1866. After this, the HSBC bank was legally
registered and started providing banking services (Mouraviev and Kakabadse, 2017). Gradually,
the bank expanded its services in its home country by the acquisition of Midland Bank in
London. Later, company relocated its headquarters from Hong Kong to London. After that, it
started acquiring the banks in other countries as well. For instance: HSBC acquired Banco
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Bamerindus bank of Brazil in the year 1997 for 1GBP billion Similarly, many such acquisitions
took place in the other financial markets of North America & South America, Europe, Africa,
Asia and Australia. At present, company has been carrying out its operations in more than 80
countries and having a huge customer base of 60 million customers and a market valuation of £
161.12 billion (approx)
Business model of the bank
The four major areas of services provided by bank are in the fields of Commercial
Banking, Retail Banking & Wealth Management as well as Global Banking and Markets
including Investment Banking and Global Private Banking (Mouraviev and Kakabadse, 2017).
HSBC divides its activity into the following segments which are the Home system, Priority
Growth markets, Network industry, and Small Marketplace. The home markets of company are
UK & Honk Kong.. The bank has listed 19 countries by prioritizing the markets on the basis of
economic growth. . These 21 countries together account for 90% profits earned by the bank and
so, they remain at primary focus of capital deployment. Network markets consist of those
markets that are of strong international relevance serving mainly to complement the international
presence and operating mainly through global and commercial banking markets. The
combination of priority growth, home and network markets covers approximately 85% of
financial flows and international trade. Last categories constitute of small markets where
banking operations are operating on a small scale in order to operate profitably or those markets
where the representative offices are maintained. All legal entities are being regulated by the local
regulators and the overall group is being regulated in UK by Prudential Regulation Authority
(PRA) for handling prudential matters and Financial Conduct Authority (FCA) for the matters in
relation to customers, market and protection. The division of markets by bank has been explained
with the help of following table:
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Segments Asia Europe North Africa
& Middle
East
North
America
Latin
America
Home
Markets
Hong Kong UK Not exist Not exist Not exist
Priority
Growth
Markets
Australia
Mainland China
India
Indonesia
Malaysia
Singapore
Taiwan
France
Germany
Switzerland
Turkey
Egypt
Saudi Arabia
UAE
Canada
USA
Argentina
Brazil
Mexico
Network
Markets
 Here the operations are focused on international clients and businesses
of commercial banking along with that of Global markets & banking.
 Along with the priority & growth markets, these cover around 85% of
the international trade and capital flows.
Small
Markets
 These constitute the markets where HSBC carry out profitable scale
operations.
 Representative offices
Investment criteria-
HSBC marks the investments priorities by analyzing the investments through six filters
which are economic development, international connectivity, profitability, liquidity and
efficiency and the risk factor associated with the investment. Decisions regarding investments is
on the basis of strategy aligned with business objectives. Other considerations regarding the
investments are based on the risk and financial factors such as returns and risk analysis. The
annual geographic and business portfolio is prepared by the bank following the six filter
approaches as explained above.
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Industry & Environmental Analysis
The banking industry is a very complex industry in which HSBC plays a dominating role.
The banking industry is facing immense challenges posed from the external as well as internal
environment since the Great Depression in 1920's. Witney Day was when a bearish note from
Meredith Whitney concerning Citibank sparked huge spell off of US banks that marked an end to
the bull market in the year 2007 and led to the beginning of US subprime mortgage crises. Till
date the US subprime mortgage crises has led to the downfall of many huge banks such as
Northern Rock, Lehman Brothers, The Royal Bank of Scotland & Lloyds which has hampered
the banking industry globally. The situation further became worse by the end of the year 2009.
Thus, the banks at present are putting efforts to rise up from this financial crunch of the recession
period all over the world (Mouraviev and Kakabadse, 2017).
External Analysis- PESTLE
The external analysis of the company is hostile and both the domestic and the global
outlook is at their lowest levels and very slow recovery is expected. This is due to the fact that a
significant period will be required to come out of the huge global market recession. The legal
and political landscape are likely to be volatile as the new political parties are occupying the
government seat. It is also expected that this change is likely to bring the new reforms in the
structure of the financial systems. It is also a fact that the changes in the governmental structure
in US may have a strong influence on the financial operations in UK due to globalisation and
offshore banking.
Social & Environmental factors suggests that India & China would be the biggest
financial markets for the upcoming decade. Aging population, longer lifespan of the people in
the developed economies implies the long prolonged relationships between the financial
institutions and their customers. With the rising levels of the educative mass constituting the
population it is likely that the future customers emerge to be more demanding due to the
increased awareness and better knowledge of the various banking activities. Recent
environmental campaigns also suggests that the company should come up as an active participant
in the environment friendly activities and as a socially responsible citizen.
The technological changes in the 21st century has led to many significant changes in the
banking structure. Globalisation opens the doors of the expansion of the business activities in to
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the foreign markets. This would lead to the increase in the price transparency in the banking
industry. The different traditional barriers in the banking industry are also being eliminated with
the advent of the internet banking concept.
Internal Analysis- SWOT
The main strengths of HSBC is that is a globally diversified bank. It is due to this factor
that the bank has emerged from the credit crunch with a better market position as against the
other banks which have resorted to the governmental aid to manage the situation arisen from the
recession or financial crunch in the year 2007-2009. Besides that, HSBC also carries successfully
its internet banking operations called First Direct.
The major weakness of the bank lies in its costly capital write downs which is due to the sub
prime loans or mortgages market. Besides this the employee's morale of the bank is also low in
the current market. Also, the bank has managed to acquire low public confidence currently.
These weaknesses are proving highly adverse for the company as there are threats from all other
competitors like Tesco which has been successful in increasing the market share in the present
environment (Vlcek, 2017). This increase is obviously on the expense of the traditional banks
like HSBC. Among the other major threats include the global recession, legal and political
uncertainties. Legal, political and other regulatory changes are going to affect the banking
operations mostly due to the changes in the structures of the banking industry. Opportunities of
the bank lies in the mergers and joint ventures of the companies that helps in the acquiring the
greater market share and a better financial position globally.
Major Objectives & strategy of HSBC
One of the major objective of the bank is to be the world most respected and leading
international bank. For this the bank efficiently puts its efforts to increase the connectivity of the
consumers to its opportunities. This will help the people in fulfilling their dreams and hopes by
realising their requirements and ambitions. The long term strategy of the bank is to develop an
effective network of businesses which enables it to connect to the world in a better way. HSBC
has positioned itself so well in the global market that it effectively captures its capital flows and
international trade. The global reach has placed the bank in a strong position to serve its growing
customers from the small enterprises to large multinationals. Another area where the company
excels is its ability to manage the wealth effectively. HSBC aims to convert the opportunities
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arising from the social mobility long term demographic changes and social mobility into its
priority growth markets. The network of the company connects to the rapidly growing global
markets.
2 LITERATURE REVIEW
According to the study of Harrigan, (2014) which states that the accountability defines
the responsibility of an individual in relation to the authorities delegated by an official to its
subordinates. The accountability plays an integral role in a business of HSBC who are based on
the needs and the expectations of several customers. The investors deposit their valuables as a
security in the bank whose protection is done by the banks as they are accountable towards the
customers. The accountability have two general concepts that is an individual held responsible
for their own actions and another party's actions (Finnerty, 2013). The accountability in case of
HSBC is towards their banking operations conducted by them in a financial year. On the other
hand, the changes in the interest rates and the charges imposed by the banks will change the
perspectives of the customers as their interest will be affected due to the external changes. The
term accountability will ensure the actions taken by the public officials which in turn affects the
interest of an individual in positive or negative terms. The accountability have clear relationship
between the governance. The decisions take by the officials of the government in the favour of
the business entity are required to respect their decisions by increasing the compliance. The rules
and the regulations are framed by the government to maintain the overall dignity and peace in the
external environment.
From the point of view of Lu and Song, (2013) which observes that the accountability are
of different types which helps in guiding an individual and the corporate entity to move ahead in
the business. The accountability frameworks designed by the authority will determine the further
steps taken by an owner in a business. The accountability is of two kind that is vertical and the
horizontal level of accountability flows from one level to another level. The vertical
accountability will flow from one designation to another in HSBC where superior will determine
the future actions to be taken by the subordinates in the same entity. The head of the bank that is
the branch manager who give instructions to its subordinates to improve their performance. The
horizontal accountability will base on the same level where the persons working at the same
level will complete their duties and the obligations. The accountability of the HSBC personnel
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who works on a same level will further report to the next level authority. The frameworks are
designed by an entity will help an individual in order to improve their existing business in
relation to the future problems may face by an individual (Harrigan, 2014). The perspectives of
the owner of HSBC shows that the accountability has revised for the new bankers who taken an
initiative to adopt this field as their career. The framed policies and criteria has changed along
with the passage of time as they focused on achieving goals and the objectives in a given time
span. The future problems are identified in the present time to make decisions in the favour of
the business entity. The basic approach followed by an individual to improves their existing
performance in relation to the future and potential benefits gained by the firm.
Kozarkiewicz and Łada, (2014) has asserted that accountability in the legal terms will
comment on the judiciary acts and legislations framed by the officials for their own benefits. The
law will intervene in the banking related operations as the handling of cash will require legal
permissions as no one can open bank without legal permissions and judiciary consent (Harrigan,
2014). The banking organisations come into existence with the act pass in the parliament who
enforce bills to define the roles and obligations of this bank in relation to the external
environment. The legal accountability is important as in case of default by the client the law will
support the interests of the bank. The accountability on the legal side will be reflected by
auditing the banks as a statutory audit in which the unbiased auditors are appointed by the
government to ensure the reliability and authenticity of the informations supplied by the clients
in the financial statements. The apex institute of banking field will reform policies and the
legislations to support the banks in order to deposit cash and other marketable securities in the
best possible manner.
Bebbington, Unerman and O'Dwyer, (2014) has observed that the social accountability is
another measure followed by an entity in order to comply the rules and the regulations framed by
the business entity. The corporate social responsibilities adopted by an organisation in which the
needs and the expectations of the society are taken into considerations. The protection offered
by the banks to safeguard the deposits of the customers by offering variety of deposit schemes in
order to facilitate the variety of users. The demand of the customers and the apex authority will
be followed by this entity by creating perfect alignment among both parties needs and the
expectations. The banks will need to consider various obligations imposes by the authority in
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form of higher interest rates, deposit amount and penalties charged for not meeting the targets
rates. The obligations impose from the customers side is related to the decreasing number of
admissions of customers who form part of the bank by taking services of the bank. The services
offered by the banks in order to attract variety of customers by offering bonds, additional benefit
of depositing money, taking current account services (Brander, 2016). The HSBC has focuses on
achieving objectives in relation to meeting accountability goals. There are several measures
adopted by the firm to ensure the future performance of an entity in relation to the financial and
non-monetary aspects. The non-monetary aspects followed along with the financial objectives
that is the customer's satisfaction which decreases the financial goals and the objectives. The
responsibilities are delegated to the variety of customers with a clear aim in order to generate
higher market returns. The basic goal of the business is to maintain its consistency of achieving
goals in a particular year to ensure the financial capabilities of the business. The basic objective
emphasises by an entity in relation to the external market frameworks. The indicators of the
external market is enhancing the existing goals framed by this entity to support the overall aims
and targets.
3 REPORT TO MANAGEMENT
(a) Identification Of Issues faced by the bank
HSBC bank needs to implement strong financial system protection as has being admitted
by the chairman. The bank has been involved in the activities of illicit funds transfers. As per the
facts provided by an International Consortium of Investigative Journalists, 11.5 million records
have been extracted from the panama papers, in which HSBC have been found to be involved.
The company at present is under immense pressure and is trying every possible way out to come
up with this situation. HSBC has been found to be involved deeply in the money laundering
activities carried in the many countries. The company is on the verge of losing its American
banking license due to its involvement in the illegally transfer of funds and hide the wealth of its
account holders. Several prosecutions have been lodged against the bank by the governments of
many countries and the issues remains still unresolved. This has led to a serious reputation al
damages to the bank and also affected its profitability to a greater extent. Currently the major
challenges faced by the bank are as follows-
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Hampering Liquidity- Despite the profitability of the bank it is still unable to manage its
liquidity and facing liquidity crises. Also, the return on the investments earned by the company is
not as per the expectations of the shareholders (D’Espallier and et.al, 2017). s
Customers expectations- The bank is under a great level of pressure due to its inability to meet
the expectations of the customers. The increasing requirements of transparency and the stringent
regulatory requirement compliances by the banks lead to the unsatisfied customers services.
Increased Competition by the financial tech companies- Fin Tech Companies are the start ups
which are engaged in the business to provide financial services using software. The increasing
popularity of these companies are posing threat to the traditional system of banking carried on by
HSBC. The bank is not able to adapt changes due to the operations and cultural facets of the
industry in which it operates.
Regulatory Pressure- Due to the recent scandals and other issues in which the bank is being
found to be involved to a greater extent have forced the industry to increase the regulatory
compliances. It has further led to the increase in the problems faced by the bank as now it had to
spend significant amount of its budget on the compliance management and other escalating
requirements (Licker and et.al, 2017).
Further these issues are escalating continuously and so it requires the bank to constantly evaluate
its performance in order to meet up with the changing requirements and thereby building systems
and other processes to meet up with the changing pace of the financial and banking industry.
Internal Control systems of the bank For the purpose of managing effectively the various
control issues in which HSBC has recently been found involved requires an implementation of
strong internal control systems. These internal control systems are the pillars of effectively
managing its current situation. The following are some recommendations to the bank for the
purpose of improving its internal audit function.
GROUP STANDARDS- As per the Global Standards Manual the common principles and
standards which are being used in the conduct of all types of business. HSBC should comply
with these standards and principles which will bring transparency in its operations and
procedures (Vlcek, 2017). Thus, it will help in regaining back its lost stakeholders confidence.
DELEGATION OF AUTHORITY- Other than the specific matters that are being reserved for
the Board of the company the other routine matters are being delegated to the other managers
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and employees. The delegation of authority should be well within the limits and powers of the
delegating authority. Also, there should be timely reporting for the purpose of ensuring adequate
transparency and accuracy in the tasks performed by the various personnels.
RISKS IDENTIFICATION- There should be proper implementation of the systems and
procedures for the purpose of identification of risks and the various control objectives (Lu and
Song, 2013). The material risks posed on HSBC are – insurance risks, retail credit risks, markets
risks, reputation risks, strategic risks, crime and fiduciary compliance, and other operational
risks. Exposures to these risks should be managed by the risk's evaluation committees. This
committee must also be held responsible for the management of the risks. All the exposure to the
risks should be considered and monitored by this committee. The members of the committee
should meet regularly and hence meet enterprise wide risk management matters by formulating
various risk mitigation strategies.
b) Evaluating the accountability of the banking operations of HSBC
The accountability is a broad concept which needs to be enhanced enough in order to
meet the current obligations of the stakeholder of this entity (Finnerty, 2013). The needs and the
expectations of all kinds of stakeholder is essential in order to stay active in the competitive race
of different banking organizations. The officials of HSBC will make good decisions in the favor
of an entity to be held responsible. The banking operations conducted by HSBC currently are
strong enough in context with the competitors and the government. The perspectives adopted by
an entity has emphasises on the social, legal accountability currently adopted by the banks. The
accountability for the banks is related with the optimum utilization of resources in order to
deliver right amount of services (Verzuh, 2015). The services are offered to the variety of
stakeholder by stresses on the core challenges faced by an entity from these streams. The current
state of legal policies are assessed by defining its advantages and disadvantages lies in the
current legislation and the policies framed by the banks to ensure its higher compliance among
the citizens. The local people of the country will determine the strengths and the weaknesses by
using the services offered by the bank as in this way the true value of these policies are
considered.
The rules and standards framed by the banking authority can prove negative for the
customers and the normal set of stakeholders who are contributing the current business entity in
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order to gain competitive advantage over its rivals. The HSBC is bound to comply with the laws
and the regulations in form of sections laws framed by the European Union, Hong Kong and the
United Kingdom and United states (Brander, 2016). The policies are required to be followed by
all the parties as all these will play an important role in achieving the higher target in relation to
the external framework. The policies are framed to be complied by the banking organization
rather than the stakeholder but its negative impact will directly affecting the customers. The
lower interest received and higher interest rates charged on providing loans. The rigid financial
obligations will restrict the current decisions made by the banks in order to gain the trust and the
loyalty of several users.
CONCLUSION
It can be summarized from the above report that HSBC have equivalent proportion
problems along with the strengths which is compensating its negative effect. The commercial
analysis will result into the identification of current strengths enjoyed by this entity. The current
base of financial resources and the stakeholder are creating higher brand image in the external
market. The internal and external analysis has identified the true picture about this entity who are
under the obligations of the government and the stakeholders. The higher authority is playing
dominant role in influencing the firm to work according to these authorities. The accountability
topic has raises the importance of this organization by assessing the performance of this
organization from different angles.
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