MGMT20144: Analysis of Commonwealth Bank's Business and Governance

This report provides a comprehensive analysis of the Commonwealth Bank of Australia, examining its business structure as a public limited company, its corporate governance framework, and the external environmental factors impacting its performance. The analysis utilizes PESTLE and SWOT frameworks to identify key political, economic, social, technological, legal, and environmental factors. The report identifies and assesses three primary risks faced by the bank: credit risk, liquidity risk, and operational risk, detailing their impact on the bank's operations and decision-making processes. Recommendations are offered to improve operational efficiency, including embracing financial technology, segmenting the client base for personalized experiences, and focusing on staff productivity through training. The report concludes by emphasizing the dynamic nature of the business environment and the influence of these factors on the bank's performance and strategic decisions.

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Management and Business Context

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Introduction
Businesses run in a dynamic environment that influence directly on how they operate and
whether they will attain their objectives. There are many external environment factors that
impact on the decision making aspect and performance of businesses (Daidj, 2016). In order to
be successful businesses consider these factors and identify risks that impact business operations.
This essay will demonstrate the business structure and governance structure of The
Commonwealth Bank Australia which operates in banking industry in Australia. The essay will
outline the environmental factors, and risks that influence on the performance and decisions
making of the company. At last recommendations will be given followed by conclusion.
The Commonwealth bank of Australia
The Commonwealth bank of Australia operates in financial and banking industry and
founded in 1911 by the government of Australia and fully privatized in 1996 (Commbank,2019).
Bank offer services across Asia, New Zealand, the UK and the US. The bank offers a variety of
financial services that includes retail banking, institutional banking, consumer banking,
insurance, superannuation and broking services. The commonwealth bank is amongst the big
four Australian banks with 51,800 employees and net income of $ 8.6 billion in 2019
(Commbank,2019).
Theoretical Knowledge and Analysis
Business Structure and Corporate Governance
Business structure is defined as the legal structure of the company, this structure impact on
various decisions such as amount of paperwork, tax payment, liability and different sources of
raising funds. The most common form of business structures are sole proprietorship, corporation,
partnership and public private limited company. The selection of business structure depends on
the business objectives and business needs (Lu, & Zhao, 2019).
In the context of the commonwealth bank of Australia, the business structure of the bank is
public limited. The public limited company can raise funds from public by issuing debentures
and equity shares. This business structure is suitable for those companies that have big projects

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and ideas. In this type of business structure ownership is shared between board members,
shareholders, and management. The common wealth bank is a public limited company;
therefore, comply with all rules and practices such as disclosing detailed information about
business activities, publishing annual reports and presenting all information to shareholders.
Furthermore, bank structure includes retail banking services, wealth management, premium
business services and executive leadership. Hence, the business structure of the bank is public
limited company as the bank raise funds from public; disclose its financial information and its
shares are traded in the market.
Corporate governance structure includes the system of practices, rules, and processes by
which a company is controlled and directed. Corporate governance mainly involves taking care
of the interests of a firm’s stakeholders. Practically it encompasses of every sphere of
management, starting from internal controls, action plans and corporate disclosure and
performance measurement (Lu, & Zhao, 2019).
The commonwealth bank of Australia corporate governance framework is given in figure 1.
The board focuses on strengthening the corporate governance at the bank to ensure better
stakeholders outcomes. Further, the board has set clear goals and expectations and has increased
scrutiny and oversight of the risks bank facing. The below figure shows the company corporate
government structure that includes board committees. The committee is responsible for planning
the strategic goals and risk appetite for the bank and for leading the values, culture and behavior
of their workforce (Sheedy & Griffin, 2018). Further, power and responsibilities of board,
committee, CEO and group executives are clearly stated. With that the corporate governance
structure of the bank is strengthening as board along with committees set rules, policies and
practices to enhance culture and values in the organization and with that focusing on fulfilling
expectations of its stakeholders.

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Figure 1: Corporate Governance Framework of Commonwealth Bank of Australia
Source: (Commbank, 2019)
Environmental factors
The environmental factors include internal and external factors that impact directly on the
organization performance and decision making. Every organization has its environment and this
is always changing and dynamic (Brocke, Zelt, & Schmiedel, 2016). Some of external factors
are technological, social, political, economic factors and legal factors. On the other side, internal
factors that influence decision making process and impact on the organizational performance are
human resources, financial resources, technological resources, values and culture and goodwill
(Pritwani, 2019).
In the context of the Commonwealth Bank Australia, the environmental factors that influence
on the performance of the bank and decision making process in the company are identified using

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SWOT analysis tool and PESTLE analysis tool. With the help of these frameworks the bank
business environment is analyzed (Doran, & Ryan, 2016).
PESTLE Analysis for Commonwealth Bank Australia
Political Factors
 Political instability
 Warming relationship with Asian
countries and developed countries
(Pritwani, 2019).
Economic Factors
 Decrease Taxation rate
 Interest rate
 Growth of economy
Social Factors
 Saving habits and borrowing pattern
 Changing lifestyle
 Cosmopolitan culture marked by
diversity (Pritwani, 2019).
Technological Factors
 Financial technology startup
 Cyber security and data protection
Legal Factors
 Laws related to data protection
 Money laundering and other litigations
against the bank
Environment Factors
 Legal actions on failure to disclose
change in climate risks
 Strict regulation by the government on
land and water usage (Pritwani, 2019).
The above stated factors influence the bank operations and decision making as any change
such as increasing taxation rate by the government impact on the financial performance of the
company and due to that bank need to take steps to improve its profitability as they need to pay
more tax. Furthermore, legal factors such as strict law for data protection off bank customers
leads to change in policies and practices related to data protection of customers in the bank (Lu,
& Zhao, 2019).Some of the factors impact directly on performance or banking operations, at
present the technological factors affecting the performance of the common wealth bank as the
bank is struggling to use technological devices such as robots and artificial intelligence in order
to provide better services due to that the services of the bank is not that efficient. Hence, it is

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analyzed that the environmental factors have major influence on the performance of any
organization and decision making of management.
Three Risks
There are different types of risks that the bank face while operating in financial and banking
industry that includes strategic risk, credit risk, liquidity risk, market risk, and operational risk.
The top three risks that the commonwealth bank Australia address and that direct influence on
the banking operations are credit risk, liquidity risk and operational risk (Hartmann, & Vachon,
2018).
Liquidity risk face by the bank is global trade dispute, and low interest rates (Hartmann, &
Vachon, 2018). In order to manage or address liquidity risks the Commonwealth bank perform
regular tests and analyses environment to find adverse operating conditions. This helps the bank
to take proactive decisions. Along with that the bank ensures stable funding sources options
across different geographies, currencies and entities. Liquidity risk impact on the operations of
the bank as low interest rate impact on the lending decision of the bank and borrowing decision
of customers (Commbank,2019). Hence, liquidity risk has direct impact on the decision ability of
bank management.
Some operational risks that the bank is facing include broadened activities of cyber criminals
and poor and slow execution of strategy (Schaltegger & Wagner,2017). The decisions taken by
the bank to address these risks includes enhancing of risk governance, reinforcing risk ownership
and investment in technology. The operational risk impact on the decision making as
technological changes, poor strategy leads to inefficiency in business operations and due to that
the bank has to change its existing plans. For instance, use of technology leads to decision of
investing huge amount in research and development and installing technological devices and
hiring tech savvy employees in bank. At last, credit risk includes changes in economic factors
and change in community expectations (Schaltegger & Wagner,2017). In order to address this
risk the bank takes decision to adjust credit limits, and changes in insurance and climate
portfolios. Hence, it is analyzed that credit risk also influences decision taken by the bank.

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Suggestions
From the above analysis of the commonwealth bank of Australia it is known that risks and
environmental factors influence on the decisions taken by the management and also impact
directly on the bank operations. Further, in order to improve performance it is necessary for
companies to improve business practices. Some of recommendations to the bank to improve its
operational efficiency include embracing financial technology as if the commonwealth bank
invest in technology they can improve their customer experience by providing services such as
artificial intelligence, robot assistance, biometric device, and different mobile payment options.
Further, it is suggested that the bank should focus on segmenting the client base and creating
personalized customer experience that helps in to gain trust of customers in Australia and the
bank can tap the opportunities for personalization. At last, it is suggested to the bank that they
should focus on staff productivity by investing on providing training to them. This enable bank
to handle more transactions and greater number of activities with the same number of workforce.
All these help in to improve the productivity and improve bank operations or overall
performance of the bank.
Conclusion
Businesses run in a dynamic environment and ever changing environment. From the
above analysis of the commonwealth bank Australia it is analyzed the bank is a public limited
company that has strong corporate governance framework that consist of board, committee,
stakeholders and culture and values. Further, it is concluded that there are various environment
factors that impact on the performance of the bank. At last, three risks are identified that impact
on the bank performance that are credit risk, liquidity risk and operational risk. Hence, the all
these factors directly influence on the performance or decision making of the business.

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References
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