MGMT20144: Business Case Analysis of Commonwealth Bank

This report provides a comprehensive business case analysis of the Commonwealth Bank of Australia (CBA). It begins with an introduction outlining the report's purpose and scope, followed by a synopsis providing background information. The analysis delves into CBA's business and governance structure, highlighting key components and practices. The report then employs a PESTLE analysis to examine the external environmental factors influencing CBA's operations, including political, economic, social, technological, environmental, and legal aspects. Furthermore, it identifies and discusses the top three risks faced by CBA, such as capital requirements, the impact of tech giants, and the falling value of the Australian dollar. The report also examines CBA's business practices, emphasizing its focus on financial well-being and integrity, and outlines its functional departments, detailing their roles and responsibilities. The report concludes by summarizing the key findings and emphasizing the dynamic nature of the banking environment and the importance of risk management and environmental awareness. The analysis is supported by references to relevant academic and industry sources.

MGMT20144 – Assessment Item 1 – Business
Case Analysis

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
CASE ORGANIZATION SYNOPSIS............................................................................................1
a. Business Structure and Governance Structure.........................................................................1
b. Environmental factors influencing CBA.................................................................................2
c. Top three risks..........................................................................................................................3
d. Business practices....................................................................................................................4
e. Functional departments............................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
There are many factors in the business environment internally as well as externally that are
influencing a business or organisation. These factors are analysed using different tools such as
Pestle Analysis, a most effective tool in analysing all the external factors affecting an
organisation. These factors also influence the process of making decisions of the business
depending upon the nature of the organisation. In the present report the business structure of
Commonwealth Bank of Australia will be examined along with analysing the various external
factors influencing the bank. Major risks faced by the chosen bank will also be identified in this
report, and the ways in which they influence the baking operations.
CASE ORGANIZATION SYNOPSIS
The Commonwealth Bank of Australia (CBA) is a global bank in Australia which came into
existence in 1911 under the commonwealth bank act. The first branch of this bank started
operating in Melbourne (Buell & John, 2018). Since the year 1920 to 1960, CBA was known to
be the central bank of Australia, it was later listed in the Australian stock exchange in 1991. It
was entirely privatized in 1996, at present the CBA has investments and operations all around the
world with the maximum of the operations the Asia-pacific region. In March 2018, it was
mentioned as the third largest company in the Australian stock exchange (Bandara et.al., 2019).
a. Business Structure and Governance Structure
CBA is a public or government owned bank and corporate bodies related to it are following the
strategy of becoming a simpler better bank for fulfilling the aim of enhancing the financial well-
being of clients and community. Structure of this bank includes Detail banking services,
Premium banking services and Wealth management (Haisken-DeNew et.al., 2019). The
corporate governance settings and activities of the bank are reviewed as well as improved on a
regular basis in light of new regulations and laws, evolving expectations of the stakeholder and
the dynamic environment in which the bank is operating. The corporate governance statement
defines the major practices and arrangements of governance of the bank. These practices and
arrangements meet all the requirements of the governance principles and recommendations
define by the third edition of ASX corporate governance council.
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The board's roles and responsibilities
The responsibility of board in the bank is to set the strategic objectives and risk management
system for the bank, and for formulating the values, cultures and behaviors of the employees.
The board is responsible for appointing the Bank's CEO, it also manages the performance,
management and corporate governance framework of the bank. The board is delegating several
power to its board committees. The board may develop several more communities for
undertaking certain duties as required. The board confers on the CEO the power of the board
exercisable in management of the practices or business operations of the bank (Ng, 2019).
Board of committees
The bank' board is comprised of four major principal committees that help it to carry out its roles
and responsibilities. These committees are -
1. Audit committee
2. Nominations committee
3. Remuneration & People committee
4. Risk and compliance committee
b. Environmental factors influencing CBA
For the purpose of identifying the various external factors influencing Commonwealth Bank of
Australia , it is important to use an appropriate tool. Therefore, Pestle Analysis will be used for
analysing each and every external factors affecting the banking operations of the organisation.
Pestle Analysis consists of six elements as defined below -
 Political - Political factors plays a vital role in analysing the elements that influences
Commonwealth Bank of Australia's long run profit in a particular marketplace or nation.
Commonwealth Bank of Australia is operating within many different countries and get
exposed to diverse political environment and related risks (Jasrotia, Sharma & Mishra,
2019). Therefore, it becomes essential for the bank to analyze various factors before
entering into particular market, these political components consist Political stability and
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value of banking industry in the economy of a country, Corruption level, Risk of military
Invasion etc.
 Economical - The macro environment factors for instance, savings rate, inflation, rate of
interest etc, defines the average funding and need in an economy. Beside this,
components in micro business environment such as competitive norms affect the
competitive advantage of the organisation. The various economic factors that should be
considered by CBA includes nature of economic system in the countries along with the
stability of the same. (Bello, 2018).
 Social - Cultural and social values are also the macro environmental factors that influence
the bank's operations in different countries. The social factors incorporate demographic
level, structure of hierarchy, class and power within the society. Education level and the
standard of education within the community as well as banking industry also influence
the bank.
 Technological - Technology is developing with a rapid pace and used by different
industries to achieve competitive advantages. There are different technological
development implemented by competitors of CBA that majorly influence the banking.
Technology also affect the product offering buy the bank such as online banking services
(Decker & McCracken, 2018). These technological changes needs to be considered by
the bank to offer effective banking services.
 Environmental - There are various environmental factors such as climate change,
weather, waste management in banking sector, laws regulating environment population
that highly influence Commonwealth Bank of Australia. In order to enter into a new
market or country, it becomes crucial for the bank to evaluate and analyse the
environmental standards that are required in such marketplaces.
 Legal - In many nations the regulatory institution and legal framework are not robust
much for protecting the intellectual property right of an organisation. There are factors
such as laws related to health & safety, employment discrimination, consumer protection
etc, that are required to be considered while entering into any new market.
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c. Top three risks
There are many challenges or risks influencing CBA, these risks are highly influence the
operations and decisions of the bank. The three major risks associated with CBA can be defined
as below -
1. Capital requirement - Capital requirements likely to be imposed upon Australian big
four banks. The banks may needed to hold up to $30 billion more capital in reserve for
bracing against a potential economic downturn. This risk has a great impact upon the
return on equity of the bank and also influence it's ability of growing or maintaining their
current dividends (Shah, Wu & Korotkov, 2019).
2. Tech Giants - In recent years, investors have been under the impressions that the banks
are offering an important service, and would hence never be threatened by non-bank
entities. Although, this concept has now been completely changed due to the introduction
of mobile payments. The recent introduction of Apply pay is one such threat while
Facebook Inc, Google Inc. and PayPal could also negatively affect banks in the coming
years by decreasing the importance or need of their services.
3. Falling value of AUD - The value of Australian currency has been fallen in recent years
and it has been investigated that it will continue to fall . This negatively affect the
confidence not borrowers and make the market less attractive for foreign investors.
Therefore, it affect the overall performance of the bank, such as lack in availability of
funds (Finger, Gavious & Manos, 2018).
d. Business practices
The bank's aim is to focus on enhancing and security the financial well-being of individuals,
communities and organisations, as well as a key requirement for achieving this is that the bank
focuses on maintaining a high professional standard and perform the banking practices or
operations with integrity. (Gale, 2019).
The Bank is one of the biggest bank in Australia that serves to people, small and midsize
enterprises, big organizations, and governments with a variety of banking, investment
management and other financial as well as products or services for managing financial risks. The
bank adopts traditional compliance model for its banking practices which is developed with a
different purpose in mind, that focuses on identifying the business practices and associated risks.
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e. Functional departments
The Commonwealth Bank of Australia basically includes 10 different departments which are
working together for offering various types of financial services to the customers or community.
These includes Loan servicing, Retail banking, wire transfer operations, wealth management,
investment Banking, cash management, deposit operations and so on. Officers handling loans,
Tellers and managers offering customer services are working in retail banking. These business
officials assist clients with checking and savings accounts, debit cards, mortgages, credit cards
and personal loans (Moscardo et.al., 2013). Loan servicing agents are handling business and
individual load payments and collections, on the other hand professionals handling wealth
management assist the people or businesses with services related to financial planning and
investment portfolio management .
Deposit operations managers are responsible for handling the processes related to creating
account and its maintenance responsibilities, while wire transfer operators make sure the bank
has enough liquid assets for meeting scheduled obligations. The electronic banking department'
role is to create and maintain the online financial transactions. The department of mortgage
banking also manages each and every type of loan payments and is also responsible for
providing customer service to the mortgage customers of the bank (Nooraie, 2012).
CONCLUSION
The above report summaries that bank is operating in a dynamic or fast changing environment.
Many environmental factors influence the operations and decision-making process of the bank.
These factors include political stability, economic system, technological innovations that needs
to be considered while entering into a new market or country. It can be concluded from the study
that chosen bank also faces various risks such as Capital requirements, Tech Giants etc. In
addition to this, it has also been identified in the above report that there are various functional
departments in CBA that helps in overall functioning of the bank.
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REFERENCES
Bandara, W., Meredith, J. C., Techatassanasoontorn, A., Mathiesen, P., & O'Neill, D. (2019).
Mechanisms for creating successful BPM governance: Insights from Commonwealth
Bank of Australia. DOI: https://eprints.qut.edu.au/131954/.
Bello, D. (2018). ENTERPRISE RISK MANAGEMENT AND PERFORMANCE INCREASE
IN THE BANKING SECTOR". SOTTOTITOLO:" Theoretical aspects and empirical
analysis on international banks" (Bachelor's thesis, Università Ca'Foscari Venezia). DOI:
http://hdl.handle.net/10579/13318.
Buell, R. W., & John, L. K. (2018). Commonwealth Bank of Australia: Unbanklike
Experimentation.
Decker, F., & McCracken, S. (2018). Central banking in Australia and New Zealand: historical
foundations and modern legislative frameworks. In Research Handbook on Central
Banking. Edward Elgar Publishing. DOI: 10.4337/9781784719227.00019.
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performance in the banking industry: A cross-country comparison. Journal of
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https://doi.org/10.1016/j.intfin.2017.09.019
Gale, F. (2019). The Circular Economy in (Corporate) Australia: a Preliminary Analysis. In 4th
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Commonwealth Bank of Australia-Melbourne Institute Observed Financial Wellbeing
Scale.
Jasrotia, S. S., Sharma, R. L., & Mishra, H. G. (2019). A Comparative Analysis on Banks
Compliance with BASEL-III Capital Adequacy Norms. Vinimaya, 40(3), 27-49. DOI:
10.1504/IJBG.2017.10007588.
Moscardo, G., Lamberton, G., Wells, G., Fallon, W., Lawn, P., Rowe, A., ... & Renouf, M.
(2013). Sustainability in Australian business: principles and practice. Wiley-Blackwell.
Ng, Y. F. (2019). In the Moonlight: The Control and Accountability of Government
Corporations in Australia. Melb. UL Rev., 43, 303. DOI:
https://law.unimelb.edu.au/__data/assets/pdf_file/0007/3166054/08-Ng.pdf.
Nooraie, M. (2012). Factors influencing strategic decision-making processes. International
Journal of Academic Research in Business and Social Sciences, 2(7), 405. DOI:
http://hrmars.com/admin/pics/985.pdf
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Shah, A. A., Wu, D., & Korotkov, V. (2019). Are sustainable banks efficient and productive? A
data envelopment analysis and the Malmquist productivity index analysis. Sustainability,
11(8), 2398. DOI: 10.3390/su11082398.
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