Comprehensive Financial and Auditing Report: Macquarie Group Limited

This report provides a comprehensive analysis of Macquarie Group Limited, a prominent public company in the Australian financial sector. It begins with an executive summary and introduction, then delves into Macquarie's operations, including investment and financing activities, and its financial reporting practices. The report examines the industry size and growth, supply chain dynamics, major players, critical success factors, and potential threats. Furthermore, it includes PEST and SWOT analyses, as well as Porter's five forces to assess the company's position in the market. The report also covers industry developments, business expansion strategies, new accounting and regulatory requirements, financing needs, and the impact of IT. Corporate governance, organizational structure, human resources, and communication are also analyzed. The report concludes with a summary of the key findings and references.

Auditing
TABLE OF CONTENT
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INTRODUCTION......................................................................................................................7
PART 1.......................................................................................................................................7
Macquarie Group Limited operations....................................................................................7
Investment and Financing Activities......................................................................................7
Financial reporting practices..................................................................................................8
PART 2.......................................................................................................................................8
Industry size and growth........................................................................................................8
Industry supply chain.............................................................................................................9
Major player and their market share......................................................................................9
Critical success factors.........................................................................................................10
Potential threats....................................................................................................................11
Part 3........................................................................................................................................11
Legal and environmental regulations...................................................................................11
Part 4........................................................................................................................................11
PEST analysis.......................................................................................................................11
SWOT analysis.....................................................................................................................12
Porter five forces..................................................................................................................12
Other factors.........................................................................................................................13
Part 5........................................................................................................................................14
Industry developments & product and service.....................................................................14
Business expansion..............................................................................................................14
New accounting as well as regulatory requirements............................................................14
Current as well as prospective financing requirements........................................................15
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Employing IT.......................................................................................................................15
Effect of implementing strategy...........................................................................................15
PART 6.....................................................................................................................................15
PART 7.....................................................................................................................................16
Communication and commitment for greater competence..................................................16
Corporate Governance.........................................................................................................16
Philosophy management and operation style.......................................................................17
Organization structure and responisbilities..........................................................................17
Human resource...................................................................................................................17
Conclusion................................................................................................................................17
References................................................................................................................................19
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Executive Summary
In the era of development, it is important that organizations like Macquarie’s Group Limited
embrace effective financial, operational and human resource capabilities to upkeep an
advanced growth. Macquarie Group Limited is a Public company providing advisory, and
investment-banking service maintain the international standard levels across the Australian
market. Macquarie Group Limited is listed in Australia and has a total of Australian $17.3
billion of equity and Australian $182.9 billion of total assets. The board and Management
comply exclusive the policies as well as procedures as issued by the IAS (International
Accounting Standards), the IFRS (International Financial Reporting Standards). The industry
is highly competitive and lucrative for organization to flourish its business across Australia
territories. Further, the industry and organization synch is matched by applying various
models such as PEST, SWOT and Porter five forces. Lastly, the report reveals the basis of
communication and structural type of organization to identify employees conduct throughout
the organization.
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INTRODUCTION
In the current era of industrialization, to survive in the competitive environment, it is
important that organizations embrace effective financial, operational and human resource
capabilities assuring a progressive growth. The performance of the organization is extremely
affected by probable risks, which is an inseparable part of the banking industry. The report
has been drafted to assess the effectiveness of Macquarie Group Limited in the banking
industry and also determine in what ways it has developed its operations in Australia.
Furthermore, the report shall draw light upon the areas where the organization has outshone
its performances and evaluate the risks that could obstruct its smooth running business.
PART 1
Macquarie Group Limited operations
Macquarie Group Limited is a Public company, which was established with the motto
to provide advisory and investment-banking service maintain the international standard levels
across the Australian market (Gordon, 2011). It is a diversified financial group offering its
clients with services such as:
1. Asset Management and Finance
2. Advisory
3. Banking
4. Risk and capital solutions in the field of equity, debt and commodities.
Investment and Financing Activities
Macquarie Group Limited acts predominantly as an investment intermediary for the
retail clients institutional, corporate and government and their counterparts across the globe.
Thus it generates income by offering clients with a diversified range of products and services.
Out of the top, 2000 companies across Australia Macquarie Group Limited is ranked at
number 24. It generates it major revenues from the Auxiliary finance and insurance services
in Australia. The total revenue generated by the company is $13,313,000,000, which includes
sales and other incomes. As per the annual reports of the company it has been noted that the
company have higher investment-related income (Dillon and Butler, 2010). Further, it has
improvised its trading conditions across the major markets (Australian Trade Commission,
2011). The Commodities and Global Market sector have also observed equity market
condition. MSI (Macquarie specialist Investment) is one of the Australia’s prime providers of
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offering specialist solutions regarding investments. It provides a solution on self-management
funds and serves with an innovative range of investment solutions.
Macquarie Group Limited is listed in Australia (ADR:MQBKY; ASX:QMC), and
APRA is the regulatory authority which monitors its banking services. It has a total of
Australian $17.3 billion of equity and Australian $182.9 billion of total assets. It has been
recognized for its robust capital positioning and strong framework of risk management.
While the Australian franchises maintained their strong positioning, the offshore businesses
across UK and Europe also continued to deliver spectacular performances with international
income accounting for about 63% of its total income. Moreover, the Banking and Financial
Services (BFS), Corporate and Asset Finance (CAF) and Macquarie Asset Management
(MAM) have altogether generated a combined net profit which contributed up to 13%, i.e.,
$A752 million for the year ended 31 March 2017. The key drivers for such outstanding
performance were gains from previous year investments like the sale of an almond orchard.
Then further the lowering charges for provision and impairments and also growth in overall
Australia’s lending/deposit and platform average volumes.
Financial reporting practices
The board and Management are committed to attaining the esteem standards of
professional conduct beyond all Macquarie operations. Compliance with all the regulatory
requirements and exclusive company policies as well as procedures are core to their business.
As issued by the IAS (International Accounting Standards), the IFRS (International Financial
Reporting Standards) are exclusively complied by the company (Coulbeck, 2012). While the
business predominantly is associated with services of BFS and CAF they are indeed
accounted on the basis of accrual method maintaining fair values.
PART 2
Industry size and growth
In Australia, it has been notified that the financial sector is the most sophisticated,
competitive and lucrative area with about fourth largest pool of investment fund assets in the
world. The economic environment also promotes the favourable conditions for the sector to
flourish. Nonetheless, the sector is in the state of flux due to change in culture, reputation and
uncertainties beyond pace (Shamsuddin and Xiang, 2012). The six powerful forces that shape
banking industry currently are:
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1. Changing demographics,
2. Technological change,
3. Government,
4. Asia growth,
5. Consumer behaviour and
6. Global economy.
The financial and insurance services sector is the eleventh largest employing industry in
Australia. The industry has accumulated assets valued approx. %5.6 trillion which is around 4
times the nominal GDP.
Industry supply chain
With the advancement in information technology, the use of more synchronised
systems of data has impeded the need to revolutionize several management practices. In the
current era, banks offering financial services serve clients through e-banking services, thus
keeping track of client’s behaviour online and providing them personalised facilities. Services
play a prominent role in a service supply chain. Herein, agent of the service supply chain can
either be independent or has its own functionality. For instance, the bank provides services to
customers and industrial customers (institutional and corporate clients). To assist the clients,
the service provider works on the basis of intelligent business analytics to offer solutions.
The service supply chain in Australia is highly dynamic and is evolving with respect
to market needs. As four decades ago in the 1980s, the concept of e-banking was just a part of
imagination, and there were no crucial services provided by banks online (Moshirian, and Wu
2012). But with time, banks and their banking services have been tailor-made offering
financial service to each individual respectively.
Major players and their market share
The Australia’s financial market has expanded manifold in the last two decades
followed up with the auxiliary services like financial and insurance services, professional,
technical and scientific services.
The leading market players of Australia banking and financial sectors and keen competitors
of Macquarie Group Limited are:
Australia and New Zealand Banking Group: this Bank is the third largest bank when
compared on the basis of market capitalisation in Australia. The commercialism and retail
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banking are pillars of the company. It employs supreme technology to handle customer’s
queries and assisting financial planners. The total Asset size of ANZ bank is
$914,900,000,000.
Westpac Bank: this is one of the oldest banks, which is remarked as one of the four
humongous banks in Australia and the largest in New Zealand. It has 1200 branches and 13
million customers. Indeed the total Asset size of Westpac is $839,202,000,000.
Figure 1: Market share of different banks as per lending capacity
(Source: Brodie, 2012)
Macquarie has created the standing by notably hiking its mortgage interest rates, becoming
the utmost lender keeping pace with major banks.
Critical success factors
To maintain a competitive standing among the other industry member, it is important
that the banks ensure to drive forces like enhancing the product attributes, resources
competencies, market achievement, competitive capabilities etc. Latest technology plays a
critical role in the banking industry (Bryant, 2012). It assists bank in introducing its
innovative products customised as per clients demands. It can also be used to lowering the
overall cost of the transaction and enhancing the quality of products. The industry of banking
offering low-cost rates makes it tempting for the customers. Since there is fierce competition
in order to survive in the industry it is important to offer products at low cost and at the same
time hold a reputable brand image. Furthermore, service quality is what the customer seeks
most in this industry.
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Potential threats
The banking industry is driven by opportunities and threats equally. The threats that
hold potential to disrupt the positioning of Macquarie Group Limited are:
1. Interest income and Loan growth has unsurprising effects of financial institution
2. Implementation of new technologies
3. Differentiating from other banks through services.
4. Offering services through mobile channels.
5. Maintaining high-security levels.
Part 3
Legal and environmental regulations
There are various acts enacted in Australia that require stringent compliance of the
organization. The Banking Act 1959, Corporations Act 2001 and Financial Sector
(Shareholdings) Act 1998 are those acts that predominantly govern this sector. Under these
acts, the regulators are required to meet the prudential standards, practice guides as well as
other guidelines (Mulyaningsih and Daly, 2012). Furthermore, it is also important that a
regular reporting and adequate disclosures are made.
Part 4
PEST analysis
According to Haiss (2013), the political environment of Australia is quite steady and
has proven out to be success factors for Macquarie Group Limited. Nevertheless, it's
international working across the UK is disturbed due to the Brexit regulations, weakening
GBP currency impacting the banks business in the UK. The economic environment, on the
other hand, is expected to be improving due to stability in oil prices and the fiscal reforms,
which has reduced the compliance as well as regulations costs.
Furthermore, the social capacity is intriguing as Macquarie’s commit to workplace
diversity meeting the utmost needs of all its clients and employees. Further, it also plays a
crucial role in changing consumer mindset towards key financial services (Pais, A. and Stork,
P.A., 2011).
Moreover, the technological advancement has been integral to banking and financial
services. Information analytics and big data have turned out to be a game changer for
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Macquarie. Also, the technology modernization and merging of digital channels have led to
lowering cost transactions and development in the virtual banking sector.
SWOT analysis
Particulars Description
Strength It has diversified portfolio throughout the
different financial service segments.
Further, Macquarie has marked up a strong
business performance in the year 2017. It's
one of the core strengths of such
performance is its dedication to corporate
governance and transparency.
Weaknesses The key weakness of the group is pressure
on credit ratings.
Opportunities The prime opportunity lies in financial
service segments. The demand for banking
and financial services has been improved
due to the increase in global markets (Goyal
and Joshi, 2011). Lastly, the geographical
expansion across developing economies has
also led to growth opportunities.
Threats The key threats that hamper banking growth
are the frauds and penalties affecting
profitability and repute. Further, stiff
competition also prevails in this sector from
global and domestic players. Malware attack
and infiltration are probable threats in online
security.
Porter five forces
Macquarie group limited is a leading Australian firm, and it is important to have a
clear outlook of the industry to maintain the repo. As inferred by Gewald (2010), Porter five
forces help in shaping strategy as one can derive the impact of firm’s profitability in the
industry in which it is currently operating. The porter five forces analysis is:
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Particulars Description
Threat of New Entrants Since there are stringent regulations and
hefty legal laws, it is not easy to invade this
industry without adhering to all the key
requisites (Mostafavi, Abraham and
Sullivan, 2011). Thus, the threat of new
entrants is low.
Bargaining Power of Buyers Buyers are often demanding and seek for
best offerings this indeed pressurises bank
to limit their profitability as switching cost
is low. Thus, the bargaining power is high.
Bargaining power of suppliers The negotiating power is high, and there are
numerous suppliers serving the field. Thus
the dominant position of the supplier is
moderate.
Threat of substitute Innovation in technology delivering new
services can create an organization to suffer
on the whole. For instance, Google Drive
and Dropbox are hardware drive which can
value proposition uniquely different from
the current offering of the industry (Beatty
and Liao, 2014.). Therefore, in this
revolutionised industry the threat of
substitute is moderate.
Rivalry among existing competitors The rivalry in this industry is intense as
there are more experienced organizations
with a large base of assets that will strive to
drop down prices for maintaining its pace in
the market. Thus, the rivalry is intense in
this industry.
Other factors
There are other factors as well, which can affect the overall performance of
Macquarie group limited. For instance the inflation period, period of development wherein
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raw materials can be scarce and expensive, that will affect the overall finance of the
company. Other than this the interest rates, as well as the economic situations, can also
hamper the company financial stability and profitability. Thus in order to compete
effectively, it is important that a proper research is conducted to react to change
spontaneously.
Part 5
Industry developments & product and service
Competent and proficient skills are required for effectively surviving through the
turbulence within the industry. Development can be guaranteed by possessing trained
workforce, as employees are the backbone of an organization they’re proficiency at work can
ensure the satisfaction of customers. Upkeeping a good base of loyal customers will require
the employee’s skilful efforts, subsequently ensuring development, as the expertise skills will
help in adequately meeting up the changed behaviour of customers on a continual basis (Wu
and Shen, 2013).
Adoption of new service or any new product offering can lead to potent risk for
companies as it may or may not be intelligible with the employees and customers. For
instance, the new technologies may not be well versed by employees thus adoption without
explicit training can lead to blunders.
Business expansion
The growing wants of the consumer must impel Macquarie to consider the expansion
of business across Asia as well. Since there are a lot of emerging economies across Asia that
can be a worthy prospect for the business. The company should do adequate research to see
how well it can suit to the environment of such economies.
New accounting as well as regulatory requirements
The business is considerably set up in a different parts of UK and US. Each of these
countries has their own set of legal accounting rules and regulations, which Macquarie is
obligated to follow. There is a probability that company might omit to adhere to such
policies, which could result in heavy fines and penalties. Moreover, the company might have
also encountered a legal coverage when they have illegally adopted any technique or terms
that are detrimental to the respective country this could result in stringent actions (Cohn, Fehr
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