University Business Environment Report: Banking Sector Key Issues

This report provides a comprehensive analysis of the business environment within the banking sector, focusing on key macro issues that significantly impact its operations. It begins by identifying and describing critical macroeconomic risks, regulatory challenges, technological threats, cyber-attacks, a...Read More

Running head: BUSINESS MANAGEMENT
Business Management: Banking Sector
Name of the Student
Name of the University
Author’s Note:

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Table of Contents
1. Introduction............................................................................................................................2
2. Discussion..............................................................................................................................2
2.1 Identification and Description of Key Macro Issues in the Business Environment for
Banking Sector.......................................................................................................................2
2.2 Explanation of Potential Impacts at Micro Levels with 2 Identified Issues with
Examples of Businesses from Banking Subsector.................................................................5
2.3 Reflection of 2 Challenges while completing above 2 Tasks with Appropriate Ways to
overcome the Challenges.......................................................................................................7
3. Conclusion..............................................................................................................................8
References..................................................................................................................................9

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1. Introduction
Business management can be defined as the core discipline that is being devoted for
organization, analysis as well as planning of several kinds of business operations. Business
management mainly comprises of interlocking functionalities to create corporate policy,
organizing, planning, controlling or even directing the organizational resources and hence
achieving policy objectives (Scarborough 2016). Proper decisions are easily made for
overseeing the enterprise and the size of management could range from one person within an
organization to several managers in multinational company. The following report outlines a
brief discussion on business management issues and their impacts of banking sector.
2. Discussion
2.1 Identification and Description of Key Macro Issues in the Business Environment for
Banking Sector
The most significant and important key macro issues in the business environment are
required to be analysed on a priority basis (Burns and Dewhurst 2016). The major
uncontrollable and external factors, which have strong influence on the organizational
decision making process and then affect the organizational strategies and performances. All
of such factors involve economic factors, legal, political, demographics and social conditions,
changes in technology and many more. The main examples of this business environment
influences involve government regulations, disastrous weather, change in work culture and
even change in the interest rates (Myers 2013). A banking sector comprises of some of the
major and the most important key macro issues, which could be extremely vulnerable for
both customers and other organizational members.
These key macro issues for the banking sector are as follows:

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i) Macroeconomic Risk: The first and the foremost key macro issue for the banking
sector is macroeconomic risk. It is one of the most significant issue that allow all economies
have eventually returned to the positive growth and development (Jeston 2014). For all the
bankers, these types of uncertainties within the macro environment together with subsequent
persistent as well as high level of debt within consumer, corporate and sovereign sectors for
laying the ground work and hence significant instability is obtained. There are other
significant issues with this macroeconomic risk like slow growth rates within the emerging
economies, unresolved conditions and also lack of clarity for the future of interest rates
(Maylor, Blackmon and Huemann 2016). Macroeconomic risk is termed as the top level
concern for bankers, analysts and risk managers, who are majorly concerns for the current
positive growth and it is the outcome for artificial conditions, which are created by the lower
interest rate or prospects of a deflation or recession are stronger.
ii) Regulation: The second important and significant key macro issue that is
extremely common for the banking sector is regulation. Although, the industry analysts and
risk managers have less concern about regulation, the bankers subsequently cite extremely
tight regulatory needs as the most ineffective, excessive and expensive. While these bankers
identify the requirement of tough controls, major concerns are being raised regarding
complexities and volume of current regulation that are to be stated for influencing overall
industrial margin and management time (Wheelen et al. 2017). Being involved in the banking
sector, the bankers are quite concerned regarding the effect of rising regulatory needs for
diversity as well as innovation and creativity with their core ability of competing efficiently
against the small bankers, who are not being exposed to the similar regulatory issues. There
are increasingly stringent requirements so that regulation continuing to be a major concern
for the banks who would be investing a significant sizable amount of time, money and effort
and hence meeting standard compliance.

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iii) Technology Risk: This is yet another important and significant key macro issue
that is extremely common for the banking sector (Van Der Aalst 2013). Of each and every
most urgent and recent concern, an outdated significant IT system is one of the major
concerns for business management in banking sector. A failure in investing appropriately
within secured as well as agile system, which could eventually enhance the mobile banking
and digital banking would result into major losses during compounding the core threat
towards any type of cyber-attack. Moreover, this type of macro issue could even get into
operational risks and hence provide major competition from the host of few disruptive
innovators, having the ability to provide clients with more affordable as well as seamless
experiences within a distinctive variety of channel (Szegö 2014). The larger banks within this
banking sector, who eventually fail in innovating risks, often lose a major amount of
business. The selection of products, services and experiences are done effectively as per
customer expectation.
iv) Cyber Attacks: The fourth important and noteworthy key macro issue that is
extremely common for the banking sub sector is cyber-attack. These types of attacks are
majorly termed as the top most concerns for any banker. Few banks do not have equipment
for better prevention of attacks from the opportunistic attackers, government funding
corporate espionage and organized criminals (DeAngelo and Stulz 2015). The most
significant concern is compounded by increased embrace of newly and potentially higher
risky technology after inclusion of real time payment, crypto currencies and distributed
ledgers. The main bankers are mainly n regarding the under investments within any banking
technology system and hence leaving the entire industry completely vulnerable for potentially
large or crippling attacks. The bankers even are concerned about process of under
investments within the banking technology system is leaving the sector much vulnerable
towards potentially crippling as well as larger attacks (Cohen et al. 2014). Often it is being

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noticed that the banks with stronger technology system are only as the weakest links after
rendering vulnerability to any type of cyber-attack from several sources. These significant
cyber-attacks over the major financial infrastructure can substantially leave the banks
extremely vulnerable towards risks in finance, regulation and reputation.
v) Political Risks: This is yet another important and significant key macro issue that is
extremely common for the banking sector. The bankers have often expressed subsequent
concern that the respective country’s government is intervening within banking processes for
several significant reasons like raising revenues within the time of budgeting stress,
rebuilding the national or international tax base as well as increasing investor protection
(Ratnovski 2013). The organizational members of this banking sector have even highlighted
that there is uncertainty within various political environments across the entire world.
Moreover, the overall impact of country’s economy can result into great interference for
banking management, taxation and lending policies and procedures. These banking
organizations are completely aware of the significant potential towards great political
interferences regarding management of the operations, taxation on the basis of a host of the
micro as well as macro-economic factors and finally lending of banking policies.
2.2 Explanation of Potential Impacts at Micro Levels with 2 Identified Issues with
Examples of Businesses from Banking Subsector
Amongst the above mentioned five distinctive and important identified issues, two
most significant key macro issues are macroeconomic risk and cyber-attacks. Both of these
issues have major impacts at the micro level in banking sector and these are required to be
eradicated on time for ensuring that the business is working effectively and efficiently
without much complexities (De Roover 2017). The potential impacts of these two identified
risks at the micro level with real banking examples are as follows:

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i) Macro Economic Risk: This is the first and the most important and significant
identified key major issue that has major potential impacts at micro levels. The
macroeconomic risk is the financial risk, which is mainly associated with the political as well
as macro-economic factors. This type of risk eventually refers to all kinds of macro-economic
and political factors (Wernz 2014). The macro economic factors are also parts of economic
factors that influence the major volatility over the time of investments, portfolios, assets as
well as investments or even the intrinsic values of organizations. The major variables of this
macroeconomic level include GDP or gross domestic product, interest rates, inflation rates
and unemployment rates and thus have major effects in micro levels within banking sector.
Northern rock, a small bank in the Northern Island have faced macroeconomic risk
during the years of 2007 and 2008 (Gomedici.com. 2019). Due to high rise of inflation rates,
they were unable to sell their loans to the other banks and hence investors withdrew their
money from the bank.
ii) Cyber Attacks: The impact of cyber attacks is extremely vulnerable for the micro
level in banking sector. The main reason for this risk is that the nature of the data they hold
might be extremely vulnerable and the banks have had to dedicate subsequent funds on better
development of their respective digital infrastructures and hence strengthening their
subsequent cyber security (Barth et al. 2013). The entire banking sector of the entire world is
considered as one of the most profitable sector and for all the significant banks, which still
remains for being true. The investment banking experts eventually demonstrated that this
particular banking sector can face major losses due to such potential impacts of cyber attacks.
Thus, it is highly recommended for them to protect their banking data and allocate more
resources for analysis of cyber security and even for performing the risk assessments. The
banking sector should even make robust policies as well as processes so that the risks of

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cyber security are reduced to a high level (Memmel and Schertler 2013). Apart from data
loss, another potential impact on micro level is the reputational damage.
In May of 2018, the most popular significant banks of Canada, Bank of Montreal
and the Canadian Imperial Bank of Commerce’s Simplii Financial
eventually confirmed the news that hackers have stolen their financial as
well as personal data for over 90000 customers (Gomedici.com. 2019). There
were several external and internal factors that were not considered before
such as lack of users’ privilege segregation, poor password policy,
inadequate logical access control and few more.
2.3 Reflection of 2 Challenges while completing above 2 Tasks with Appropriate Ways
to overcome the Challenges
I had faced 2 distinctive challenges while completion of the above mentioned 2 tasks.
Since, I did not have idea about business management in banking sector, I had to learn about
this type of management at first, I have known that this type of management is solely
responsible for supervising or training the new employees and even for assisting various
events in an organization. A business manager also plays a significant role within business
operations and it is necessary to deal with all types of complexities. Management is the
significant administration of a company or a business. Moreover, I have also known that a
proper organization and coordination of all types of business activities for the core purpose of
achievement of the defined objectives. The most basic task of this business management
involves innovation and marketing. This practice of modern management is required for
dealing with the lower efficiency and failure of the enterprises.
The first and the most important challenge that I have faced here was identification of
key macro issues. For solving this problem, I contacted with one of my acquaintances, who

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work in a bank. He was able to guide me in this problem. Moreover, I personally visited the
bank and checked for new technologies and up gradations. The second issue that I have faced
here was during finding case study of banks that have faced macroeconomic risk. However,
finally I did research and was able to come up with a real life example.
3. Conclusion
Therefore, from the above discussion, it can be concluded that there are several core
responsibilities of business managers that include overseeing of several operations, helping of
employees for reaching to the top productivity level and even reviewing of contracts. This
management even involves several activities to set the organizational strategies and
coordinating the employees’ efforts for the purpose of accomplishing the objectives by the
application of every available resource like human resources, technological, natural and
financial. Social organization and organizational leadership are being enhanced and the
strategic goals or objectives are obtained in a better manner. The above provided report has
clearly outlined a brief discussion on business management of banking sector with relevant
details like issues and potential impacts.

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References
Barth, J.R., Lin, C., Ma, Y., Seade, J. and Song, F.M., 2013. Do bank regulation, supervision
and monitoring enhance or impede bank efficiency?. Journal of Banking & Finance, 37(8),
pp.2879-2892.
Burns, P. and Dewhurst, J. eds., 2016. Small business and entrepreneurship. Macmillan
International Higher Education.
Cohen, L.J., Cornett, M.M., Marcus, A.J. and Tehranian, H., 2014. Bank earnings
management and tail risk during the financial crisis. Journal of Money, Credit and
Banking, 46(1), pp.171-197.
De Roover, R., 2017. The Medici Bank: its organization, management, operations, and
decline. Pickle Partners Publishing.
DeAngelo, H. and Stulz, R.M., 2015. Liquid-claim production, risk management, and bank
capital structure: Why high leverage is optimal for banks. Journal of Financial
Economics, 116(2), pp.219-236.
Gomedici.com. 2019. [online]. Accessed from https://gomedici.com/risks-in-the-banking-
industry-faced-by-every-bank/ [Accessed on 05 Apr. 2019].
Jeston, J., 2014. Business process management. Routledge.
Maylor, H., Blackmon, K. and Huemann, M., 2016. Researching business and management.
Macmillan International Higher Education.
Memmel, C. and Schertler, A., 2013. Bank management of the net interest margin: new
measures. Financial Markets and Portfolio Management, 27(3), pp.275-297.
Myers, M.D., 2013. Qualitative research in business and management. Sage.

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Ratnovski, L., 2013. Liquidity and transparency in bank risk management. Journal of
Financial Intermediation, 22(3), pp.422-439.
Scarborough, N.M., 2016. Essentials of entrepreneurship and small business management.
Pearson.
Szegö, G.P., 2014. Portfolio theory: with application to bank asset management. Academic
Press.
Van Der Aalst, W.M., 2013. Business process management: a comprehensive survey. ISRN
Software Engineering, 2013.
Wernz, J., 2014. Bank management and control. Strategy, Capital and Risk Management.
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic
management and business policy (p. 55). Boston: pearson.