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HSBC is one of the world's largest local banking and financing service organization which is granted selection of services on personal finance, private, commercial, corporate and investment banking. Its global network consists of around 7500 offices in 83 countries and territories entire. It was founded in 1865 to assist the expansion of business between china and Europe. HSBC, now stand in 6th position in global business having headquarters in London, United Kingdom. (Source: One world trust, 2007 accountability profile)
Product and Service
At the global phase HSBC promote to improve new business or personal accomplishment and opportunities to everyone around the world with its spacious range of product and services. The HSBC has different major products like premier checking, free credit card, mortgage and home equity, wealth management, investor saving and current account and preferred rates on CDs. Same as it provide services of ATMs, call centres, online banking facilities-worldwide view and free amount transfer in global HSBC accounts and any other different services. (Source: us.hsbc.com)
The HSBC has number of competitors at the basis of performance, key measures and market analyst recommendations. The top competitors in UK territories are Barclays plc, The royal bank of Scotland group plc, Citigroup Inc, Lloyds banking group (Source: Daily Finance, 2011). Other main competitors are JP Morgan Chase &Co, Wells Fargo &Co, Banco Santander SA, Mitsubishi UFJ Financial group, Bank of America corporation, Royal bank of Canada and Credit Suisse group (Source: : e-consultant, 2009).
For the initial improvement process of HSBC, it focuses on private banking business and online banking & investment services. According to Group Chief Executive Michael Geoghegan, HSBC has fair and unique strategy process. The main area has to focus that build upon unrivalled contract in emerging markets. In the process of wealth management, insurance and mortgage, it has high profit and sales and higher customer deposit procedure. (Source: HSBC holding plc, interim report 2010: 5) In internal control, HSBC established disclosure committee to review any errors or omission in work. Similarly in employees hiring process, HSBC first selects through online application form, then testing and telephone interview, lastly, select in assessment centres. Further expected process of HSBC are building equity and emerging market insurance platforms, Sustainable revenue streams, maintaining funding power and characteristic. (Source: HSBC holding plc, interim report 2010: 9, 10, 11)
1. Remuneration Policy: - HSBC has established the policies which support to fulfil the human resource like remuneration, employment and retirement benefits. It includes the terms of bonus plan, share plan and many other long-short term incentive plans. (Source: Capital and risk management, 2010: 48)
2. Dividend Policy: - The HSBC board at all times strongly committed to payment of supplementary dividend and also distributing the positive and essential long term appraisal to the customers and shareholders. The board has adopted a policy of paying quarterly interim dividend on the ordinary shares.
3. Sector Policy: - Sector risk policies depend upon international level which is for in certain sensitive sectors when bank invest in many companies or project. . This policy has been quite beneficial for the future of the HSBC and making the relationship with companies friendly. (Source: HSBC Global Site)
5. Insurance, Investment and Customer Satisfactory Policy: - The HSBC holdings prepared policy to swot and verify the satisfaction level of various segments of customers.
It is the process of accretion, preparation and development of the managerial financial reports which is more value by the management for evaluating and providing accurate information to make short term decision of the organization. It is one of the techniques of recognition, collection, measurement and analysis of actual information used by management in order to plan and control business activities. (Source: Business Directory.com)
Requirements fulfilled by the management accounting report
Managerial accounting is being planned to fulfil a large number of requirements. It is being needed to fulfil the need of outside user of financial information and also to assure the various needs of decision makers inside the organization. It may be different for other organizations because it depends upon to their needs. (Source: Middle city, Chapter16)
There are different numbers of techniques used to make reports. Among them, here major techniques are discussed below:
Activity based costing
Cost Volume Profit Analysis
Inventory Management Technique
Analysis of Management accounting techniques
1. Activity Based Costing (ABC)
ABC is an accounting method to gather data of operating cost. It is an approach for allocating overhead costs to products. It provides information rather than result. (Source: Jerry J. Weygandt, 2009:150). In order to ABC, it is better to make specific information which is especially used for various purpose like to create decision of sustainability, pricing, production and supporting budget development and planning.
It could be very important for the HSBC holdings to hit the losses faced by global economic crises like during the year 2009. This technique helps to prove better control of indirect cost faced by HSBC. So ABC is useful way of losses could again recovered by HSBC during time period and this is effective method of allocation cost and work activities.
2. Cost Volume Profit (CVP) Analysis
CVP analysis is used for profit planning in organization. Through this we should analysis not only single result but also evaluate the entire business as a whole. It is a technique to identify the level of operating activities needed to avoid losses and achieve target profit to help in the decision making process. (Source: Mawsen Liao, 1975:780-790)
During the competition from other banks and monitory shortages, HSBC could be getting beneficial achievement using CVP analysis. HSBC could to make clear strategy and build on position as the top international and rising market bank. It may helps to get success in delivering sustainable value to shareholders.
3. Budgeting Technique
Budgeting is a plan which creates outline financial and operational goals of organization. It is a powerful financial tool to maintaining short and long term financial plan to control cash flow.
The board of HSBC sets the strategy for approves the risk appetite, capital and operating plans. This technique has been recommended to control expenses and show guidelines to the management. Budgeting technique helps to make decision of recruitment, manage liquidity position and reach in new customers and global network. This technique force to the management for further planning and implementation as HSBC could able to achieve its goals.
4. Inventory Management Technique
It is a process that identifies the inventory needs, set targets, provides replacement system and report actual and planned inventory position.(Source: Inventory Management:2007)
The major service of HSBC has been funding system. It has a system of collection and process customer payments. To make better access to accurate information it has to improve management of inventory, credit risk and liquidity position. This can have impact on the decision of improved cash flow, reduced credit exposure, and increased posting accuracy, receivable corresponding and access to real deposit information of inventory management.
Not recommended techniques
5. Just In Time (JIT) Technique
JIT is a strategy for inventory management in which components are distributed from suppliers directly before they are essential in the built-up process. (Source: investorwords.com) This technique has not recommended to the HSBC because management has various skill plans to perform in competitive market and other effective technique to implement. So it is not very essential to use this technique. HSBC wants to save costs as do not need to stock up on the inventory which means the assumption has not completed to use.
Variance analysis used to identify the differences between actual and standard cost and budgeted overhead. (Source: Michael Armstrong: 379) It is least suggested to the HSBC because this analysis focus on present cost and condition. HSBC already has a communication or reporting system like budgeting and CVP to synchronize the dealings with customers, shareholders, staffs and line departmental functions. Managerial tool such as variance and incremental analysis are not used to deal with long range decision and objectives. So that means it is not complete technique to analysis.
Weaknesses and Strength of analysis
The strengths of this analysis have explained various operations of HSBC and to suggest the guidelines to the management to implement it in long and short term planning and making of decision. For every business it is very important to minimize the cost, competitors and other problems which have to face by company daily that's why company must have to analysis the weak points and try to use better technique for further progress. So, all the suggested techniques would be very useful to HSBC holdings in the Competitive period of business.
The weaknesses of this analysis that examples of companies the management accounting to details has not maintained and the analysis did not focus the depth of the area of HSBC. Most of techniques highlight the short term problems and this analysis practically appropriate to reduce the shortcoming problems. This analysis only consists of information available on internet and journal that's why this analysis has not any practical experiences. There were many opportunities and threats of HSBC but this report did not focus much on this. Anyways either have weaknesses on analysis but this report has tried to focus on main target of writing.