Pestel Philips Essay

POLITICAL FACTORS Because Philips is an international company, it has to deal with many political factors such as: tax policy, employment laws, environmental regulations, trade restrictions and political stability inside each country they are in. Philips is a manufacturer, a sales company and needs to maintain service organization too, so it must deal with many varieties of laws and policies that are changing, depending the country and the time. For example in many countries of European union now taking place dynamic changes in employment law. (Federation of European employees, 2007) ECONOMIC FACTORS Depending on the country and the economic growth of it, the purchasing power of the population is not the same everywhere. In fact, as Philips is present in many countries, it has to adapt its products and sales processes to the buying habits and the standard of living. For Philips high economic growth means the increasing purchasing power of the population that is desirable for the company. SOCIO-CULTURAL FACTORS The social and cultural influences on business vary from country to country, region to region. It is very important that such factors are considered. Then, it is necessary for Philips to understand the consumer needs and habits in order to meet its expectations. Moreover, in developed countries nowadays, customers are paying more and more attention to ethics, respect and culture of the company. TECHNOLOGICAL FACTORS Because of the international presence of Philips, each country doesn’t have the infrastructure to welcome properly Philips’ technologies, including online processes. So Philips needs to adapt its products to the country where they are. Moreover, Philips Company is very dependant on technology. New innovations can significantly improve operations of the company. Also, it’s important not to neglect the Research and Development department even if it’s the most expensive one. ECOLOGICAL FACTOR: Many countries are now environment concerned and try to reduce pollution. Philips as a large manufacturer can face some problems because of that, even more as it is a lightening company. With the important development of the LED, Philips has a real challenge even if the LED market is not as profitable as the lamp market. LEGAL FACTOR Each country has its own legislation even countries which are parts of the same organization, for example, in Europe, there is the European legislation and the country’s legislation, so Philips needs to be aware of every aspects of this system and adapt quickly.

Namcol online rgistration

The purpose of this project Is to create and provide an online form of registration at Noncom – Mammalian College of Open Learning, an Institution which provides learning opportunities for adults and out-of-school youth; upgrading their grades for tertiary level. In this project, I will use a form for the learners to fill In and press the submit button and it will connect to the database and eventually feedback will be return to the user, be it the date, the point where the learner will need to go attend classes.This will all be possible and accurate if the learner submits all the information required from him or her. Introduction For almost twenty years, Noncom has been enhancing the management capacity of learners around the country through traditional way of registration using filling in paper forms. I carefully selected this because I have reason to believe that some learners do not register, not because they are not willing to or do not have the money, but the other facto rs like lack of transport to reach to selected places where registration takes place.The aim Is to Improve In the provision of service. During my research, I thought such a system would be very effective and efficiency for both the institution and the learners. Gone are the days when one has to travel and fill in forms, standing in queues and waking up early to go secure your space, online registration can eliminate all these problems. And for the company, it will save time since opening and sorting out illegible or inaccurate forms can be very time consuming so Just by eliminating these processes off your duty you get less administrative work.

Everyday Use by Alice Walker Essay

I would like to share this wonderful story that I had chosen for my English class research‘s paper â€Å"Everyday use† by Alice Walker. The story of â€Å"Everyday Use† is about a single mother and her two daughters, Dee and Maggie. Dee is the family’s proud. She is beautiful, smart and educated, on the other hand, Maggie is simple, low confident and her skin burned severely in a house fire. The author Alice Walker uses Mama as the narrator in the â€Å"Everyday Use† to describe these two characters, Maggie and Dee, to show us two different views of culture and tradition heritage during 1970’s. My thoughts on the story were drawn from personal experience with my own grandmother’s by entrusting their granddaughters with valuable heritage connections. This story also taught me how to value more my family. I also like this story because applies to every young person, and especially to all the young women who do not attempt to understand to respect the women who made them. I enjoyed reading it and symbolized the life of a family that is learning what their heritage really is and how to use it. I love the person I have become and I often scorn my grandparents, in their education and values. Today Most of us do not think about passing things down from one generation to another, either objects or traditions and I think is a valuable to understands the importance of cultural heritage and the story suggests that children should appreciate their heritage as it is passed down.

A Critical Evaluation of the Inside Job Essay Example | Topics and Well Written Essays - 750 words

A Critical Evaluation of the Inside Job - Essay Example These people have commented on the reasons of the global economic crisis, their role in the crisis and about their reaction when the financial meltdown began. The Inside Job basically means that there are behind the door interactions among the banks, governments and the academia to a certain extent, which triggered the global financial crisis in 2008 (Bradshaw). The documentary shows how the concepts of keeping a balance in the economy for the safety and financial soundness of the nation were violated by the capitalists who destroyed the economic stability in the country with the help of various influential people (Bradshaw). These were government officials, who had once been bankers and were now making liberal policies in which bankers could make money, on the expense of risking the financial stability of the region. They used political appointees and people from academia who provided forged evidence of the advantages of excessive deregulation. Some people in the government, like Ba rney Frank, tried to regulate this process in order to prevent the economy from breaking down, but their efforts went in vain in face of the high influence of the supporters of deregulation. This process still exists and continues to prevail today, but at a slower pace (Bradshaw). The documentary has been first of its kind, highlighting the change in the banking system after the deregulation of banks in 1980’s. It clearly describes how the risk of the loans previously lived with the lender, which was the bank which made the bank responsible in granting the amount of loans. Gradually, the process of securitization started whereby, the high risk loans were bundled together and were offered to risk taking borrowers on high interest rates. The loans were securitized, and the banks no longer held the responsibility to collect the loan back. This subprime market offered high returns for the banks; therefore, the banks lent large sums of money without anticipating that they could de fault by providing such risky assets. On the other hand, securitization itself is not as harmful as shown in the documentary (Epstein). The securitization process allows the investors to diversify their portfolios by holding a large pool of credit card debt. In this way, investors are not exposed to a single debt risk. It is also a flexible process whereby, the securitizers customize the pools of debt according to the preferences of the investor (Lee). The risk of default lies on the assets on which the securities are formed (Epstein). If those assets are high risk subprime mortgages, there is a high risk of default, which is exactly what happened with the banks in the United States. After the deregulation, in the period from 1987 to 2006, the movie shows how banks and its employees enjoyed a favorable time. Bankers became drastically rich and thought of their richness as a result of their smartness. The perception prevailing among the bankers has been clearly portrayed in the movie , as the Bankers thought of themselves as clever providers of prosperity to the nation and that they deserved to be rich (Bradshaw). However, this led to the concentration of huge sums of money amongst a handful of CEO’s, economists and members from the government. One of the most excruciating realities of the financial world came to the forefront when Charles Fergusons’s documentary highlighted that not only banks and government officials were involved in the excessive deregulation of the banking system, but members from the academia had a vital role in promoting the liberalization process (Bradshaw). The greed of bankers and government o

Response paper Essay Example | Topics and Well Written Essays - 250 words - 18

Response paper - Essay Example Ultimately, it is the view of this student that the choice to diversify into the economy market is a positive one. Essentially, this decision is based upon the fact that unless a firm is continually growing and seeking to diversify its new markets, it risks becoming irrelevant and shrinking. Likewise, relying upon the cash cows that have provided the sustenance of this company into the foreseeable future is not a tenable business plan that can likely continue to promote further success. In terms of what the CEO might actually think of these arguments, it is likely that he will be hesitant to risk company profitability and productivity based upon a product that has not sufficiently been analyzed, tested, or room for market space determined. Nevertheless, he will likely be intrigued by the possibility of engaging this particular product line and production with relatively low startup costs and without a great deal of investment in machinery or

International Marketing (report 3) Essay Example | Topics and Well Written Essays - 750 words

International Marketing (report 3) - Essay Example The population of Sydney, Perth, Brisbane and Canberra comes to about 10.1 million people. The expected market will be 374,535/10.1 million, which is about 3.74 percent of the total population. The density rate of population in developed areas is 1.2% yearly. Data as of 2010 posted the 89% urban population with 1.2% rate of urbanization. The expected sale in five years will be calculated by taking the target market which is male’s surfers and multiplying with the price of one surf board. Assuming one surfboard is $300. The expected sales will be $300 *374,535 =$112,360,500 (Australian Bureau of Statistics 2012). Currently there are over 4000 stores selling competitive surfboards in Australia. Since the product is innovative, no other products have been introduced to the Australian market with such advanced technology and extremely limited direct competition. The target market with regard to income of the intelligent surfboard will be part of the 78% of Australians employed and more specifically, the 58% of households earning over $41,000 per year (Yellow Social Media Report 2012). The production costs of competitors vary from $400-$1500. The marketing budget was determined based on the average disposable household income. It was calculated by the income that a single person household would require maintaining the same standard of living was $848 per week (Wilson & Bell 2004). The average amount that an Australian household spends on all sporting goods a year is at $123.24. It will be obtained by adding all the marginal costs plus net contribution. From estimation we obtain; The figure obtained is equivalent to the average amount an Australian surfer spends in surfing. The contribution is adjusted to satisfy the average customer. Average number of units produced per year becomes 10,700 i.e. 112,360,500/ (5*2100). Advertising and publicity costs of Internet and social media will meet 79% of large businesses

Zadie Smith's White Teeth Identity and Progress Essay

Zadie Smith's White Teeth Identity and Progress - Essay Example Joshua supports the environmental group FATE, while his own father supports the genetically-produced FutureMouse. Samad’s twin sons, Magid and Millat, also believe in different goals; the eldest is one with Marcus and his scientific future, while Millat embraces a fundamentalist view of religion and society. White Teeth argues that people build relationships based on their inner preferences and external pressures on life and their differences will perpetually clash, but they have to accept that as part of human identity and progress. People are born to be different in ideas and beliefs, because of their own choices in life and external influences on the development of their human identity. The novel includes three generations that intersects the â€Å"themes of heritage and family history† (Chernysheva 3). Every generation has important questions that they wish to answer. For Samad, he wants to conserve history, which he also does through promoting the myth of his great -grandfather, whose role in Indian history is not entirely reliable. Archie also feels the same nostalgia for the past. His so-called war wound is not real, because he put it on himself. Despite this self-inflicted wound, Archie creates a memory of the war with a strong sense of â€Å"self-defensiveness† (Chernysheva 3). Samad and Archie essentially promote a traditional approach to history and identity formation. They repeat their wartime concerns, where they usually find people forgetting the war, as if it is not important. These best friends, nevertheless, do everything to preserve their fabricated history of the war. Samad comes from a generation that sees history in a linear relationship, where every action has a consequence (Chernysheva 3). He supports the notions of karma and fate. Clara’s mother, Hortense, has the same views but for her, religion has become a different lens from which she makes sense of history. The generation of the youngest characters experie nce and see the future in diverse prisms and for different expectations and goals. The Iqbal twins believe in conflicting values. Magid, who lives most of adolescent life in Bangladesh, returns to England with a more Westernized view than the English themselves, while Millat finds truth and peace in fundamentalist religion. Samad is disappointed that Magid becomes more ultra-Westernized, when he planned for him to continue their traditions. The twins follow extremes ideologies that threaten to break their family apart. Irie has her own personal struggles. She is divided between her volunteer work in Africa and an occupation as a dentist and also faces diverse choices for hairdos and weight-loss plans. Irie’s child, however, bears the consequences of Irie’s choices (Chernysheva 3). The demolition of the Berlin Wall represents the demolition of obstacles to individual freedoms and differences (Chernysheva 3). Traditions versus modernity clash in influencing human progres s and identity. Samad â€Å"moves between positions of authority and deauthorisation or subordination† (Gustar 335). He wants to impose his authority, but he does not have any power over his own family. He exaggerates his claims regarding his life, but he is â€Å"also emasculated by a radicalized discourse in an ethnocentric culture that often treats him as subaltern† (Gustar 335). Ironically, he spreads lies about his heritage that only makes him smaller as a person, since he cannot achieve the same level of greatness. Since he cannot control his life, he applies power chiefly over his family and children and even uses kidnapping to send his elder child to Bangladesh (Gustar 335). He does this because he knows that in the end, his

Ultimate axial bearing capacity of jacked pile in layered sand with Dissertation

Ultimate axial bearing capacity of jacked pile in layered sand with using Driven Program 1.0 - Dissertation Example The experiments are performed on three different water tables from dry level, cross-surface level and to the bottom of the 15m depth. Four different depths of steel and concrete piles are used for the experiment which is performed with the help of computing software Driven 1.2 providing all supposed calculation. Different depths of the surface are varying from medium sand to coarse sand with fine gravel. 8 tests were conducted for each of four piles making a series of tests manifesting the behaviors and measures of ultimate axial bearing capacity over the standards. A comparison of results manifests the consequences and derivations of the experiments as well as the supposed notions of the experiments. ... In fact, all the early eras of human faculty in constructions had been depending on pile engineering to provide them with the sufficient strength for lasting long enough. British Architecture and pile-engineering is considered to develop rapidly with the emergence of modern architecture techniques around the beginning of the eighteenth century which is also an era that brought new technologies to most of the Europe. A success of a civil work is always inherited in its performance over the forces of deformations. And the task of a foundation is obviously to provide the strength to the construction structure. Thus, the success of pile engineering resides in a toleration of all possible factors that deform the structure and lead to a failure. Therefore, pile engineering mostly circulates around the idea of toleration. The major mean of the piles is to provide a foundation that can tolerate the weight of the construction, deformation torques, and the supposed climatic and geographical ch anges expected to affect the construction during its life. In our current ongoing proceedings, we are setting up an experiment that will analyze the bearing capacity of two sets of piles. This experiment is performed to analyze particularly the ultimate bearing capacity of the jacked piles, as the jacking method is best usable for our supposed layered sand structure and is also very commonly used in most of the constructions popular today. We have chosen steel and concrete piles to be analyzed during the experiment. As a specimen of the behavior of the piles, this experiment manifests a comparative and analytical result that shows up the

Issues impeding the reconciliation of South Korea and Japan Research Paper

Issues impeding the reconciliation of South Korea and Japan - Research Paper Example For Hideyoshi’s army to mobilize easily to China, he had to pass through Korea. Hideyoshi deciced to claim Korea by conquest, but with the sole purpose of merely passing through and making the Kingdom of Korea serve under his rule. That expectation did not go as planned as the initially weak Korean defense stiffened as they became more organized and relentless. It is also noted that the Chinese Ming sent an army to support the Koreans in their defense when it was apparent that the Japanese really intended to make a push for China. This bogged down the Japanese’ first invasion attempt. The second attempt to invade Korea was far more brutal as it is noted here: His second invasion of  Korea  was more about saving face than conquest: he wanted to demonstrate to the Chinese that he did not fear them or feel subservient in any way. He also wanted to punish the Koreans for resisting him. In the first invasion he had hopes of winning them over, and thus had ordered his troops to treat civilians well so long as they were compliant. There would be none of this in the second invasion. Hideyoshi wanted the Koreans killed, soldiers and civilians alike, and evidence of the slaughter sent back to him in  Japan. (Hawley, â€Å"The Imjin War: Part 2†) Though the Japanese pushed further in their second invasion attempt, the combined force of the Korean and Ming soldiers halted them, and much of Japan’s defeat was due to the skillful and daring capability of the Korean navy. When Hideyoshi finally died due to illness, the invasion was called off. Centuries after, there was the Japanese imperial expansion prior and during World War II. When Japanese Imperial Forces marched through Korea, they pillaged cities and committed murder on civilian populations. Many Japanese soldiers, out of cruel whim, took many Korean girls and women for their own pleasure. As such, the euphemism "comfort women" (ianfu) was coined by

Entrepreneurship-Creating a Business Opportunity Assignment

Entrepreneurship-Creating a Business Opportunity - Assignment Example Finally, the study will be concluded with the managerial capabilities required to manage the business in the production of PVC chemical by the author of the study. Polyvinyl chloride also known as PVC is highly used for its application in the construction business and is manufactured by polymerization of vinyl chloride monomer, which is used in the reactor and then condensed from the reactor so that gases are emitted. The PVC production is one of the most profitable businesses and is regarded as a significant contributor in the economy. The importance of PVC production increases with the growth in the construction industry and is widely used for manufacture of plastics. The worldwide PVC production is one of the most important businesses in the world economy, which requires the manufacture of polyolefins polypropylene and polyethylene. These business products have a large number of market shares, which includes high quality processing and production of plastics in bulk quantity (Vox, 2008). My company is already proficient in manufacturing high quality PVC chemical in South Korea and has been distributing the chemical to major medium and large sized enterprise of South Korea. It plans to expand further in Mumbai due to its easy availability of manufacturing sub parts, raw materials, and machinery and varied other materials. The major objective of my company would be to introduce my chemical in the Mumbai markets through innovation capabilities. It would be ensured that the chemical product would be highly compatible with the operational facilities and also with business environment of Mumbai. The market potential for the PVC chemical in India is quite high and is required mainly for water supply, tube well and land drainage schemes. The corrugated pipes are ideal for the drainage system of Mumbai and the requirement

Write about three things you are an authority on Essay

Write about three things you are an authority on - Essay Example It also teaches us to put our trust in Allah regarding our familial and community relationships so that we could live peacefully with everybody. As one who has been raised in a highly technological environment, I could also say that I am well versed with the internet. The internet is currently the most popular medium used by people around the world to communicate. Where there is a computer and internet connection, one can learn about a lot of things about people one never met or places he never visited. The internet is an awesome discovery that very important because aside from the information, it also provides easier communication through social networking sites such as twitter and facebook. Moreover, it provides people entertainment such as video games. I, for one, play a lot of video games because it releases stress. I enjoy playing with my friends because it is one form of communication for us and it also serves as a common ground for us which we use to create closer relationships. When one has a computer and internet connection, it is easy to find games online and enjoy one’s

Family theories Essay Example for Free

Family theories Essay In this answer, I am going to discuss about the conjugal relationship in modern industrial societies. This means I will assess the claim that conjugal relationships are based on equality in modern industrial societies. I plan to structure my answer from housework and childcare, power and money management. The hours worked between husband and wife become more equal by the increased participation by women in the labour market have led to more equality in modern family life. This view is highly supported by many sociologists like Young and Willmott who suggest that the family is becoming more symmetrical and therefore, is in fact becoming more egalitarian via a ‘march of progress. ’ They suggest that the family is gradually improving in terms of equality as there has been a trend away from segregated conjugal roles and more of a shift towards joint ones. This they argue is due to major social changes in that women are more financially dependant with employment opportunities and so there is less of a need to rely on extended kin. This is further explained by Gershuny who suggests that because women have these employment opportunities, they are more likely to do less domestic work. This is shown by the item as it suggests that ‘men were making more of an effort to do housework when their wives were in full-time employment. By this change of position for women, it has meant that men are now more responsible for different household tasks therefore suggesting that equality within modern family life is evident and so this view seems correct. He emphasises the change in social values as a reason for this which is also supported by Sullivan’s study (2000) which found an increase in equal division of labour. This supports Young and Willmott’s ‘march of progress’ view that conjugal roles are becoming more symmetrical; thus suggesting that the view of equal gender roles and relationships is likely. Also, due to post-modern society, there are better living conditions compared to those during industrialisation and so this has drawn the men back into the family and thus has enabled them to help with housework and childcare as well as providing leisure time; enhancing equality in relationships. The social changes have meant that equality is becoming evident and so the statement seems highly likely. However, the functionalist view of equality in modern family life has been highly criticised particularly by feminists like Ann Oakley (1974). Oakley rejects the ‘March of progress’ view described by Young and Willmott as she suggests that this is simply exaggerated as we still live in a patriarchal society where women do most of the housework. She suggested that the methodology used by Young and Willmott was hardly convincing as their questions lacked in detail. In Oakley’s research, she found only 15% of husbands had a high participation in housework, showing how the statement is flawed as this clearly does not show evidence of equality in relationships and gender roles. Despite Gershuny suggesting that paid work entitled equality for women, Oakley suggested that this was only an extension of the housewife role. Therefore, unlike Parsons claim of a ‘natural’ role, feminists argue that this was socially constructed to enforce dependence on men which became worse with industrialisation as it forced women to stay within the home. Thus, it is clear that joint conjugal roles are not as ‘joint’ as functionalists initially suggested they were as the social changes have only exacerbated the role of women suggesting this so called equality does not exist. Besides, other feminists like Elsa Ferri and Kate Smith (1996) suggest that the changed position of women in terms of employment has only created a dual burden as they now have to undertake paid work as well as the unpaid housewife role. Ferri and Smith suggest that unlike Gershuny, increased employment has had little impact of the domestic labour as fewer than 4% of families had a father responsible for childcare. Therefore, women still remain responsible for the children as well as their employment responsibility; clearly suggesting that modern family life is not as equal as it seems. The dual burden is also supported by Dunscombe and Marsden’s theory of a triple burden in that women are expected to do the double shift of housework and paid work but also the caring of the emotional welfare of the family. This clearly disputes Gershuny’s idea that women are more equal due to employment as the triple burden means that they in fact gain more responsibilities than losing them. Next, feminists ‘point to inequalities of power and control that persist in modern family relationships’ as a key reason for inequality; again challenging the statement. Allan suggests that ideological factors limit women’s power in that they are ‘disadvantaged from the start. ’ This suggests that the family is always going to be founded on inequality; thus suggesting that the view of equality is limited. This is supported by Barrett and McIntosh who suggest that men gain far more from women’s domestic work than they give in financial support and that in turn this support often comes with ‘strings’ attached. Also, men are usually the ones who make decisions about finances despite some families being dual-earners. This is due to the fact that women are statistically still paid on average less than men; enhancing male economic power. Therefore you can question the extent of equality in modern family life. Resources are also said to be shared unequally like Kempson’s (1994) study among low-income families. This leaves women in poverty and so restricts their power in the family which creates an atmosphere of inequality in conjugal relationships. This is further explained by feminists Pahl and Vogler (1993) who focused on the effects of decision making within the family through ideas like ‘pooling’ and ‘allowance systems. They found a 31% increase in pooling where both partners have joint decision responsibility as well as a decline in allowance systems. However, it was still evident that men usually made huge financial decisions. Edgell also supports this as the levels of decision making are not equal due to the male economic power that still exists. Therefore, women have less say in the decisions and thus it is obvious that the view that gender roles and relationships are becoming more equal is incorrect as inequality in pay and decisions still exist. Similarly, this inequality of power has led to domestic violence which clearly shows how inequality is evident in that relationships are being gender dominated. Radical feminists like Millett and Firestone (1970) use domestic violence as a way to show that society is primarily founded on patriarchy and that men oppress and exploit women. They suggest that the inequality of power within the family maintains men’s power and so domestic violence is inevitable. Similarly, Dobash and Dobash suggest that marriage legitimises violence against women as it provides the male with power and the women with dependency, therefore evidently showing no signs of equality. Thus, this disputes the statement of gender roles and relationships becoming more equal with 1 in 4 women being assaulted in their lifetime according to Mirrlees-Black. Finally, childcare which is essentially about exercising responsibility for another person who is not fully responsible for herself and it entails seeing to all aspects of the child’s security and well-being, her growth and development at any and all times. Mary Boulton ( 1983 ) argues the exaggeration in the extent of men’s involvement in childcare and she denies that questions about who does what give a true picture of conjugal roles. She also claims that although men might help with particular tasks, it is their wives who retain primary responsibility for children. It is the wives who relegate non-domestic aspects of their lives to a low priority. This shows that there is still inequality in terms of childcare in conjugal relationships. In addition, Elsa Ferri and Kate Smith provide some empirical support for Boulton by conducting a study based on National Child Development Survey. The survey found it was still very rare for fathers to take primary responsibility for childcare. In both the sample of mothers and the sample of fathers it was very rare in dual-earner families, no-earner families or families where only the mother worked, for the man to be normally responsible for the children or to look after them when they were ill. In almost every category the man was the main carer in 4 percent or less of families. This is also supported by the radical feminist idea of ‘gender scripts’ in that there are expected norms in terms of gender roles and so patriarchal relationships are inevitable. Therefore, they suggest that equality without burdens will only be reached through same-sex relationships as this eliminates the ‘gender script’ idea. Thus, this enhances the inequality of the family, and suggests that the view that conjugal relationships are becoming more equal is in fact incorrect as the inevitability of patriarchal relationships means that equality cannot be established. In conclusion, I have discussed and assessed the view that conjugal relationships are based on equality in modern industrial societies by evaluating three sections which are hours worked, power and childcare. With all of the statement, I believe that conjugal relationships in modern industrial societies are not based on equality.

Effects of Psychological Contract on the Work-Life Balance

Effects of Psychological Contract on the Work-Life Balance A contemporary analysis of the concept of work life balance and the effects of the psychological contract within the business Aimed towards Retail Terms of Reference To define, explore and critically analyse the extent to which contracted work in the retail business is affected by psychological contract theory Establish from primary and secondary sources the factors which impact on the work life balance for employees, and if any policies and practices are effective. Examine the various ideas from the literature around organisational culture and the psychological contract, in order to determine how Toys R Us fits with these definitions. To draw conclusions around the extent to which Toys R Us has managed to achieve a suitable work life balance for all of their employees without the use of a psychological contract; and to examine possible future changes/ recommendations which could be implemented to create said contract. Literature Review The journal Management Research News (2007) provides a useful starting point, as it looks to review the literature around the psychological contract in order to help develop an understanding around the various unique agreements and the work environment that underlies modern working. As such, the paper is a conceptual paper, and its main aim is to categorise the existing knowledge around the psychological contract in the workplace, as well as to provide practical direction for future research. The results of this investigation indicated that the context of the psychological contract must be reconsidered, due to the nature of the flexible modern working environment where jobs are not always seen as being long term commitments. As such, it is important to consider the impact of organisational justice, rather than looking at potential relationship development (Management Research News, 2007). This is particularly relevant for retail organisations such as Toys R Us, where a large number o f their staff may be students or other short term casual workers. Unfortunately, there has been little research into the levels of job security felt by temporary employees and contract employees, and how this impacts on any psychological contract which may exist. This is addressed to some extent by De Cuyper and De Witte (2006), who examined how perceptions of job security, as well as job satisfaction and organisational commitment, varied from permanent employees to temporary ones. This research was based on the claims of psychological contract theory, which holds that a lack of job security only arises if the psychological contract is violated, and that permanent employees tend to feel stronger psychological contracts that temporary and contracted workers. Their results support this argument, showing that the temporary staff tended not to create strong psychological contracts with their employers, and hence their perceptions of job security did not impact on their overall performance. In contrast, for permanent employees job security was a key pre dictor of both job satisfaction and organisational commitment, indicating that the psychological contract is of greater concern for permanent staff (De Cuyper and De Witte, 2006). Indeed, George (2003) found that the use of temporary and contract workers in an organisation could actually harm the psychological contract which existed between the permanent workforce and the organisation. These finding are based on a detailed study of 256 permanent employees across three organisations, and showed that the extent to which contracting and temporary workers were used, combined with the duration of their use, had negative impacts on permanent employees’ trust in the organisation, as well as the psychological contract with the organisation. These results are explained by the fact that permanent workers see the increased use of temporary and contract staff as indicating that their organisations do not have a strong commitment to their permanent employees. As such, permanent employees begin to see themselves as being less attached to the organisation. The grounded theory approach taken by George (2003) indicates that this is consistent with theoretical prediction s that the use of contract staff acts as a violation of the psychological contract for permanent staff, since contracting makes it harder to permanent workers to advance in the organisation. As such, when attempting to manage this, organisations should look to show strong levels of commitment towards their permanent employees, as this will help counter the perceived violations from the use of contracted staff. Whilst George (2003) claims that this can be achieved through making permanent employees supervisors and trainers of other employees, there is little empirical data to support this, hence it is not clear if this would be a valid method for countering the negative impacts of contracting. Another useful empirical study in this area comes from Ellis (2007) who used the theory of psychological contracting to develop a framework exploring employee reactions to the various promises and contract violations they received from their employer. This is based on the hypothesis that an employee’s status within the organisation may affect their perceptions of promises and contract violations, but this will depend on what the promise is about. This hypothesis was tested using a survey of 163 full time employees working for 25 different organizations. The results supported the hypothesis, showing that supervisory and managerial employees placed more value on promises and violations that their manual labouring counterparts. This indicates that, not only will contracted employees have a less significant psychological contract but, in industries where contracted workers are often used for manual labour, this effect will be pronounced by the lower value manual workers assign to organisational promises and violations (Ellis, 2007). When considering the work life balance, Watson (2001) discusses a lecture given by Ewart Wooldridge, the director of the Civil Service College, who claims that many employees are now moving towards a more flexible approach to work. This is in contrast to prior situations, in which work tended to be the dominant feature in many workers’ lives. This is claimed to be largely due to factors such as recession; the reduction in the power of the trade unions; and the rise of a new psychological contract, which is focused on individual employees more than on organisations. As such, Watson (2001) claims that employees will tend to offer less loyalty to their existing employer, whilst attempting to improve their overall employability in an attempt to find a better job with another employer. Whilst they will continue provide their current employer with effective results during this period, they will be less likely to fully commit themselves to their employer. As such, unless their employ er promotes the work life balance they require, there is a chance that the employee will lose faith in the organisation, reducing their effort and hastening their departure (Watson, 2001). However, it should be noted that Watson’s (2001) article is entirely based on theoretical arguments, with not empirical backing. This may reduce its relevance and validity to all situations. In contrast, Conway and Monks (2008) exploration of the relationship between HR practices and employee commitment is based on a case study analysis of three health service organisations in the Republic of Ireland. This research examines how employees perceive HR practices such as work life balance, and how these perceptions affect employee level commitment and perceptions of the psychological contract. These findings indicate that there is a disparity between the HR practices which are valued most highly by employees, and the practices detailed in the HR literature and those which are practiced by organisations. This indicates that organisations need to consider the basic factors underlying the employment relationship and the psychological contract, rather than simply introducing the latest HR practices (Conway and Monks, 2008). However, this research is somewhat limited by the fact that it is only based on one industry, and includes just three organisations. Sturges and Guest (2004) conducted a much larger survey into the factors which affected the perceptions of the work life balance amongst new graduates who had recently started working. They found that the main factors affecting perceptions were conflicts between work and non-work priorities; the number of hours worked; and the degree of organisational and personal commitment shown by the graduates. As such, whilst most graduates tended to look for a good work life balance, their desire for long term career progression tended to lead them to work increasingly long hours in an effort to progress earlier. However, this tendency led to a worsening relationship between the graduates’ perceptions of work, which ultimately acted to harm the psychological contract. As such, Sturges and Guest (2004) argue that organisations need to introduce policies and practices designed to promote a healthy work life balance, showing support for their employees’ lives outside of the workplace , in order to avoid any negative impacts on performance. In addition to this, Sutton and Griffin (2004) argued that the degree to which employees’ expectations prior to starting work were supported by their experiences in the job had a significant impact on their perceptions of their work life balance and the psychological contract. This argument was assessed through a longitudinal study of 235 occupational therapy students who were about to start work, and compared with their views 14 months later. The results showed that if their experiences of work after entering a job were not consistent with their expectations, the employees were more likely to perceive psychological contract violations, and hence lower job satisfaction. In particular, the expectations around work life balance were found to be driven by the recruitment and selection process (Sutton and Griffin, 2004). This indicates that policies aimed at improving work life balance need to take account of, and control, employee expectations at the recruitment stage in order to be effective. Unfortunately, as before, the narrow nature of this study, which only examines one occupation, makes it of limited relevance to the case of Toys R Us. Another factor found to be relevant to the psychological contract, and violations of the contract, is employee personality. Raja et al (2004) carried out a survey of personality types and responses to the psychological contract, finding that personality characteristics such as extraversion, neuroticism and self-esteem were all related to employee perceptions of the psychological contract. In addition, personality characteristics tended to predict employee perceptions of breaches of the contract, as well as when these breaches were perceived as violations. This indicates that, when designing policies, organisations need to pay attention to employee personality characteristics, and their potential impact on the psychological contract. In addition, when considering the nature of the psychological contract, it is important to realise that the contract is a dynamic thing, which can grow and develop over time. As such, organisations need to consider the need to display a level of commitment to shared values, as well as the welfare of their employees, if they are to develop the contract and the level of organisational commitment shown by the employees. Indeed, Barnett and Schubert (2002) claim that a developing psychological contract and employment relationship can have significant benefits for employees and employers alike. Their survey of 194 employees working in a large retail organisation showed that employees valued their employers having strong principles, and showing concern around their employees’ welfare. This indicates that these are key factors to be considered when developing policies and practices aimed at strengthening the psychological contract. Further research in the retail sector comes from DAnnunzio-Green and Francis (2005), who examined how managers’ view of an emotion management leadership programme acted on their perceptions of the psychological contract. The results of this study indicated that the programme led to a shift in perceptions away from a transactional psychological contract, and towards a relational one. This in turn influenced managers’ perceptions around what the organisation’s expectations of them were, as well as what the organisation offered them in return. This effectively led to the construction of a new, ‘trial’ psychological contract, where managers agreed to believe that the leadership programme would create a more favourable work environment, both for the managers and their subordinates. The managers then internalised and tested the contract to determine whether the organisation’s actions lived up to the promises contained in said contract. This indicate s that organisations need to be sure that any new policies enacted do not create unrealistic expectations, as then any benefits from the policies will be undone by the resulting breaches of the trial psychological contract created by the policies (DAnnunzio-Green and Francis, 2005). Finally, Porter et al (1998) carried out a significant study into the extent to which these perceptual gaps between the promises of the contract and the actual behaviour of the organisation had significant explanatory power over and above measures such as employee satisfaction. This was based on a study of 48 executives and 339 employees over four organisations, in an attempt to determine the promises made to the employees, the employees’ perceptions of these promises, and the employee’s perceptions of the actual benefits provided. This showed that the larger the gap between the perceptions of the promises and the perceptions of the actual benefits, the lower the level of employees’ overall satisfaction with the organisation. This effect was found to be significant even after considering factors such as employee satisfaction with their job and their performance. As such, it appears that employee perceptions of organisational promises can have a more significant e ffect than many other factors, including the nature of the employee’s role and their performance within the organisation (Porter et al, 1998). References Barnett, T. and Schubert, E. (2002) Perceptions of the Ethical Work Climate and Covenantal Relationships. Journal of Business Ethics; Vol. 36, Issue 3, p. 279-290. Conway, E. and Monks, K. (2008) HR practices and commitment to change: an employee-level analysis. Human Resource Management Journal; Vol. 18, Issue 1, p. 72-89. DAnnunzio-Green, N. and Francis, H. (2005) Human Resource Development and the Psychological Contract: Great Expectations or False Hopes? Human Resource Development International; Vol. 8, Issue 3, p. 327-344. De Cuyper, N. and De Witte, H. (2006) The impact of job insecurity and contract type on attitudes, well-being and behavioural reports: A psychological contract perspective. Journal of Occupational Organizational Psychology; Vol. 79, Issue 3, p. 395-409. Ellis, J. B. (2007) Psychological Contracts Does Work Status Affect Perceptions of Making and Keeping Promises? Management Communication Quarterly; Vol. 20, Issue 4, p. 335-362. George, E. (2003) External Solutions and Internal Problems: The Effects of Employment Externalization on Internal Workers Attitudes. Organization Science; Vol. 14, Issue 4, p. 386-402. Management Research News (2007) Understanding the psychological contract: a direction for the future. Management Research News; Vol. 30, Issue 6, p. 432-440. Porter, L. W. Pearce, J. L. Tripoli, A. M. and Lewis, K. M. (1998) Differential perceptions of employers inducements: implications for psychological contracts. Journal of Organizational Behavior; Vol. 19, p. 769-782. Raja, U. Johns, G. and Ntalianis, F. (2004) The Impact Of Personality On Psychological Contracts. Academy of Management Journal; Vol. 47, Issue 3, p. 350-367. Sturges, J. and Guest, D. (2008) Working to live or living to work? Work/life balance early in the career. Human Resource Management Journal; 2004, Vol. 14 Issue 4, p5-20. Sutton, G. and Griffin, M. A. (2004) Integrating expectations, experiences, and psychological contract violations: A longitudinal study of new professionals. Journal of Occupational Organizational Psychology; Vol. 77, Issue 4, p. 493-514. Watson, B. (2001) Report: A New Deal? Understanding the Psychological Contract. Public Money Management; Vol. 21, Issue 3, p. 57.

Study on Financial Statements and Ratios of Banks

Study on Financial Statements and Ratios of Banks 4.0 Introduction The data analysis chapter has been divided into two parts. In the first part, I have tried to do some sort of quantitative analysis. The first part is based on the financial statements and key ratios of both the chosen banks. Again it was broken down into sub-points like the analysis of data before recession and after recession. Some key ratios were calculated, compared and analysed from the financial data of last 10 years for both the banks. The second part of this chapter is a mixture of literature review data analysis and some points were written with reference to the analysis done in first part in my own words. 4.1 Analysis of Data Derived from Financial Statements and Ratios 4.1.1 Bank Status before Recession After Recession To be able to answer our research questions it is imperative to look at the two companies data from financial statements, this will reveal the risks inherent in each banks operation. The analysis utilizes data from the financial statements of the banks under review from year 2005 to 2010 just before recession started. While the two banks have similarities in risk management RBS use pounds while HSBC use dollars as the basis currency in the books of accounts, while this may hinder the analysis especially quantitative analysis the general data increase and decrease is an important aspect sufficient for this study. 4.2 Financial Position of RBS 4.2.1 Financial Position of RBS before recession (2004-2005, 2005-2006, 2006-2007) The Royal Bank of Scotland turnover had been on steady increase, in the financial year ending December 2007 the turnover was  £30,366 million; in 2005 the turnover was  £25902 million while in the year ending 2006 turnover increased to  £28002 million. In 2005 operating profits were  £7936 million while in 2006 operating profits increased marginally to  £9186 and in 2007  £9807 million. Profits before tax has been on steady increase from  £7936million in 2005 to  £9186 and  £9832 million in 2006 and 2007 million respectively. 4.2.2 Financial Position of RBS After Recession (2007-2008, 2009-2010) The turnover for year 2008 was  £25868 Million and finally the turnover for the year ending December 2009 was  £38690 million. In but in 2008 and 2009 losses of  £40836 and  £2595 were recorded respectively, this was after recession started. The full details for the full year 2010 results have not been announced but the first half results profits had increased by 44% to  £3950 million. Table 1 Royal Bank of Scotland Profit and loss Extracts Year Ended 31 Dec 2010 2009 2008 2007 2006 2005  £millions  £  £  £  £  £  £ Turnover 38690.0 25868.0 30366.0 28002.0 25902.0 Operating Profit Q3 726 -2595 -40836.0 9807 9186 7936 Profits before tax -2595 -40836.0 9832.0 9186.0 7936.0 Source; RBS website 4.3 Financial Positions of HSBC 4.3.1 Financial Positions of HSBC before recession On the other hand the turnovers for HSBC on the financial years under review were as follows; year 2007 the turnover was $ 87601 million, $ 61704 million in 2005 and $70070 million in 2006 in terms of operating profits, the group managed $20966.0m, $21240.0m and $22709.0m in years 2005, 2006 and 2007 respectively. Profits before tax were $20966m, $22086m, and $24212m in years 2005, 2006, and 2007. 4.3.2 Financial Positions of HSBC After recession The group managed a turnover of $ 88571 million and $ 78631 million in 2008 and 2009 accounting periods respectively. HSBC recorded $ 22709 million profit in 2007; however the profits declined substantially to $7646 million in 2008 and $ 5298 in 2009 again profits were affected as recessionary fears started. In third quarter of 2010 the profits increased marginally. Table 2 HSBC Profit and Loss Extracts Year Ended 31 Dec 2010 2009 2008 2007 2006 2005 $millions $ $ $ $ $ $ Turnover 78631 88571 87601 70070 61704 Operating Profit 5298 7646 22709 21240 20966 Profit before tax 7079 7079 9307 24212 20086 20966 Source: HSBC website 4.4 Tabular, Graphical representation, interpretation and analysis of key ratios of HSBC RBS for last 10 years In the next few pages, I have tried to present the data in tables, graphs and charts. Some of the data was presented and calculated for last 10 years and some for the last 5-6 years. Some of the key ratios as given below were calculated, analysed and compared for both the banks. Net Interest Margin Return on equity Capital adequacy Liquidity ratio Non-performing assets ratio Loans Turnover ratio Loans to Assets ratio Gross Yield on Earning Assets (GYEA) Table 3 HSBC Ratio Analysis in percentage Year Ending 31 Dec 2010 up to June 2009 2008 2007 2006 2005 2004 2003 2001 Net Interest Margin 3.25 3.09 3.05 2.00 3.4 2.04 2.60 2.54 2.24 ROE 11.1 12.3 11.21 9.62 11.60 12.25 11.2 15.6 13.21 Capital Adequacy 11.50 11.60 11.75 10.89 10.97 11.01 11.12 11.31 11.63 Liquidity ratio 2.20 2.50 3.62 4.21 5.31 6.54 1.23 1.11 2.15 Nonperforming assets ratio 2.17 2.27 2.12 2.14 2.16 2.14 2.11 2.01 2.00 Loans Turnover ratio 66.2 55.2 25.10 29.2 54.0 59.1 67.12 74.21 76.45 Loans to Assets ratio 0.60 0.40 0.22 0.15 0.12 0.113 0.21 0.28 0.32 GYEA 5.21 4.60 4.49 4.36 4.24 4.42 4.68 4.29 3.26 Source: Data glanced from HSBC website and did personal analysis. Figure 4 HSBC ratio analyses (Note: all the figures are in percentage) Table 4 RBS Ratio analysis as a percentage Year Ending 31 Dec 2010 up to June 2009 2008 2007 2006 2005 2004 2003 2001 Net Interest Margin 1.97 1.76 1.70 1.75 1.83 1.91 2.01 2.03 1.92 ROE 12 11.5 11.4 9 9.6 9.12 14 11.2 10 Capital Adequacy 12.51 11.44 11.95 12.98 11.72 11.10 12.21 13.11 13.23 Liquidity Ratio 3.21 2.42 3.21 5.22 3.23 3.29 2.23 2.11 3.15 Nonperforming Assets Ratio 11.1 14.1 16.1 12.15 12.11 12.10 11.11 11.01 10.10 Loans Turnover Ratio 66.9 45.25 44.15 39.2 44.0 49.12 57.21 63.32 66.00 Loans to Assets Ratio 1.56 1.45 1.35 1.40 1.19 0.20 0.89 0.46 0.56 GYEA 3.33 4.6 2.12 4.06 4.12 3.28 2.86 2.92 2.45 Source: Data glanced from RBS website and did personal analysis Fig. Comparison of the two banks PL data Generally over the years the turnover of the two banks has been increasing but the increase in HSBC turnover has been moderate while that of RBS has been steep. HSBC has managed to remain profitable for the period of analysis showing that the company has been able to mitigate the risks well as compared to RBS. RBS made substantial operating losses amounting to 2595 million in 2009 and had to be supported by the government as a result of subprime mortgage crisis. The data show that HSBC has adopted prudent management even though profits declined, the ratios show the group has maintained strong capital base Findings During the two years before year 2009 and after the two banks were adversely affected by economic condition. The profit and loss analysis from the two banks show that HSBC has been able to tackle liquidity risks well as it has been able to maintain profitability through out even during the recession on the other hand RBS was affected and made losses in 2007, 2008 and 2009 but the half year available indicate the bank has returned to profitability after the government support. The profitability before tax is shown in the figure below. Figure 5 Source: Data glanced from RBS and HSBC websites and did personal analysis Note: HSBS figures are in million dollars while figures for RBS are in million pounds. 4.5 Literature Review Data Analysis This dissertation presents the underlying strategies and approaches applied by the top UK banks in learning the differences between HSBC and Royal Bank of Scotland. The strategies and approaches are observed before and after the recession period when assets and stocks were reducing in value putting the banks in worst case financial scenario. To compare their financial, business and operational risks concern will create a bigger picture. The aim is to determine which between the two banks has a better and effective approach and strategy in the risk-reduction initiatives (Drew Michael, et al., 1996) Banks in United Kingdom have relied upon a proven system of strong liquidity risk management. This has been in existence for over three years now and since the system was started banks have made it a priority to update their systems of risk management to keep abreast with the changing demands of the society and technological innovations associated with risk management. Financial stability is easily achieved by following less complicated process and that is to stick to the rules and created in less difficult way that whenever you try to explain it to a customer or client. The grasp of the policy will then be easily absorbed (Issing, 2004). The liquidity risk management of most United Kingdom has been seen to be strong and responsive whenever banks experience risks. Banks have to ensure that they exercise prudent risk management to be able to provide customer satisfaction, but some of the banks are less committed to the task to minimize their exposure to risks. It can be costly to the bank and expose the bank to court cases, licence cancellation by the supervisory authorities and customers withdrawing from the bank. The only way to do this is to create a reliable system of liquidity risk management (Issing, 2004). Risk management actions count the most in the future and especially in setting the reputation of the banks. Extra effort is required in creating policies that will withstand the effect of any risks. Being able to communicate the recent risk situation among the team members will help a lot in the resolution and in effectively carrying out the regulations which they intended to implement for the banks organization. A manifestation of a high level of activity would spell a lot of difference compared to those who lag behind due to poor management risk planning (Kahf Homud, 1998). An effective liquidity risk management is able to make anticipations on the occurrence of future risks. There is also a type of liquidity risk management that can only provide satisfactory level of service or performance, however, it possess certain weakness though very insignificant, it may still deliver anticipated results like those managements that are strong since it only manifest very minor signs ineffectiveness (Bank of England 2007). HSBS and the Royal Bank of Scotland are not just the top banks in United Kingdom they are the two banks that show an impressive liquidity risk management. This record could be very much proven by the profits earned annually and the impression they make among their customers is excellent and they never settle for anything less. The two banks have applied similar systems although HSBC is the bank that shows the most impressive and effective strategy/ approach against a liquidity risk. They always make sure to protect not only their money but also protect the welfare of their customers and intend to move with them and manage their finances by avoiding incompetence in dealing with liquidity risks. HSBS guides their customer from the time they enter the institution until the time they become part of a much growing and impressive banking industry (Bank of England 2007). In the last two years HSBC only experienced short term recession only, they had prepared for the recession, through management and the fact that they had experienced a crisis before and had rectified it by creating a frame work that worked well for the bank. Prudent risk management at HSBC can be analysed by looking at the profits that the bank has earned recently where the bank doubled its half-year profits by posting  £7 billion as at August 2010, this is at a time when smaller banks were feeling the effects of recession. Analysts have seen the capabilities of the bank base from their well-managed systems and strategies. They had already expected such things to happen so there is nothing surprising about that (Goodway, 2007). The banks have taken all necessary precautions and the management maintains optimism that in case of risks they will find a way out. The way the two banks react to problems is always quick thus they are able to find real time solutions. This strategy is a good way of keeping loyal customers. The primary goal is to offer consistency in performance whether the nature of the transaction differs or not, this is exemplified by the HSBC spirit of being consistent and reliable in every possible way. One of the ways that the banks have avoided the risks is to anticipate the risks thus making in advance plans. HSBC has made a point to anticipate risks and make plans to mitigate or avoid the risks completely, this is seen in the banks preparation of the recession in the last two years the bank made adequate plans and adopted prudent lending, adopted technology and minimized operations expenses, while other bank were unprepared and had to be rescued by the government. HSBC operates inn flexible economies, this has been explained by looking at the diversity of the markets it operates, and this gave the bank diversity as not all markets experienced recession. HSBC reaction to risks is a testimony to its objective to effectively handle risks, one such objective identified in the study was is to create liquidity through making an arrangement to leaseback or sell assets whenever loans are defaulted (Goodway, 2007) On the other hand, the Royal Bank of Scotland has similar strategies, before recession the management had drawn a plan on risk management, this is exemplified by the fact that they didnt change their banking rates during this period. Although they needed to take precautions on the insurance, once this has been resolved they could go back to the most important part which is keeping the business even more profitable (Aldrick, 2008). Royal Bank of Scotland (2011) strategy has been to invest heavily in being relevant to the needs of the customer; the bank has also created a buffer to protect the bank in times of recession. In 2007 the bank lost 3% in book value as it experienced subprime related mortgage crisis, but the bank made an effort in ensuring that the customers needs were addressed as soon as possible and assured clients that their accounts with the bank were safe. The Royal Bank of Scotland has not seen changes in sub-prime related write downs, the bank has remained stable. During the recession the bank still managed  £ 1.1 billion in half year profits, though the bank was affected by recession as it could not prevent the effects of recession on their profits and capital enhancements. When making a comparison between the two banks, they differ on how they carry out their risk strategies but have similar characteristics. 4.5.1 Implications of recession on house mortgage and corresponding subprime losses HSBC has always tried to offer options that are sustaining and a relief to those who are about to lose their home due to the effect of recession, some of the options are leaseback and sales. In terms risk management HSBC has adopted a different approach when it comes to helping customers experiencing cash flow problems in paying mortgage. The bank identifies the need to assess the urgency to save the customers financial status or his house under mortgage (Goodway, 2007); the bank allows customers to modify their loan allowing customers to pay the loan at an adjusted future time. This reduces the risk to both the customer and the bank. On the other hand Royal Bank of Scotland reduce risks by allowing variable or fixed mortgage rate, and has applied the straightforward approach where a customer mortgage application is approved decisively, this ensures the payments are as flexible as possible. The bank has also limited the bank charges it can attach to an account thus creating customer satisfaction. 4.5.2 Bank Strategies and Policies Applied The effectiveness of the banks strategy and approach can be analysed by looking at how well the banks management performed their roles. As risks are recognized the management needs to assess the risks and careful interpretation of the consequences. If the management do not carefully assess the crisis, then the risk might probably worsen until it can no longer be helped (RBS, 2011). The loan modification adopted by HSBC may not work as it is difficult to find a common ground. It may also not be possible to carry out assessment and evaluation. The Royal Bank of Scotland has minimized its risk exposure by allowing the straightforward method, thus the bank is able to assess the qualification of each customer. 4.5.3 Criteria for house mortgage loan allocation Both banks utile interest options, period of payment, and a flexible payment options. However, the criteria need to be assessed on individual application basis while at the same time maintaining objectivity and should not be applied to all. This criterion has to be flexible in terms of meeting the customer needs such as unforeseen circumstances. The current criteria risk the banks profit if it is contravened, it should allow the customers meet their monthly loan repayment deadlines. It can be very well taken into account that the system used by these two is similar to those applied by the rest of the banks in United Kingdom (Effros, 1998). However, the researcher intends to discuss the reliability of the system utilized by the two chosen banks as they encounter inevitable risks in global economic environment. A study of the HSBC system shows how well they have managed risks that have placed other banks in receivership. The study helps to understand the important issues needs to be tackled by a bank to manage risks successfully. The two banks have had good financial risk management, in terms managing the credit and market risks by having a proper risk assessment. These two risks take place when an improper assessment is made (Newman, 2006). Strong and reliable management organization has been used as a tool to help the banks strengthen and arrive to a risk free system. In case of system failures a dependable measure has been created that would minimize financial implications. The banks initiative is to push the participation of the depositors in the program and to treat them as among the driving force which affects the system. The methods are extensively researched and adapted among institutions which mean that it has been carefully checked (Banks, 2003). Extensive study on the feasibility of the issue in addressing the effectiveness of system implemented in the banking institution. In the previous discussion, regarding the imposition of law affecting banking system, the European banks are known to be sanctioned under a strict regulation whereby giving them less control over their own management. The variability in the solution technique being employed by either HSBC or the Royal Bank of Scotland cannot simply be the solution to this problem. It is the way they approach the problem with a system proven by time. The HSBC and the Royal Bank of Scotland have several financial planning portfolios in helping the customers reach their goals. The two banks have manifested expertise in providing the most expert advice on planning and investing. They consider it as their responsibility to provide their customer with the best advice available and have to be right and fitting to their customers needs. They exert and commit themselves as they go the extra mile of keeping their customers for a lifetime by answering and addressing quickly their customers growing demands and they have never failed to do so (Newman, 2006). The banks will not wait in vain but makes sure that they get to customers and provides them with a personalized service that cannot be found from other bank institutions creating confidence and trust with the customers. No wonder these two banks were voted top United Kingdom banks (Duttweiler, 2009). The assessment of the policy utilized by these two banks operates as a measure that monitors whether a prescribed risk guideline has been complied with and then makes a report accordingly (Crouhy, 2006). The design of the policy has been able to achieve the appropriate strategy, though require the framework and the funding capacity be adequately met by the funding institution. The design as a result, gives the customer the assurance and the security as they are given the key role and part in developing the system. The United Banking system has also been extensively analysed in this dissertation. Risks such as the financial and operational risks has been analysed by relating them to the strategies being employed by each bank, thus, an empirical method has been applied by exploring details about each bank. Various important factors about a banking institutions risk management system have been looked into as well. Looking into the advantages of a well-organized risk management banking system will help minimize damages brought by liquidity risks. A well-managed and well carried management plan will save the bank from recovering from years, after suffering from significant financial risks. Chapter 6 Conclusions and Recommendations 6.1 Conclusions While the data analysed show similarities in the way the two banks manage liquidity risks HSBC has prudently managed the risks better as compared to RBS. The profits before tax for the two banks indicate that RBS made losses for the last two years while HSBC has maintained profitability despite recession. Fair amount of loans have been advanced that may not pose great risk to both banks, the loan to asset rate is low for both banks and this reduces unnecessary exposure to bad debts. The ratios indicate the banks have maintained adequate capital bases that can with stand systemic risks. HSBC has managed to maintain low operating margins leveraging on technology to deliver products thus avoiding high staff expenses, on the other hand RSB government ownership reduces the risk exposure and thus the bank has been able to obtain loans from the bank after the recent recession, the operating margins are negative for the last two years indicating the bank has not been able to achieve optimal operations. After a sustained increase in the operating profits of RBS before the recession profits declined from 9807 million pounds in 2007 to losses of 2595 million pounds, this emanated from the exposure of the bank to mortgage related risks therefore to ensure the bank is protected from the risk the bank should carry out evaluation on the ability of the customers to meet the monthly mortgage requirements. The effectiveness of the risks management policies of the banks under study has been evaluated, to be able to have a wider view about risk management bank mortgage and subsequent reaction to recession has been analysed. When the risk management policies that each of the banks under consideration is evaluated, HSBC possess the most formidable liquidity risk management policy implementation well articulated in the banks reaction to the recession. The study established that the liquidity risk management plays an important role in monitoring the flow of assets into the banks system. Banks are required to have standard set of policy to affect its benefits. However, without a reliable system from which the organization management plan is created, it is easy to say that such a management plan will not be effective. It will produce no progress at all and could costly on the part of those who implement these management strategies. Since the two banks have applied similar systems; HSBC is the bank that shows the most impressive and effective strategy/ approach against liquidity risk. They always make sure to protect not only their money also they make sure that they protect the welfare of their customers. The dissertation focus on the UK banking system was ideal as the perfect niche where to study liquidity risk because the banks have a wide access to almost all parts of the world and. The banks are universal and possess that impressive banking track record. HSBC and the Royal Banks of Scotland are equally as competent and committed to a strong liquidity risk management (Casu Molyneux, 2001). However, this study was limited to the top two banks it is recommended that in order to understand liquidity risk a study should be conducted not only on those two banks but also on those ranked at the bottom. This way it is possible to understand the liquidity risk in the banking industry and serve as a basis of reference by other researchers or particular areas of concern that may be a source of risk for banks. It should also be necessary that a case study be conducted on a particular scenario focusing only on one risk management area so as to have a clearer view. The banking system is explained along with some points on how important it is to build a strong impression with international institutions by securing a reliable system within the bank by good risk management policies that serve as its foundation. A discussion on the importance of liquidity risk management policy has been explored using policies as the guidelines and indicators that help determine the confidence level in each banking system. If weak policy system is in place, it gives doubt as to the effectiveness of the risk management approach. Royal Bank of England has been analysed and the responsibility it has on the control of rates. The bank has been used as the point of reference since it has flexibility in decision making as well as its crucial to the good functioning or detriment of the whole banking institution in United Kingdom. The HSBC and the Royal Bank of Scotland has impressive financial planning portfolios that are geared towards helping the customers reach their goals. They make it their utmost responsibility to provide their customer with the best options that are available and have committed to meet the customers need. The two banks provide the most expert advice on planning and investing. An analysis of HSBC system shows that they have managed risks well, including risks that have placed other banks in receivership. The Royal Bank of Scotland equally possesses reliable strategy where all the decisions regarding risks have to be decided after careful analysis and Proper management of credit and market risks is essential in eliminating financial risks. The study established that these two risks occur when an improper assessment is made. The commitment of the management of an organization is an important element needed to help reduce the risk on possibility of a bank to collapse. It is a guiding force that a responsible banking institution must adhere to, so as to avoid the consequences of financial failure because of mismanagement. Proper risk management could be a simple way of solving liquidity risk problem which management believe is difficult to tackle. In order to protect their earnings the banks have to institute proper risk management policies as it is not always predictable where risks will emerge. The two banks under study have implemented some of the most desired risk management policies. Many banks were severely affected by the recession but HSBC and RBS still returned maximum profits despite the operating environment existing in 2010 the financial year under review. Customers are concerned with the risk management practises of their banks this is because it also determines the availability of credit and all necessary bank products that they need. 6.2 Recommendations The banks need to ensure that the risk exposure on their portfolios is minimized or eliminated completely. While the recession risks were inevitable the need to anticipate liquidity risks are imperative. HSBC had gone through a crisis however the management had foresight and planned well for the recession on the other hand RBS had to rely on government bail out to minimize the risks the mortgage portfolio had. The need to pursue vigorous risk management policies is important than before, while management decisions influence the direction of the banks, careful planning and consulting is essential. A deep analysis of the causes of the losses registered in the last two years would be a good starting point to be able to collect the mistakes. Management will be valuable in this, the ability of the management to run smoothly the banks and predict future risk will determine the bank that emerges from recession stronger. From the data analyzed while turnover for the banks increased the operating profits were affected by the recession. Like HSBC did RBS need to leverage on technology to reduce operating losses. 6.2.1 Recommendations on Managing liquidity through Organizational structure and Governance It is imperative that the two banks define the liquidity risks exhaustively this will ensure that the risks the banks are exposed to are identified and placed in respective risk category, then the risks are communicated to the respective groups to that they can identify, understand and evaluate liquidity risks that the banks face including new lines of business, products, acquisitions, alliances or any initiative that the banks intend to participate. A clear understanding of the various risks is essential particularly distinguishing Market liquidity and funding liquidity risks. R Study on Financial Statements and Ratios of Banks Study on Financial Statements and Ratios of Banks 4.0 Introduction The data analysis chapter has been divided into two parts. In the first part, I have tried to do some sort of quantitative analysis. The first part is based on the financial statements and key ratios of both the chosen banks. Again it was broken down into sub-points like the analysis of data before recession and after recession. Some key ratios were calculated, compared and analysed from the financial data of last 10 years for both the banks. The second part of this chapter is a mixture of literature review data analysis and some points were written with reference to the analysis done in first part in my own words. 4.1 Analysis of Data Derived from Financial Statements and Ratios 4.1.1 Bank Status before Recession After Recession To be able to answer our research questions it is imperative to look at the two companies data from financial statements, this will reveal the risks inherent in each banks operation. The analysis utilizes data from the financial statements of the banks under review from year 2005 to 2010 just before recession started. While the two banks have similarities in risk management RBS use pounds while HSBC use dollars as the basis currency in the books of accounts, while this may hinder the analysis especially quantitative analysis the general data increase and decrease is an important aspect sufficient for this study. 4.2 Financial Position of RBS 4.2.1 Financial Position of RBS before recession (2004-2005, 2005-2006, 2006-2007) The Royal Bank of Scotland turnover had been on steady increase, in the financial year ending December 2007 the turnover was  £30,366 million; in 2005 the turnover was  £25902 million while in the year ending 2006 turnover increased to  £28002 million. In 2005 operating profits were  £7936 million while in 2006 operating profits increased marginally to  £9186 and in 2007  £9807 million. Profits before tax has been on steady increase from  £7936million in 2005 to  £9186 and  £9832 million in 2006 and 2007 million respectively. 4.2.2 Financial Position of RBS After Recession (2007-2008, 2009-2010) The turnover for year 2008 was  £25868 Million and finally the turnover for the year ending December 2009 was  £38690 million. In but in 2008 and 2009 losses of  £40836 and  £2595 were recorded respectively, this was after recession started. The full details for the full year 2010 results have not been announced but the first half results profits had increased by 44% to  £3950 million. Table 1 Royal Bank of Scotland Profit and loss Extracts Year Ended 31 Dec 2010 2009 2008 2007 2006 2005  £millions  £  £  £  £  £  £ Turnover 38690.0 25868.0 30366.0 28002.0 25902.0 Operating Profit Q3 726 -2595 -40836.0 9807 9186 7936 Profits before tax -2595 -40836.0 9832.0 9186.0 7936.0 Source; RBS website 4.3 Financial Positions of HSBC 4.3.1 Financial Positions of HSBC before recession On the other hand the turnovers for HSBC on the financial years under review were as follows; year 2007 the turnover was $ 87601 million, $ 61704 million in 2005 and $70070 million in 2006 in terms of operating profits, the group managed $20966.0m, $21240.0m and $22709.0m in years 2005, 2006 and 2007 respectively. Profits before tax were $20966m, $22086m, and $24212m in years 2005, 2006, and 2007. 4.3.2 Financial Positions of HSBC After recession The group managed a turnover of $ 88571 million and $ 78631 million in 2008 and 2009 accounting periods respectively. HSBC recorded $ 22709 million profit in 2007; however the profits declined substantially to $7646 million in 2008 and $ 5298 in 2009 again profits were affected as recessionary fears started. In third quarter of 2010 the profits increased marginally. Table 2 HSBC Profit and Loss Extracts Year Ended 31 Dec 2010 2009 2008 2007 2006 2005 $millions $ $ $ $ $ $ Turnover 78631 88571 87601 70070 61704 Operating Profit 5298 7646 22709 21240 20966 Profit before tax 7079 7079 9307 24212 20086 20966 Source: HSBC website 4.4 Tabular, Graphical representation, interpretation and analysis of key ratios of HSBC RBS for last 10 years In the next few pages, I have tried to present the data in tables, graphs and charts. Some of the data was presented and calculated for last 10 years and some for the last 5-6 years. Some of the key ratios as given below were calculated, analysed and compared for both the banks. Net Interest Margin Return on equity Capital adequacy Liquidity ratio Non-performing assets ratio Loans Turnover ratio Loans to Assets ratio Gross Yield on Earning Assets (GYEA) Table 3 HSBC Ratio Analysis in percentage Year Ending 31 Dec 2010 up to June 2009 2008 2007 2006 2005 2004 2003 2001 Net Interest Margin 3.25 3.09 3.05 2.00 3.4 2.04 2.60 2.54 2.24 ROE 11.1 12.3 11.21 9.62 11.60 12.25 11.2 15.6 13.21 Capital Adequacy 11.50 11.60 11.75 10.89 10.97 11.01 11.12 11.31 11.63 Liquidity ratio 2.20 2.50 3.62 4.21 5.31 6.54 1.23 1.11 2.15 Nonperforming assets ratio 2.17 2.27 2.12 2.14 2.16 2.14 2.11 2.01 2.00 Loans Turnover ratio 66.2 55.2 25.10 29.2 54.0 59.1 67.12 74.21 76.45 Loans to Assets ratio 0.60 0.40 0.22 0.15 0.12 0.113 0.21 0.28 0.32 GYEA 5.21 4.60 4.49 4.36 4.24 4.42 4.68 4.29 3.26 Source: Data glanced from HSBC website and did personal analysis. Figure 4 HSBC ratio analyses (Note: all the figures are in percentage) Table 4 RBS Ratio analysis as a percentage Year Ending 31 Dec 2010 up to June 2009 2008 2007 2006 2005 2004 2003 2001 Net Interest Margin 1.97 1.76 1.70 1.75 1.83 1.91 2.01 2.03 1.92 ROE 12 11.5 11.4 9 9.6 9.12 14 11.2 10 Capital Adequacy 12.51 11.44 11.95 12.98 11.72 11.10 12.21 13.11 13.23 Liquidity Ratio 3.21 2.42 3.21 5.22 3.23 3.29 2.23 2.11 3.15 Nonperforming Assets Ratio 11.1 14.1 16.1 12.15 12.11 12.10 11.11 11.01 10.10 Loans Turnover Ratio 66.9 45.25 44.15 39.2 44.0 49.12 57.21 63.32 66.00 Loans to Assets Ratio 1.56 1.45 1.35 1.40 1.19 0.20 0.89 0.46 0.56 GYEA 3.33 4.6 2.12 4.06 4.12 3.28 2.86 2.92 2.45 Source: Data glanced from RBS website and did personal analysis Fig. Comparison of the two banks PL data Generally over the years the turnover of the two banks has been increasing but the increase in HSBC turnover has been moderate while that of RBS has been steep. HSBC has managed to remain profitable for the period of analysis showing that the company has been able to mitigate the risks well as compared to RBS. RBS made substantial operating losses amounting to 2595 million in 2009 and had to be supported by the government as a result of subprime mortgage crisis. The data show that HSBC has adopted prudent management even though profits declined, the ratios show the group has maintained strong capital base Findings During the two years before year 2009 and after the two banks were adversely affected by economic condition. The profit and loss analysis from the two banks show that HSBC has been able to tackle liquidity risks well as it has been able to maintain profitability through out even during the recession on the other hand RBS was affected and made losses in 2007, 2008 and 2009 but the half year available indicate the bank has returned to profitability after the government support. The profitability before tax is shown in the figure below. Figure 5 Source: Data glanced from RBS and HSBC websites and did personal analysis Note: HSBS figures are in million dollars while figures for RBS are in million pounds. 4.5 Literature Review Data Analysis This dissertation presents the underlying strategies and approaches applied by the top UK banks in learning the differences between HSBC and Royal Bank of Scotland. The strategies and approaches are observed before and after the recession period when assets and stocks were reducing in value putting the banks in worst case financial scenario. To compare their financial, business and operational risks concern will create a bigger picture. The aim is to determine which between the two banks has a better and effective approach and strategy in the risk-reduction initiatives (Drew Michael, et al., 1996) Banks in United Kingdom have relied upon a proven system of strong liquidity risk management. This has been in existence for over three years now and since the system was started banks have made it a priority to update their systems of risk management to keep abreast with the changing demands of the society and technological innovations associated with risk management. Financial stability is easily achieved by following less complicated process and that is to stick to the rules and created in less difficult way that whenever you try to explain it to a customer or client. The grasp of the policy will then be easily absorbed (Issing, 2004). The liquidity risk management of most United Kingdom has been seen to be strong and responsive whenever banks experience risks. Banks have to ensure that they exercise prudent risk management to be able to provide customer satisfaction, but some of the banks are less committed to the task to minimize their exposure to risks. It can be costly to the bank and expose the bank to court cases, licence cancellation by the supervisory authorities and customers withdrawing from the bank. The only way to do this is to create a reliable system of liquidity risk management (Issing, 2004). Risk management actions count the most in the future and especially in setting the reputation of the banks. Extra effort is required in creating policies that will withstand the effect of any risks. Being able to communicate the recent risk situation among the team members will help a lot in the resolution and in effectively carrying out the regulations which they intended to implement for the banks organization. A manifestation of a high level of activity would spell a lot of difference compared to those who lag behind due to poor management risk planning (Kahf Homud, 1998). An effective liquidity risk management is able to make anticipations on the occurrence of future risks. There is also a type of liquidity risk management that can only provide satisfactory level of service or performance, however, it possess certain weakness though very insignificant, it may still deliver anticipated results like those managements that are strong since it only manifest very minor signs ineffectiveness (Bank of England 2007). HSBS and the Royal Bank of Scotland are not just the top banks in United Kingdom they are the two banks that show an impressive liquidity risk management. This record could be very much proven by the profits earned annually and the impression they make among their customers is excellent and they never settle for anything less. The two banks have applied similar systems although HSBC is the bank that shows the most impressive and effective strategy/ approach against a liquidity risk. They always make sure to protect not only their money but also protect the welfare of their customers and intend to move with them and manage their finances by avoiding incompetence in dealing with liquidity risks. HSBS guides their customer from the time they enter the institution until the time they become part of a much growing and impressive banking industry (Bank of England 2007). In the last two years HSBC only experienced short term recession only, they had prepared for the recession, through management and the fact that they had experienced a crisis before and had rectified it by creating a frame work that worked well for the bank. Prudent risk management at HSBC can be analysed by looking at the profits that the bank has earned recently where the bank doubled its half-year profits by posting  £7 billion as at August 2010, this is at a time when smaller banks were feeling the effects of recession. Analysts have seen the capabilities of the bank base from their well-managed systems and strategies. They had already expected such things to happen so there is nothing surprising about that (Goodway, 2007). The banks have taken all necessary precautions and the management maintains optimism that in case of risks they will find a way out. The way the two banks react to problems is always quick thus they are able to find real time solutions. This strategy is a good way of keeping loyal customers. The primary goal is to offer consistency in performance whether the nature of the transaction differs or not, this is exemplified by the HSBC spirit of being consistent and reliable in every possible way. One of the ways that the banks have avoided the risks is to anticipate the risks thus making in advance plans. HSBC has made a point to anticipate risks and make plans to mitigate or avoid the risks completely, this is seen in the banks preparation of the recession in the last two years the bank made adequate plans and adopted prudent lending, adopted technology and minimized operations expenses, while other bank were unprepared and had to be rescued by the government. HSBC operates inn flexible economies, this has been explained by looking at the diversity of the markets it operates, and this gave the bank diversity as not all markets experienced recession. HSBC reaction to risks is a testimony to its objective to effectively handle risks, one such objective identified in the study was is to create liquidity through making an arrangement to leaseback or sell assets whenever loans are defaulted (Goodway, 2007) On the other hand, the Royal Bank of Scotland has similar strategies, before recession the management had drawn a plan on risk management, this is exemplified by the fact that they didnt change their banking rates during this period. Although they needed to take precautions on the insurance, once this has been resolved they could go back to the most important part which is keeping the business even more profitable (Aldrick, 2008). Royal Bank of Scotland (2011) strategy has been to invest heavily in being relevant to the needs of the customer; the bank has also created a buffer to protect the bank in times of recession. In 2007 the bank lost 3% in book value as it experienced subprime related mortgage crisis, but the bank made an effort in ensuring that the customers needs were addressed as soon as possible and assured clients that their accounts with the bank were safe. The Royal Bank of Scotland has not seen changes in sub-prime related write downs, the bank has remained stable. During the recession the bank still managed  £ 1.1 billion in half year profits, though the bank was affected by recession as it could not prevent the effects of recession on their profits and capital enhancements. When making a comparison between the two banks, they differ on how they carry out their risk strategies but have similar characteristics. 4.5.1 Implications of recession on house mortgage and corresponding subprime losses HSBC has always tried to offer options that are sustaining and a relief to those who are about to lose their home due to the effect of recession, some of the options are leaseback and sales. In terms risk management HSBC has adopted a different approach when it comes to helping customers experiencing cash flow problems in paying mortgage. The bank identifies the need to assess the urgency to save the customers financial status or his house under mortgage (Goodway, 2007); the bank allows customers to modify their loan allowing customers to pay the loan at an adjusted future time. This reduces the risk to both the customer and the bank. On the other hand Royal Bank of Scotland reduce risks by allowing variable or fixed mortgage rate, and has applied the straightforward approach where a customer mortgage application is approved decisively, this ensures the payments are as flexible as possible. The bank has also limited the bank charges it can attach to an account thus creating customer satisfaction. 4.5.2 Bank Strategies and Policies Applied The effectiveness of the banks strategy and approach can be analysed by looking at how well the banks management performed their roles. As risks are recognized the management needs to assess the risks and careful interpretation of the consequences. If the management do not carefully assess the crisis, then the risk might probably worsen until it can no longer be helped (RBS, 2011). The loan modification adopted by HSBC may not work as it is difficult to find a common ground. It may also not be possible to carry out assessment and evaluation. The Royal Bank of Scotland has minimized its risk exposure by allowing the straightforward method, thus the bank is able to assess the qualification of each customer. 4.5.3 Criteria for house mortgage loan allocation Both banks utile interest options, period of payment, and a flexible payment options. However, the criteria need to be assessed on individual application basis while at the same time maintaining objectivity and should not be applied to all. This criterion has to be flexible in terms of meeting the customer needs such as unforeseen circumstances. The current criteria risk the banks profit if it is contravened, it should allow the customers meet their monthly loan repayment deadlines. It can be very well taken into account that the system used by these two is similar to those applied by the rest of the banks in United Kingdom (Effros, 1998). However, the researcher intends to discuss the reliability of the system utilized by the two chosen banks as they encounter inevitable risks in global economic environment. A study of the HSBC system shows how well they have managed risks that have placed other banks in receivership. The study helps to understand the important issues needs to be tackled by a bank to manage risks successfully. The two banks have had good financial risk management, in terms managing the credit and market risks by having a proper risk assessment. These two risks take place when an improper assessment is made (Newman, 2006). Strong and reliable management organization has been used as a tool to help the banks strengthen and arrive to a risk free system. In case of system failures a dependable measure has been created that would minimize financial implications. The banks initiative is to push the participation of the depositors in the program and to treat them as among the driving force which affects the system. The methods are extensively researched and adapted among institutions which mean that it has been carefully checked (Banks, 2003). Extensive study on the feasibility of the issue in addressing the effectiveness of system implemented in the banking institution. In the previous discussion, regarding the imposition of law affecting banking system, the European banks are known to be sanctioned under a strict regulation whereby giving them less control over their own management. The variability in the solution technique being employed by either HSBC or the Royal Bank of Scotland cannot simply be the solution to this problem. It is the way they approach the problem with a system proven by time. The HSBC and the Royal Bank of Scotland have several financial planning portfolios in helping the customers reach their goals. The two banks have manifested expertise in providing the most expert advice on planning and investing. They consider it as their responsibility to provide their customer with the best advice available and have to be right and fitting to their customers needs. They exert and commit themselves as they go the extra mile of keeping their customers for a lifetime by answering and addressing quickly their customers growing demands and they have never failed to do so (Newman, 2006). The banks will not wait in vain but makes sure that they get to customers and provides them with a personalized service that cannot be found from other bank institutions creating confidence and trust with the customers. No wonder these two banks were voted top United Kingdom banks (Duttweiler, 2009). The assessment of the policy utilized by these two banks operates as a measure that monitors whether a prescribed risk guideline has been complied with and then makes a report accordingly (Crouhy, 2006). The design of the policy has been able to achieve the appropriate strategy, though require the framework and the funding capacity be adequately met by the funding institution. The design as a result, gives the customer the assurance and the security as they are given the key role and part in developing the system. The United Banking system has also been extensively analysed in this dissertation. Risks such as the financial and operational risks has been analysed by relating them to the strategies being employed by each bank, thus, an empirical method has been applied by exploring details about each bank. Various important factors about a banking institutions risk management system have been looked into as well. Looking into the advantages of a well-organized risk management banking system will help minimize damages brought by liquidity risks. A well-managed and well carried management plan will save the bank from recovering from years, after suffering from significant financial risks. Chapter 6 Conclusions and Recommendations 6.1 Conclusions While the data analysed show similarities in the way the two banks manage liquidity risks HSBC has prudently managed the risks better as compared to RBS. The profits before tax for the two banks indicate that RBS made losses for the last two years while HSBC has maintained profitability despite recession. Fair amount of loans have been advanced that may not pose great risk to both banks, the loan to asset rate is low for both banks and this reduces unnecessary exposure to bad debts. The ratios indicate the banks have maintained adequate capital bases that can with stand systemic risks. HSBC has managed to maintain low operating margins leveraging on technology to deliver products thus avoiding high staff expenses, on the other hand RSB government ownership reduces the risk exposure and thus the bank has been able to obtain loans from the bank after the recent recession, the operating margins are negative for the last two years indicating the bank has not been able to achieve optimal operations. After a sustained increase in the operating profits of RBS before the recession profits declined from 9807 million pounds in 2007 to losses of 2595 million pounds, this emanated from the exposure of the bank to mortgage related risks therefore to ensure the bank is protected from the risk the bank should carry out evaluation on the ability of the customers to meet the monthly mortgage requirements. The effectiveness of the risks management policies of the banks under study has been evaluated, to be able to have a wider view about risk management bank mortgage and subsequent reaction to recession has been analysed. When the risk management policies that each of the banks under consideration is evaluated, HSBC possess the most formidable liquidity risk management policy implementation well articulated in the banks reaction to the recession. The study established that the liquidity risk management plays an important role in monitoring the flow of assets into the banks system. Banks are required to have standard set of policy to affect its benefits. However, without a reliable system from which the organization management plan is created, it is easy to say that such a management plan will not be effective. It will produce no progress at all and could costly on the part of those who implement these management strategies. Since the two banks have applied similar systems; HSBC is the bank that shows the most impressive and effective strategy/ approach against liquidity risk. They always make sure to protect not only their money also they make sure that they protect the welfare of their customers. The dissertation focus on the UK banking system was ideal as the perfect niche where to study liquidity risk because the banks have a wide access to almost all parts of the world and. The banks are universal and possess that impressive banking track record. HSBC and the Royal Banks of Scotland are equally as competent and committed to a strong liquidity risk management (Casu Molyneux, 2001). However, this study was limited to the top two banks it is recommended that in order to understand liquidity risk a study should be conducted not only on those two banks but also on those ranked at the bottom. This way it is possible to understand the liquidity risk in the banking industry and serve as a basis of reference by other researchers or particular areas of concern that may be a source of risk for banks. It should also be necessary that a case study be conducted on a particular scenario focusing only on one risk management area so as to have a clearer view. The banking system is explained along with some points on how important it is to build a strong impression with international institutions by securing a reliable system within the bank by good risk management policies that serve as its foundation. A discussion on the importance of liquidity risk management policy has been explored using policies as the guidelines and indicators that help determine the confidence level in each banking system. If weak policy system is in place, it gives doubt as to the effectiveness of the risk management approach. Royal Bank of England has been analysed and the responsibility it has on the control of rates. The bank has been used as the point of reference since it has flexibility in decision making as well as its crucial to the good functioning or detriment of the whole banking institution in United Kingdom. The HSBC and the Royal Bank of Scotland has impressive financial planning portfolios that are geared towards helping the customers reach their goals. They make it their utmost responsibility to provide their customer with the best options that are available and have committed to meet the customers need. The two banks provide the most expert advice on planning and investing. An analysis of HSBC system shows that they have managed risks well, including risks that have placed other banks in receivership. The Royal Bank of Scotland equally possesses reliable strategy where all the decisions regarding risks have to be decided after careful analysis and Proper management of credit and market risks is essential in eliminating financial risks. The study established that these two risks occur when an improper assessment is made. The commitment of the management of an organization is an important element needed to help reduce the risk on possibility of a bank to collapse. It is a guiding force that a responsible banking institution must adhere to, so as to avoid the consequences of financial failure because of mismanagement. Proper risk management could be a simple way of solving liquidity risk problem which management believe is difficult to tackle. In order to protect their earnings the banks have to institute proper risk management policies as it is not always predictable where risks will emerge. The two banks under study have implemented some of the most desired risk management policies. Many banks were severely affected by the recession but HSBC and RBS still returned maximum profits despite the operating environment existing in 2010 the financial year under review. Customers are concerned with the risk management practises of their banks this is because it also determines the availability of credit and all necessary bank products that they need. 6.2 Recommendations The banks need to ensure that the risk exposure on their portfolios is minimized or eliminated completely. While the recession risks were inevitable the need to anticipate liquidity risks are imperative. HSBC had gone through a crisis however the management had foresight and planned well for the recession on the other hand RBS had to rely on government bail out to minimize the risks the mortgage portfolio had. The need to pursue vigorous risk management policies is important than before, while management decisions influence the direction of the banks, careful planning and consulting is essential. A deep analysis of the causes of the losses registered in the last two years would be a good starting point to be able to collect the mistakes. Management will be valuable in this, the ability of the management to run smoothly the banks and predict future risk will determine the bank that emerges from recession stronger. From the data analyzed while turnover for the banks increased the operating profits were affected by the recession. Like HSBC did RBS need to leverage on technology to reduce operating losses. 6.2.1 Recommendations on Managing liquidity through Organizational structure and Governance It is imperative that the two banks define the liquidity risks exhaustively this will ensure that the risks the banks are exposed to are identified and placed in respective risk category, then the risks are communicated to the respective groups to that they can identify, understand and evaluate liquidity risks that the banks face including new lines of business, products, acquisitions, alliances or any initiative that the banks intend to participate. A clear understanding of the various risks is essential particularly distinguishing Market liquidity and funding liquidity risks. R