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Analysing the Commonwealth bank of Australia business structure

Question

Task:
Introduction (100 words)
Introduce the topic, state the purpose of the essay and the key points (scope) to be covered.

Case company synopsis (100 words)
Briefly provide some background information which you deem essential and highly relevant to your analysis.

Body paragraphs (1300 words)
You decide how to allocate words per question listed below, I would suggest that questions (a) and (b) are descriptive in nature, answers are expected to be concise and straightforward. Remember to incorporate definitions of key concepts in your answer. (See criteria 2 in Marking Rubric). Questions (a) to (d) require critical thinking and analysis based on your research, hence allocate more words accordingly. In-text citation is very important in this part of the essay, as it corresponds to evaluation criteria 2 and 3 (which combined account 20% of your score for this assignment) and criteria 6.

  1. How are the business and governance structures of your chosen companies different/similar, and why might this be the case?
  2. What are the environmental factors that influence your chosen companies’ performance and/or decision-making?
  3. What are the top three risks your chosen companies face and how might this influence their decision making?
  4. Make 3 suggestions regarding how the companies might improve their business practices.

Conclusion (100 words)
Once again, be concise. Provide a summary of your key points in the essay (avoid using same sentences). Avoid introducing new topics (e.g., recently, the company is involved in a scandal etc.), but do highlight implications on the management of the company in the future on the basis of your analysis.

Answer

Introduction
The main focus of the present report is to explore the several aspects of Commonwealth bank of Australia business structure in a detailed manner. Each organization whether it is a profit or a non-profit making organization is surrounded by an ever-changing and dynamic environment.  The environment which surrounds the company often comprises internal and external factors affecting its operations favourably or unfavourably. The internal environment consists of those forces which operate within the organization.  They form the components of the internal environment of the company. On the other hand, the external factors comprise of forces operating outside the organization. They form the components of the external environment of the company (Massa, Tucci  & Afuah, 2017). So, the purpose and the scope of this essay is to conduct a business case study analysis to assess the impact of internal and external factors on the performance and decision making of The Commonwealth bank of Australia business structure. It would also highlight certain implications on the management of the company in the future based on this assessment. 

Case company synopsis
The Common Wealth Bank of Australia is a multinational bank headquartered in Australia with its operations across Asia, New Zealand, the United States and the United Kingdom. It was founded in 1911 by the Government of  Australia as per the Common Wealthbank Act. It is the largest bank in Australia that delivers various financial services like a business, retail and institutional banking, superannuation, management of funds, investment, insurance and brokerage services. Its objective is to deliver sustainable and balanced outcomes for its consumers, people, stakeholders and community. It focuses on providing financial education thereby contributing good corporate practices to the community (Commonwealth Bank of Australia, 2020a).

Body
Assessment of the similarity or difference amongst the business and governance structures of The Common Wealth Bank of Australia and why?
The Commonwealth bank of Australia business structure
The Common Wealth Bank of Australia and its associated body corporates are committed to their strategy of becoming a better and simpler bank in terms of their operations and to fulfill their objective of improving the financial wellbeing of its consumers and society. The Commonwealth bank of Australia business structure is based upon the focus to shape a responsible culture that assists in the accomplishment of the business strategies. It is also based upon sound decision making which is legal, accountable and ethical thereby leading to better results for the stakeholders and consumers (Commonwealth Bank of Australia,2020b).

The purpose of the Commonwealth bank of Australia business structure is to improve the economic wellbeing of society and consumers. Its values are associated with doing the right deeds, being accountable and dedicated to social welfare along with pursuing excellence and getting the things done. To establish a robust and efficient Commonwealth bank of Australia business structure and policy framework of the company, the Board ensures that the policies are appropriate to achieve the desired purpose. It also reviews all the policies and supporting processes from time to time (Hambrick, Misangyi & Park, 2015).

The governance structure of the bank
The Corporate Governance Statement of the Bank elucidates its crucial governance practices and arrangements. These practices and arrangements fulfill the requirements of the Corporate Governance Principles and Recommendations of an ASX Corporate Governance Council (ASX Corporate Governance Council,2019). The corporate governance structure of the bank is reviewed and modified in the context of new legislation and regulations regularly. The expectations of the stakeholders and the ever-changing environment in which the bank is operating are also considered in this regard. The Code of Conduct of the Bank also articulates the behavioral standard expected from the personnel while engaging with the stakeholders along with balancing the interests of the stakeholders (Mitchell, Weaver, Agle, Bailey & Carlson, 2016).  

The purpose and value of the Commonwealth bank of Australia business structure are verified against the 'Should We?' test so that the policies assist in delivering the appropriate results. The Bank has also assimilated policies related to the protection of whistle-blowers, anti-bribery and corruption, conflict management, diversity and inclusion along with slavery and human trafficking in its corporate governance and business structures (Commonwealth Bank of Australia,2018). Thus it is evident from the above discussion that business and corporate governance structures of the Bank are similar as it has integrated its culture, purpose and values in the twin aspects of its policy framework.  

What are the main environmental factors affecting the performance and/or decision-making of the Commonwealth bank of Australia business structure?
The SWOT analysis can help the managers to analyze its internal strategic elements like strengths and weaknesses and external strategic elements like opportunities and threats. 

Strengths

Weaknesses

    Opportunities

Threats

It has a successful track record of innovating new products.

 

The Bank has not gained expertise in demand forecasting thereby resulting in higher missed opportunities as compared to its contenders.

 

The lower inflation rate can make the company stable and enable a low rate of interest to the customers.

 

The Commonwealth bank of Australia business structure is facing intense competition due to stable profitability during the last two years which has decreased its sales.

 

It has invested in training and development programs of its workforce so that it not only becomes skilled but is also enthusiastic about achieving more.

 

It is successful in selling its products but has failed to define its unique selling proposition and positioning in the market.

 

The emergence of online platforms can be leveraged as an opportunity by assessing its consumers in a better way and fulfilling their requirements by big data analysis.

The development of new technologies by competitors has proved to be a severe threat to the Bank.

 

The Bank has got a huge amount of cash inflows which help it is expanding into newer projects (Armanios, Eesley, Li & Eisenhardt, 2017).

 

It has a high attrition rate as compared to its contenders  . Furthermore, it has spent more on the training and development programs of its employees.

 

The Commonwealth bank of Australia business structure can take advantage of the environmental policies and gain share in its market in the category of new product innovation (Ramoglou & Tsang, 2016).

 

The shortage of skilled labour in the international market has proved to be a threat to the Bank.

 

The three risks confronted by The Commonwealth bank of Australia business structure and their influence on its decision making
Failure of the Board to mitigate the non-financial risks: In August 2017, the Board was informed about the non-implementation of the data management framework which created risks of data exposure and quality issues. According to the governance structure, the Board had to pass on such critical matters to the CEO to deliver consistency in the external and internal communications.  It resulted in a lack of presence, visibility and rigor of the Board. So, the lack of clarity in roles resulted in mismanagement and failure to analyze the risks (Colvin & Anastasi, 2018).    

Lack of clarity in accountabilities and ownership of significant operational and compliance risks at the level of Executive Committee:  Before 2017, there was an absence of  Executive Committees for supervising the compliance and operational risks. Although these were overviewed over some time but consistently, which stopped the company to form a consolidated view of its risk profile. The risk management mechanism was not viewed too seriously and the risks were not assessed and examined at their early stage. It resulted in dilution of decision and lack of strong oversight amongst the Board members (Aguilera, Desender, Bednar & Lee, 2015).

Weaknesses in the identification of environmental and business risks and lack of urgency in taking managerial decisions: The Commonwealth bank of Australia business structure has 'Three Lines Of Defence' risk management model to deal with environmental and business risks – manage the environment, compliance function and dealing with the risk profile. However, this model is manipulated by the various units and they use it for fulfilling their purposes and interests. It resulted in inconsistency amongst the various business units. Due to lack of efficiency amongst them, the roles are exchanged which increased the gap of identifying the risks, their measurement and mitigation. The risk compliance policies are technical which makes them difficult to implement and hence prove to be a big hindrance for the management in effective decision making and mitigation of environmental and business risks (Bromiley, McShane, Nair & Rustambekov, 2015).

Suggestions Regarding How the Companies Might Improve Their Business Practices
There are three suggestions for the companies to improve and add value to their business practices:

Firstly, if the procedures are effective, they consume less time in execution and can have fewer steps to be followed. It helps in easier removal of the inefficient activities thereby resulting in minimizing the cost of managing those processes and maximizing the quality of the product (Benner & Tushman, 2015).

Secondly, companies must always endeavour towards improving consumer experiences which would automatically increase their revenue. Well-structured processes denote that a company can measure the number of consumers in its lifetime and hence created a consistent and outstanding consumer experience.

Thirdly, establishing consistency in processes lead to mitigation in risks confronted by the company. Therefore, rigorous procedures make it easy for the managers to assess the root cause of the risks which would help in reducing the risk causing issues ( Marquis  & Raynard, 2015).

Conclusion
This essay can be concluded by stating that the implications on the management in the future based on this business case analysis are that the study of the contextual factors of the environment of the company would assist in overcoming its threats and weaknesses.  The Commonwealth bank of Australia business structure would ensure that all the control mechanisms are in place. The risk management systems would be efficiently implemented along with maintaining consistency in compliance with the internal and external audit functions. It would also help them in effectively aligning the business and governance structure of the Bank.

References
Aguilera, R.V., Desender, K., Bednar, M.K. & Lee, J.H.( 2015) Connecting the dots: Bringing external corporate governance into the corporate governance puzzle. The Academy of Management Annals, 9(1), 483-573.

Armanios, D. E., Eesley, C. E., Li, J. & Eisenhardt, K. M. (2017). How entrepreneurs leverage institutional intermediaries in emerging economies to acquire public resources. Commonwealth bank of Australia business structure Strategic Management Journal, 38(7), 1373-1390.

ASX Corporate Governance Council (2019). Corporate Governance Principles and Recommendations. Retrieved 30th  March,2020 from https://www.asx.com.au/documents/regulation/cgc-principles-and-recommendations-fourth-edn.pdf

Benner, M. J. & Tushman, M. L. (2015). Reflections on the 2013 Decade Award—“Exploitation, exploration, and process management: The productivity dilemma revisited” ten years later. Academy of management review, 40(4), 497-514.

Bromiley, P., McShane, M., Nair, A. & Rustambekov, E. (2015). Enterprise risk management: Review, critique, and research directions. Long range planning, 48(4), 265-276.

Colvin, J. & Anastasi, G.(2018). Summary: Prudential Inquiry into CBA. Retrieved 30th  March,2020 from https://www.colvinconsulting.com.au/index.php/insights/summary-prudential-inquiry-into-cba

Commonwealth Bank of Australia (2018). Commonwealth Bank Code of Conduct. Retrieved 30th  March,2020 from https://www.commbank.com.au/content/dam/commbank-assets/about-us/2018-09/CBA-code-of-conduct.pdf

Commonwealth Bank of Australia (2020a). About Commonwealth Bank. Commonwealth bank of Australia business structure Retrieved 30th  March,2020 from https://www.commbank.com.au/about-us.html

Commonwealth Bank of Australia (2020b). Corporate governance. Retrieved 30th  March,2020 from https://www.commbank.com.au/about-us/shareholders/corporate-profile/corporate-governance.html

Hambrick, D. C., Misangyi, V. F. & Park, C. A. (2015). The quad model for identifying a corporate director’s potential for effective monitoring: Toward a new theory of board sufficiency. Academy of Management Review, 40(3), 323-344.

Marquis, C. & Raynard, M. (2015). Institutional strategies in emerging markets. The Academy of Management Annals, 9(1), 291-335.

Massa, L., Tucci, C. L.  & Afuah, A. (2017). A critical assessment of business model research. Academy of Management Annals, 11(1), 73-104.

Mitchell, R. K., Weaver, G. R., Agle, B. R., Bailey, A. D. & Carlson, J. (2016). Stakeholder agency and social welfare: Pluralism and decision making in the multi-objective corporation. Academy of Management Review, 41(2), 252-275.

Ramoglou, S. & Tsang, E. W. (2016). A realist perspective of entrepreneurship: Opportunities as propensities. Commonwealth bank of Australia business structure Academy of Management Review, 41(3), 410-434.

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