Examining The Commonwealth Bank Of Australia Business Structure
Task: 1. You must first select ONE of the following three organizations as the subject of your business case
–The Commonwealth Bank of Australia
–Richmond Football Club
–Aboriginal and Torres Strait Island Mathematics Alliance(ATSIMA)
2. Conduct research on your chosen organization in the aspects below, which correspond to week 1-5 topics, with a focus on critically analysing the impact of a range of internal and external contextual factors on the performance and decision making of your chosen organization:
a.What is the business structure [not organisational structure] and governance structure of your chosen organization?
b.Which environmental factors are influencing your chosen organization’s performance and/or decision-making?
c.What are the top three risks your chosen organization face and how are they influencing its performance and/or decision making?
d.What business practices your chosen organization adopt and how are they influencing its performance and/or decision making?
e.What functional departments does your chosen organization have?
3. Your business case analysis must include at least five (5) peer reviewed journal articles published after year 2009 from reputable journals (please see a list of recommended journals in the next page).
You should include the doi for each journal article in the reference list. For example:
Derouiche, I., Hassan, M., & Amdouni, S. (2018). Ownership structure and investment-cash flow sensitivity. Journal of Management & Governance, 22(1), 31-54. DOI: 10.1007/s10997-017-9380-x
You could search the library databases via the online ‘advanced search’ function of the CQUniversity library. By choosing the ‘advanced search’ function you can select the actual journal you wish to search. Recommended to use key concepts in week 1-5, e.g., unitary boards, PESTEL, risks, business practices etc. as search items to find the most relevant article to incorporate.
The essay presents the discussion on various organizational aspects of Commonwealth bank of Australia business structure. The purpose of the report is to identity and analyzing the key business aspects that are currently being influencing the working of CBA. The report is purposed to determine Commonwealth bank of Australia business structure and the mechanism of its corporate governance, its key business practices and the impact of various environmental forces over its overall performance. Also, the essay is purposed to identify the risks that are being confronted by CBA in the business environment and the functional departments that are being operated at CBA.
Commonwealth bank of Australia is a leading multinational banking organization that deals in provision of various banking as well financial services including retail, business, premium banking, fund management, wealth management, insurance and investment services, institutional and private banking and the products or services related to broking. CBA is listed on the Securities Exchange of Australia under CBA code. Apart from Australia, the bank is operating its business in multiple countries like New Zealand, South Africa, United Kingdom, United States and various Asia-Pacific regions. The head office of CBA is situated in Sydney.
Commonwealth bank of Australia business structure:
CBA is a public company which is owned locally with its separate existence other than its owners. The bank has its clearly defined corporate governance mechanism and the framework of its corporate governance is being closely monitored and reviewed regularly to address the changes in the laws and regulations in its business environment and to take into account the expectations of its stakeholders which keep on evolving from time to time and to deal with the dynamic business environment in which it operates its business. The framework of corporate governance of CBA is comprised of certain key elements such as:
- Culture: Commonwealth bank of Australia business structure is focused on maintaining the culture which not only supports its business growth but also that leads to lawful and ethical decision making and valuing its customers and stakeholders. It has various mechanisms to promote healthy corporate culture such as its strong set of codes of conduct, its whistleblower policy, policies related to anti-bribery and corruption practices, employee diversity and inclusion and so on.
- Risk management practices: Risk is some potential uncontrolled loss in relation of a thing or aspect of value. The risk framework of CBA covers the systems and policies that monitors, controls and mitigate any material risk faced by the bank.
- Stakeholder engagement practices: Stakeholders engagement is the practice of involving the key stakeholders of business while making any necessary decision for the business as they are directly or indirectly influenced by such decisions of the company. Commonwealth bank of Australia business structure seeks to engage all its key stakeholders such as employees, customers, community, shareholders by providing them all the relevant information that is required to them for the decision making on timely basis (Commonwealth Bank, 2020).
Board composition: The board of CBA comprises various bodies such as Catherine Livingstone AO - Independent Non-Executive Director (Chairman), Matt Comyn - Executive Director, Shirish Apte - Independent Non-Executive Director, Professor Genevieve Bell - Independent Non-Executive Director, Paul O'Malley - Independent Non-Executive Director, Mary Padbury - Independent Non-Executive Director, Wendy Stops - Independent Non-Executive Director, Anne Templeman-Jones - Independent Non-Executive Director andRob Whitfield - Independent Non-Executive Director (Commonwealth Bank, 2020)
Environmental factors are influencing CBA’s performance:
In order to identify the factors from both internal and external environment influencing the performance of business of Commonwealth Bank of Australia some important tools such as SWOT, PESTLE analysis are used. As Commonwealth bank of Australia business structure is expanding and operating its business in multiple countries it is exposed to different political environment and the trade disputes occurring at global level are lowering the business confidence of CBA (Commonwealth Bank, 2019). Secondly, the economic condition of Australian banking industry is not going well in the current era and this has resulted in the sharp deterioration of its operating environment. The interest rates in the country are at their historically lower level. The profitability level, Return on Investment and Dividends of the Australian banks are falling due to weaker economic condition but still CBA has not reported any loss or instability in its financial performance (Smyth, 2019). Social and environmental factors are also affecting the overall performance of CBA and it is important for it pay attention to the demographics of the country while extending the services. It cannot offer its premium services to the lower-class segments. The social status and their interests of people impact the business performance of CBA. Also, the environmental forces affect its smooth functioning. Like in the current times when COVID-19 has been affecting the globe, it is important for Commonwealth bank of Australia business structure to bring in various strategies to operate its business in such times. The sustainability of environment is very important for CBA to operate successfully and hence it has come up with various environmental, social and governance (ESG) policies. It has contributed its efforts in limiting the global warming and has adopted the practices like carbon reporting and making various climatic disclosures in its reports. Also, the way CBA treats its customers also impacts its functioning and hence it has promoted the practices of extending human rights to its people. The rapidly occurring technological advancements in the developed countries like UK such as digital banking are also impacting its overall performance as the adoption of such advancements has made business quite simpler (Priem, Li & Carr, 2012). The legal framework of the banking industry which comprises various laws and regulations such as anti-trust laws, consumer protection, anti-bribery and corruption laws, and discrimination laws affects the functioning of CBA. Apart from these external factors the performance of CBA is also being influenced by its strengths such as its MFI rankings, robust financial performance. However, CBA’s excessive reliance on off shore borrowings and increasing operating expenses are weakening its performance.
Top 3 risks facing Commonwealth Bank
The CBA group is exposed to financial as well as non-financial risks. Few of the key risks faced by Commonwealth bank of Australia business structure are discussed below:
Liquidity and Market Risk: Due to the macroeconomic uncertainties which are causing volatility in the global markets in the current environment, banks are facing high market and liquidity risk. The lowest interest rates reported in the present times from the historic records casts high market risk in front of CBA (Commonwealth Bank, 2019).
Credit and Insurance Risk: The macroeconomic conditions are causing slow credit growth as well as lower consumer confidence in the market which is ultimately leading to their restricted spending patterns. Also, the economic factors influencing the country’s banking sector are also affecting the housing markets and thereby reducing the revenues generated out of home lending (Yates, 2014).
Operational Risk: In 2018, the inquiry raised by APRA has identified that Commonwealth bank of Australia business structure has lack of maturity in its management practices of its non-financial risk (Williams, 2016). Also, the information security risk has increased in the recent times due to increased digitalization of its business (Martinez-Simarro, Devece & Llopis-Albert, 2015).
Business practices of Commonwealth Bank has adopted
In terms of banking operations, CBA is dealing in business and the retail and premium banking, private banking, institutional banking, wealth management practices, fund management practices, insurance and investment related services. To cope up with such a wide range of services CBA has adopted various business practices of Common in response to the risks to which the bank is presently exposed to, Commonwealth bank of Australia business structure has emphasized on regularly reviewing and revising its credit limits according to the changing market and economic conditions. Also, the group regularly performs some stress tests as well as scenario analyses to prepare it for severe business conditions. Further, CBA maintains the diversified pool of funding sources in different currencies, products, geographies and the entities. Apart from this, Commonwealth bank of Australia business structure also puts limits on its short term off-shore funding sources and maintains a liquidity buffers so as to withstand in the long run in the periods which involves disruption of its cash position. CBA is also working on strengthening its governance framework to become more accountable and customer centric through a transparent corporate culture. To combat the strategic risk in the present times the group has also formulated structured approaches to identify with the strategic business and deal with them proactively. Moreover, the group is also performing climate change analyses to understand the potential impacts of such scenarios so that improved decision making could be undertaken well before the occurrence of such changes. The business is also putting upfront its efforts towards mitigating the operational risks especially the Cybersecurity and data management (Commonwealth Bank, 2019).
What are the main functional departments of Commonwealth bank of Australia business structure?
The basic functional departments of Commonwealth bank of Australia business structure are its operations department, human resource department, customer service department, business banking dimension, legal and governance department, marketing and corporate affair department. The operations departments indulges in the day to day business operations of the banks, the customer service departments remains available 24*7 to carter to the queries of the banks customers and maintaining sound business relationships with them. The human resource department of the bank is engaged in procuring the need of human resources of the company and brining required resources to the business. The legal department of CBA ensures the compliance with all the laws and regulations to which the group is to abide by (The Official Board, 2020).
Now to conclude the discussion it can be said that it is very important for all the organizations of any business nature whether it belongs to banking or any other industry to keep in mind all the organizational aspects that offers it growth and sustainability in the business. However, when it comes to banking organization it is highly important to take into account all the forces from within and outside its business environment so as to check for all the opportunities and threats available to it. Since, Commonwealth bank of Australia business structure is operating through diversified countries it is required for it to consider all the risks it is exposed to while dealing with its business with the customers in the transparent manner.
Commonwealth Bank (2019) Risk Report. Available at: https://www.commbank.com.au/content/dam/commbank-assets/about-us/2019-08/CBA-2019-Annual-Report-Risk-management.pdf
Commonwealth Bank (2020). Corporate governance. Commonwealth bank of Australia business structure Available at: https://www.commbank.com.au/about-us/shareholders/corporate-profile/corporate-governance.html
Martinez-Simarro, D., Devece, C., & Llopis-Albert, C. (2015). How information systems strategy moderates the relationship between business strategy and performance. Journal of Business Research, 68(7), 1592-1594. DOI: http://dx.doi.org/10.1016/j.jbusres.2015.01.057
Priem, R. L., Li, S., & Carr, J. C. (2012). Insights and new directions from demand-side approaches to technology innovation, entrepreneurship, and strategic management research. Journal of management, 38(1), 346-374. DOI: 10.1177/0149206311429614
Smyth, J. (2019). Financial times: Australia banks brace for tighter regulation and weaker economy. Available at: https://www.ft.com/content/3670ce80-00fa-11ea-b7bc-f3fa4e77dd47
The Official Board( 2020). Commonwealth Bank. Available at: https://www.theofficialboard.com/org-chart/commonwealth-bank
Williams, B. (2016). The impact of non-interest income on bank risk in Australia. Journal of Banking & Finance, 73, 16-37.DOI: https://doi.org/10.1016/j.jbankfin.2016.07.019
Yates, J. (2014). Protecting housing and mortgage markets in times of crisis: a view from Australia. Journal of Housing and the Built Environment, 29(2), 361-382. Commonwealth bank of Australia business structure Available At: https://www.researchgate.net/profile/Judith_Yates/publication/266568212_Protecting_housing_and_mortgage_markets_in_times_of_crisis_what_can_be_learned_from_the_Australian_experience/links/54f062560cf25f74d726521c.pdf