Financial Services Professional Practices

Roles and Responsibilities of Different Financial Sectors

Part 1: Brief description of roles and responsibilities of the five financial sector

Accounting:

Accounting in simplest terms means the recording of the financial statement including the financial transaction. It keeps tracks of the details like profit and loss, cost and earnings, liabilities and assets. This information not only help to understand the financial strength of the concerned organization or the individual, it helps to take decision based on the proper information and statistics and plan accordingly for the improvement of the financial position.

Due to the ability of accounting to help in making the decision, in modern day the accounting is often related to financial management.

Bookkeeping:

Bookkeeping is also an important area in the financial sector. It helps to maintain the account receivables and account payables. It also plays an important role to prepare and update statement including the balance sheet and income statement.

It is an effective way to keep detailed record of the day to day financial transaction that helps a lot in the accounting process. Hence it can be said that accounting and bookkeeping is closely related.

Insurance:

Insurance plays an important role in the financial sector as well. The does have a significant impact on the economy. It mobilizes the domestic saving and also arrange for capital that is required for the productive investment.

It helps in mitigating the financial loss that the organization is likely to incur into the financial performance. It also helps in promoting trade and commercial activities that ensures economic growth as well as economic prosperity.

Lending services:

Lending in the simplest terms means is to give someone money or property in a temporary basis. The amount that has been given needs to be return by the person who taking the money. In financial sectors the lending service includes different type of commercial loans for different purpose.

The loans are given with a certain amount of interest rate specified when the loans are taken. It is one of the important service that is offered and it is also an important source through which bank make money with the interest collected for a particular loan.

Banking:

The banking is an important sector in the financial services. Commercial banks provides financial service that is aimed toward reducing the cost with effective allocation of money from the savers to the borrowers.

Banking builds an economic system that is not only effective but beneficial for all. Hence banking is important for making the overall economy more stabilized and efficient.

Interaction between Two Selected Sectors and Their Benefits

Interaction of the two sector:

Book keeping and accounting is closely related to each other. The accounting is the process of analysing the financial statements. This statement includes the cost, investment, return and other financial related activities. Based on this analysis the financial statement is produced. The financial statement is necessary to take financial related decision like where the company has invested more and how the investment has been made. This information is necessary to identify proper strategy to mitigate the issues like low investment in return, financial loss. Hence it implies that the accounting helps a lot in taking financial decision and management.

Benefits of the interaction

Although the accounting is necessary for making financial related decision and financial management, it is only possible if the data based on which the decision are made is accurate and reliable. Without correct and proper data it is not possible to make the effective decision.

Bookkeeping ensures that information is collected on a regular basis and it is collected correctly the process includes the complete details of the each and every financial details. Thus bookkeeping ensures that proper information is always available whenever it is required.

Interest rate:

The interest rate plays an important role in the banking sector. It is the amount that banks provide against the saving account. It also decides the money that the banks is supposed to collect against the loan provided. If the interest goes up or down for a long term it will have diverse effect on the economy and its stability. The reserve bank of Australia has kept the interest rates at 1.5%, despite the hike of interest rate in other major countries having higher GDP including America. Due to the low level of interest rate it will support the growth of Australian economy including the banking sector as well.

Dollar value:

Although the RBA has kept the interest on a record law, the value in the Australia dollar (AUD) is declining thus keeping it at a risk of higher inflation. Hence a tight monitoring is being performed on the value of the AUD, before the market stabilizes significantly. The falling value in the AUD will have a significant impact on the long term debts fund and the impact is also likely to be seen on the net asset value (NAV). Due to this the return rate will also increase. A decline in the AUD value is likely to create pressure due to inflation which will involve making the import costlier than before. However if current situation is analysed, the situation is much stable due to close monitoring on the AUD value and also the interest rate has been kept at record lower value before the situation is completely stabilized and bring to reliable position.

Impact of Interest Rates, Dollar Value, and Political Climate on Different Industries

The triple bottom line approach is a brilliant concept that redefines the way the organization defines its service and scope and the way it operates. The triple bottom line approach consists of three major factors which includes financial, economic and social aspects. The triple bottom line approach puts the financial terms at the lowest level and giving major preference to the social and moral aspects. Although the inclusion of the principle to the banking sector has been a major issue as there has been always concern how social and environmental value will be preferred instead of the financial term. However these values need to be incorporated for the sustainable practises.

For ensuring the social value, organization needs to create effective organizational policies and standards. For example if bank relaxes the standards for the lending service and instead tries to increase the amount of money, it will definitely improve the economy or financial performance for the bank. However, if the bank faces economic crisis it will have to put larger charge for the mortgage which will create a social crisis among the people. People will go through family violence due to economic pressure and tension between couple and children will also prevail. People will work overtime for income to repay money and that too will create stress within family. Hence banking before creating the standards for money lending have to take this into account and plan according to that. The mortgage rate should be set such that the organization don’t have to force higher rate on the customers even when there is an economic crisis and proper backup plan is there if these happens at all. 

In order to ensure environmental value the bank must invest in projects that are environment friendly and in some cases the funding should be provided at a subsidised rate if possible. This might limit the profit to some extent, but it will definitely boost the environmental value that goes beyond the financial investment and profit.

In order to make an appraisal of work team obligation, a proper code of conduct needs to be developed that address the applicable rules and regulations in that particular sector as identified in part 1 to 4. The actions of the employee will be assessed on based on that. Proper training and seminar will also be arranged for the employee for personal, moral and ethical as well as professional development so that it is easy for them to follow and apply the code of practise in the workplace.

Triple Bottom Line Approach and Its Application in Financial Services Industry Practices

Training is necessary for the employees working in the financial sector to make them aware of the legal and ethical practises. Employee training and development plays an important role in associating the goals of the employee to the goals of the organization. The training programs that are common in the financial sector trains the employees in topics like sales training, budget management, anti-money laundering and cash flow management. This training not only helps the employees to sharpen their skills for professional development, it also helps them to understand relevant rules and regulations while performing those tasks in the professional job sectors. Thus it is an effective way for the organization too to deal with the obligations while implementing the rules and regulations for the sectors as identified in part 1 to 4.

In order to carryout financial activities corporations and organizations need to comply with the licensing requirements as applicable in the particular sector.  Most of the laws relevant in the sector makes it mandatory that organization need to have corresponding license before it associates words like banking, insurance and national with the organization. The process of acquiring the license is a complex and lengthy process, though it depends on the type of license for which the organization apply for. However without the license no organization is entitled to execute its business process. 

To provide safety and keep the customer information secured and for that technologies like encryption, digital verification, and digital signature needs to be incorporated. Public key infrastructure is another important way to ensure the safety of the information. As per the legislations requirements, banks are required to keep the information safe and secure. The technology as enhances the information security, also helps to meet the legislated requirements.

The concept of sustainability means to preserve the present need while ensuring that the future development is capable for meeting the demands of the next generations. Sustainability is not all about preserving the environment and the biodiversity, it is also about ensuring that the human life is free of poverty and basic financial demands are met properly. Bank has an important role to play in this direction as a lot of people depends on banks for financial activities. Hence, sustainability legislation, regulations will ensure that bank progress towards this direction and create a sustainable impact on the life and society while keeping the financial basics intact.

 The code of conduct ensures that the organizations address the rules and regulations applicable in that particular industries. In order to create consumer value as well as reputation for the organization it is important to have proper code of conduct which will ensure that organization is following the moral and ethical standards while conducting the business activities.

Effect of Legislation, Regulations, Codes of Practice, and Organizational Policies on Work Practices

The bank policies and procedures are implanted to make the financial activities complied with the applicable rules and regulation

Two example in this regard are:

E-banking:

 If the customer opt for the e-banking facility, the bank makes it sure that the online transaction is safe and secure and customer is always keep up to date regarding the financial statement including the credit and debit

Financial assistance:

Bank as part of their extended banking services also provides financial assistance to the customer who want it. However the customer has to provide the complete details including document proof to make it sure that the process is transparent and legal.

As part of the ethical behaviour two of the most important examples are:

• Bank never shares the personal details including account details  with the others except the one nominated by the customer
• Bank never charges customer with manipulating information and details. Any activities regarding the transaction is kept safe and personal

The bank database and the server is always kept up to date so that information related to the customer is kept safe. If the data is not kept safe and the server is hacked somehow it will expose a lot of information including the personal details to the hackers. Hence the security is a major requirement for the banking sector. As part of the security measures bank provides SMS and email alerts regarding the transaction

The accounting system or commonly known as the account information system is the system that is responsible for the collection, storage and processing of the financial data which helps in auditing, financial accounting & reporting.

Database is the technology of storing the customer related data including the personal details of consumer like documents proof , digital signature , photos , account number and several other data related to customer and the bank itself.

In order to create a sustainable society financial service industry should adopt precautionary approach and support actions that develops product and services which encourage sustainable development.  As part of the sustainable practise, financial institution should promote healthy development for capital market. Institutions are also expected to work together to improve the techniques that enhance the ESG or the environment safety guidelines for sustainable financial development. To provide safety and keep the customer information secured and for that technologies like encryption, digital verification, and digital signature needs to be incorporated. The security providers the institute appoints should also comply with the ESG rules and regulations. It will help the investors to make sales related decision that is not only appropriate but sustainable too. 

• Consumer credit code

The credit score is the evaluation of the customer credit worthiness of an individual based on which loan is provided. According to the Fair Credit Reporting Act, the consumer is entitled to get the credit score report free of cost. If the consumer credit score is above the prime value which is subject to the individual organization, then the organization needs to give the loan amount that the customer is entitled for. However while evaluating the credit score, the source of the credit score has to be defined to make the process authenticate.

• Privacy act

Role of Technology in Ensuring Compliance with Legislated Requirements

According to the international privacy act for information, every organization who collects and store the customer information has to provide the highest security measure for the information security. It is the duty of the banking institute to ensure that they collects, store and process information in such a way that security is maintained in each of the process.

• Credit act

According to the national credit act, the consumer have to be protected in the credit market. It is the duty of the bank or financial institute to makes the credit and banking service more accessible to others

• Financial transaction reports act

According to the financial transaction report act, if there is any issues related to transaction report after the tax filling it has to be resolved at an immediate basis. The report should aim to create the regulation for money laundering and other financial related transaction. Organization failing to do so will have to come under the legal dispute

• Corporations act (including accounting standards)

The corporation act sets the accounting standards for the financial institutions. It is aimed towards preparing standard that prepares and present the financial information in a transparent and effective way.  The act enforces the organization to comply with the financial position, financial performance and cash flow in the fairest way possible.

• Financial services reform act (FSRA)

The financial service reform act set a common legislation term for various financial service and products. It makes the ethical investment mandatory for the organization and give value to the interest of people more than the unit holder.

According to the RBA, due to the low interest rate and steady growth in economy banks will not face the inflation in the financial in return and investment. Even the inflation is accounted in the investment to return, the process will be gradual and it will make it is easy for the banking sector to account with that.

The political situation is currently very turbulent and it is likely to impact the economic and financial sector too. It will particularly impact the invest rate and the return on the investment. The invest rate will likely to be declined as the uncertainty in the political sector is increasing

Two examples of the professional practice application specific to the workplace in the banking sector are:

Data collection:

The amount of information that is applicable for a particular service for instance account opening, only that amount of information is collected. No sensitive information if not required will be collected form the customer.

Data retention:

Data will be retained in the database as long as it is necessary. The application for which the data is collected no longer needs the data, then it has should not be retained in the database. It not only makes the chances of data hack less, it also makes the professional practices fair and transparent.

Type of Insurance	Average Annual Premium	Average Deductible	What it cover	Providers
Commercial General Liability	$400 to $500	$1,000	Claims by third party such as property damage, medical payments, and injuries regarding personal advertising. For example  If a customer faces injuries inside the saloon the medical bill will be covered by the insurance	The Hartford
Professional Liability Insurance	$800 to $1,200	based on coverage amount .however it varies	Damages due to mistakes, negligence or non-fulfilment of contractual obligations. If due to mishandling of the employees the business faces any loss or damage when the customer sues the company, the financial damage that the company is likely to encounter will be considered in the insurance term.	Next Insurance
Business Interruption	$300 to 750	Based on revenue	Loss of income due to interruption in business. It might be happen that if the business is interrupted due to natural calamities like rain, storm, the financial loss of the company will be considered in the insurance term.	Next Insurance
Commercial Property Insurance	$300 to $700	Varies based on property value	Assets that belongs to the business such as building, equipment and inventory. Any kind of damage that is related to the above mentioned assets is paid by the insurance term as agreed	Allstate
Workers Compensation	1% of compensation per employee	None	Work-related injuries, medical bills, wage replacement and more for employees. It is standard practise for the organization to provide compensation to the workers for helping them meet the costs mentioned above. This insurance cover these expenses for the organization with effective package that ensures maximum profit not only for the employees but for the organization as well. Hence it is a popular insurance plan companies apply for	Allstate

Insurance type:

Professional Liability Insurance

What it will cover:

Any damage to the business that is due to negligence or mistake. While covering the insurance term, it does not matter whose fault it was, customer or the employers. It will basically pay for the lawsuit if customer sue the organization, even if it is the fault of the customer

What it will not cover:

• Commercial General Liability like property damage , medical payments
• Personal and the advertising damage
• Business Interruption Insurance like loss in revenue including the damage due to natural calamities like storm

Estimate cost:

Average annual premium of $800 to $1,200 while the average deductible based on the revenue of the organization. Hence the insurance will be an appropriate for the Hairdresser Salon.

References:

Scott, William Robert, Financial Accounting Theory (Pearson, 2014)

Clemens, J. H, Technology in Banking (Europa Publications, 2015)

Stout, Lynn A, A team production theory (Willey Publication, 2017