Blog 3: How HSBC change management under the background of Brexit

During several months of infighting, Britain’s historic Brexit has aroused people’s concerns for the future of Britain and the change of world economy. British and multinational industries in UK have worried about the impact of Brexit on the situation of domestic economy, which also aroused attention of people of all cites of life(Armstrong 2016). Thousands of businesses and jobs are under pressure and at risk because of the move of Brexit, they are not sure about the future tariffs and investment. Most economists predicted that the Brexit probably brings a long-term economic damage to the UK, even possible recession.

There is no doubt that Brexit has great impact on British banking industry mainly because UK’s passporting rights was remained, which means if banks want to keep cross-border operations in European economic area, they have to registered in the European framework(ECB 2015). In order to keep operations in the EU, banks need to think about the content of framework. They can make use of the subsidiaries in other European countries to achieve the passporting rights of cross-border operations. Except for these strict operational conditions, U.K. banks are facing at a complicated process of licensing by governments, which would result in a heavy costs and time consuming delays due to many firms or institution would apply for the licenses at the same time. In addition, the adjustment of operations between British and continent of Europe would result in the difficulty in complete matching between employees and operating posts in a short time. Thousand of talents have to make tough option to follow their company working outside the continent of Europe or quit their jobs and find a new one in the local area. 

The blog takes HSBC as an example. It was founded in 1865 whose headquarter is in London. As one of the world largest banks and financial institutions, HSBC has about 9,500 subsidiaries in 76 countries and areas all over the world. It has 200,000 stockholders distributing in more than 100 countries and regions and more than 228,000 employees. It also possesses 0.11 billion clients globally.

The original headquarter of HSBC was built in Hong Kong and moved to the U.K. in 1993. Under the help of passporting rights, HSBC set up many subsidiaries in the EU for the purposes of regulatory and tax. After the historic moment of leaving the EU, these subsidiaries out of the EU can still take advantage of passporting rights to support the cross-border operations.

HSBC is obviously entering a period of recession because of Brexit, not only having difficulty on economic risks, but also the political and geopolitical events. The primary mission is to support the colleagues who was sent to outside the U.K. and positively touch their clients. In addition, facing the shock brought by Brexit, HSBC needs to adjust its operations in Europe to improve its competitiveness including its international network and professional management. It can make use established subsidiaries to promote cross-border cash management and the solutions of trading. So, HSBC has the opportunities to sell other products and services, which can add clients’ conversion cost and make them become the long-term clients. With the increasing administrative costs, HSBC can sell a large amount of products which have a lower price to the clients in order to accumulate the profits to meet the demand of operating the bank. 

The stable development can be maintained by HSBC after Brexit, because HSBC has a large number of floating capital and its senior management has accumulated rich experience of dealing with major stressful events. Most investors have the confidence to HSBC believing it can tide over the financial crisis(Danielsson 2016).

The banking services of HSBC can be classified as global banking, market banking and merchant banking. Most of the large transnational corporations which have complex global trade and financing needs were served by global banks and market departments. Small and medium enterprises are often covered by merchant banks. HSBC adjusts these operation lines and promote resource sharing in order to rise the success rate of its conversion strategy and provide a better service for new clients of merchant banks with offering cross-border professional knowledge and service which were only traditionally given to large transnational corporations. The change of management strategy will cater to the new cross-border demands. Although the passporting rights no longer exists, HSBC can provides a better service for its clients by virtue of its core competence. Lase but not least, HSBC can increase investment in inventing such apps as retail banking, financial management and merchant banking and use financial technology to protect the network safety and prevent financial crimes. 

In a sum, the management in a certain industry should be constantly adjusted according to the economic and financial situation and international affairs. Changing management can be an important approach for a business to tide over the crises.

Reference 

• Armstrong, A. (2016), ‘EU membership, financial services and stability’, National Institute Economic Review 236, 31-38. 
• Danielsson, Macrae, and Zigrand (2016), ‘On the financial market consequences of Brexit’, Voxeu, 7 June. 
• ECB (2015), EU Structural Financial Indicators 2014, Frankfurt.