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What is the role of corporate finance professionals?
dealing with sources of funding, the capital structure of corporations, examining the actions that managers take to ensure profitability and maximum value to shareholders, and the tools and analysis used to allocate financial resources
What is the difference between cash and profit. What is the importance of cash flow.
Not all cash paid into a business is profit. A business must pay its costs from the money that comes into it. Once all costs have been deducted from all revenue, the amount that is left is the business’ profit.
Cash flow - ensures you have enough funds to pay your bills whilst also making a profit
What is the difference between information, advice and guidance.
information is based on facts and does not provide an opinion; whereas advice and guidance are recommendations based on opinion and not on fact and carries legal connotations
What is PII and how can it be used in financial businesses?
Professional indemnity insurance protects you and your business from the cost of compensating a client if you make a mistake in a piece of work for a client that causes them reputational or financial loss.
Explain the following V's of big data in a financial context; volume, variety, velocity, veracity.
volume: the explosion in global payments fuelled by ecommerce and mobile payments
variety: Big Data makes sense of unstructured data from a variety of sources in banking from transactions details to credit scores
velocity: incoming Big Data at high speed, extraction of insights into financial behaviour
veracity: the challenge of receiving accurate information from Big Data, attempting to manage the financial risk of a customer
Explain, using examples, what the difference is between regulated and non-regulated products/services.
FCA regulated products: consumer credit activities, investment activities, home finance, insurance, electronic money
non-regulated products: investment products - gold, diamonds, crypto assets; high risk investments
Explain who each of the regulatory bodies are and what their purpose is.
Financial Services Compensation Scheme (FSCS): pays compensation to consumers in the event of failure of an authorised financial institution
Financial Conduct Authority (FCA): authorises financial services; protects consumers with mortgages, credit, loans, savings and pensions; provides information and advice to consumers and issues penalties for infringements
Financial Ombudsman Service (FOS): investigates consumer complaints against the business practices of financial institutions
Financial Reporting Council (FRC): regulates auditors, accountants and actuaries
Prudential Regulation Authority (PRA): supervisory role over banks, building societies, credit unions, insurers and investment companies for avoiding failure
The Pensions Regulator (TPR) ensures that employers, trustees, pension specialists and business advisers can fulfil their duties to scheme members.
What are the 2 key elements required in formation of a company under the Companies Act?
Articles of Association - written rules about running the company agreed by the shareholders or guarantors, directors and the company secretary
Memorandum of Association - a legal statement signed by all initial shareholders or guarantors agreeing to form the company
Explain some of the roles in finance
retail and commercial banking analyst, investment banking and asset wealth management analyst, insurance practitioner, financial compliance risk analyst
Explain the difference in FinTech for B2B and B2C customers.
Business to Consumer (B2C) - Delivering something to a customer using customer facing technology, e.g. an app, website. Although, the minority – B2C Fintech is what is most seen and talked about
Business to Business (B2B) - Using technology to manage data in the background and help financial providers to be more efficient in their financial reporting.The majority of Fintech is B2B
provide goods and services and meet consumer needs/wants
provide employment and training opportunities
contribute towards economic and social priorities
pay taxes
enhance the economic security of the country in the face of overseas competition from imported foreign goods.
What are some practices to address mis-selling?
promotion of an ethical sales culture including sales practices, risk management and data analytics
robust procedures for complaints handling
accountability
random sales audits.
Explain business aims/objectives according to the 3 types of ownership
private: profit, growth, diversification, competitiveness, efficiency, cover costs (break-even), survival, market leadership
public: service provision, cost control, value for money, service quality, meeting government standards
not-for-profit: raise funds and accept donations in order to generate surpluses; invest in social, environmental or cultural initiatives.
Explain the advantages of good data management.
speed of data transmission and access, business planning, monitoring key performance indicators, budget setting and monitoring and business decision making
What are the potential costs of digital transformation?
hardware, software, staff training, specialist in-house personal teams, depreciation costs, replacement costs, ongoing system upgrading, system security costs.
What are the main risk areas within the financial industry. What are some risk reduction strategies that can be used (these are not the same as risk management strategies).
Risk areas: legal, governance, reputation, compliance, financial crime including fraud, operational, conduct
Risk reduction strategies: ensure efficient processes, determine service failures, ensure adequate risk assessment is conducted across all processes, document and communicate processes, update processes regularly.
Explain how the whistle blowing process works.
When an individual provides the right information to the right people, the individual has made a Protected Disclosure and is a Whistleblower. Once a Protected Disclosure is made, the Whistleblower is afforded protections established by various whistleblower protection laws and policies.
Explain the purpose of each legislation relating to financial crime.
Proceeds of Crime Act
Criminal Finances Act
The Money Laundering, Terrorist Financing and Transfer of Funds Regulations
What are the considerations of a code of ethics?
compliance with the law
acting with integrity
treating suppliers, customers, partners and employees fairly and with respect
contributing to a healthy and safe workplace
respecting equality and diversity of the workforce
maintaining high standards in their finance department.
Explain the project lifecycle.
initiation: set out scope, purpose, and SMART objectives of project
planning: create project plan that includes resources, contingencies, finance, quality, Key Performance Indicators (KPIs), communication and evaluation mechanisms
execution: implement project plan, create tasks, organise workflows, brief team members
closure: complete paperwork, release resources, and report to key stakeholders
evaluate: identify how far the project met objectives and expectations and identify how to improve future projects by supporting evidence and research.
What is the purpose of governance within financial firms.
Explain using multiple examples.
IT / technology
Regulations/legislation
Ethics
Diversity/inclusion
Accounting
Project/change management
Explain how changes in business environments can influence business objectives, looking at;
political, ethical, social/demographic, environmental.
political: budget and tax changes, changes to standards, political volatility in foreign and domestic markets, sustainability of debt; regulations including Financial Conduct Authority (FCA), strengthening of regulatory frameworks
ethical: financial conduct, ethical objectives, risk management, accountability, ethical investing, ethical financial advice, professional behaviour, professional competence and due care, honesty, integrity, confidentiality and transparency
social/demographic: ageing workforce, financial exclusion, fairer employment practices, social investment and values
environmental: climate change events and financial losses, demand for green financial products, risk management, impact of government environmental policies, climate-related financial disclosure, 3Ps in sustainability People/Profit/Planet, Corporate Social Responsibility (CSR).
What are the financial factors that may cause a financial crisis and influence the stability of the financial system?
Which of these do you think is most likely to happen in current times.. why?
high levels of credit provided to high-risk/low income individuals/businesses
a sudden drop in asset prices
run on banks due to lack of confidence by depositors
level of regulation of financial services insufficiently robust
speculation on the financial markets
economic policies, interest rates and inflation rates in major economies resulting in a significant decrease in economic activity; a significant increase in unemployment; hyperinflation.
Explain the internal and external sources of finance available to businesses.
internal: retained profits, net current assets, sale of assets
external: owner’s capital, bank overdraft, hire purchase, leasing, trade credit, mortgages, shares, loans, debt factoring, grants, donations, invoice discounting, crowdfunding, venture capitalists and business angels.
How has the development of technology impacted on financial businesses and their trading models?
the role of technology: increasing use of the internet by consumers to purchase financial products and services, banking, insurance
virtual businesses: no high street presence
working practices and workforce organisation and structure: increase in the use of home working and 24-hour banking via outsourcing
increased competition: impact on established financial businesses of smaller financial services businesses entering the market offering bespoke services to the consumer
the increased importance of customer service and personalised products: personal bankers, loyalty programmes, product portfolio.