The Importance of Location
The location of any business is critical in determining whether or not the endeavor will prosper. For a long time, London has prided itself on being Europe's financial center. As a result, several international corporations have relocated to the city in order to gain access to the European market. The preceding considerations influenced my decision to open a new office in London. The bank will benefit greatly from the expansion of enterprises. The special relationship that the United Kingdom has with its former colonies especially those in Africa will also be a plus in enabling the bank get access to new markets. United Kingdom's system of governance is that of open economy.
Challenges in London
Despite the numerous opportunities available in the city of London, the city is not short of challenges. One of the major challenges facing the city of London is the traffic jams brought about t by the increase in population. Population in the city grows by an average of 100,000 people per annum. The traffic jam may be a big hindrance for the employees of the banks as it implies that a lot of time is wasted which is very costly. Moreover, the recent decision by the United Kingdom to leave the European Union may present a major challenge to the bank (Dhingra, 2016). This is due to the fact that some international businesses have threatened to move their head offices to new countries in anticipation of the negative effects of Brexit. The recent cases of terrorism across European cities are also a cause for alarm. The most recent case is where children were attacked in a terrorism act in the city of Manchester. Terrorism by nature breeds insecurity which prevents business people from investing in areas which are regarded as dangerous.
Regulations in the Financial Sector
The financial sector is very sensitive to any economy. As such, certain rules and regulations have been put in place by the Britain government which governs the conduct of banks and other financial institutions in the financial arena. Since the financial crisis of 2008/2009, the government has increased the supervisory powers of the bank of England. The government's bank has been given powers to address risks which by nature are systemic as soon as they emerge. This is in a bid to ensure that banks are safeguarded from going under which may put the economy into an economic abyss. This is in response to the challenges that bedeviled HBOS during the aforementioned financial crisis. Had the government not intervened, the bank would have gone under. Moreover, the government has legislated punitive measures that ought to be taken against the top management of a bank in case the bank goes under. This also includes very high standards imposed by the government to those who may wish to practice banking. This is aimed at ensuring that the people at the top level management exude integrity.
International Trade and Opportunities
The economy of the United Kingdom is heavily reliant on international trade. Being an open economy, the government has endeavored to ensure that its economies are open to other countries. The United Kingdom is also a member of international trade Organizations like the World Trade Organization (WTO). This means that the government is fully committed to International trade (Feenstra, 2015). For a long time, the European Union has been a major trading partner of the United Kingdom. The main trading partners of United Kingdom within the European are Germany which accounts for 12 percent of Britain's exports. The other market which is outside the European Union is the United States of America which accounts for 14% of United Kingdom's exports. The government involves itself in international trade issues by sending its delegation to trade seminars. The delegations raise pertinent issues regarding United Kingdom's stand on the matters under discussion.
Expanding Territories and Considerations
United Kingdom's commitments to international trade presents an opportunity to the bank as it will enable the bank expand its territories. As such, this will be of great importance to the bank. The location of the bank in London will be of great importance in enabling the bank get access to developing economies. This will especially be the case as far as getting access to economies which were former Britain colonies. Despite Britain's exit from the European Union, the country still belongs to the United Kingdom which consists of Wales, England, and Scotland. The bank will be in a position to access the markets of these countries by being placed in London.
Considering Costs and Long-Term Objectives
In deciding whether to open an office in the United Kingdom or not, some factors will have to be considered. As a bank manager, I will consider the cost of building an office in the city as compared to the costs involved in leasing an office. It will also be imperative to consider the long term objectives of the bank. If it is the wish of the board of management to continue operating in London for the foreseeable future, it will be prudent to establish a permanent office.
Foreign Exchange and Hedging
Foreign exchange should be hedged in order to insure against fluctuations of exchange rate. Some of the hedging methods to be applied is forward contract, future contract, and spot exchange. Interest rate is also imperative in affecting foreign exchange rate.
References
Dhingra, S. O. (2016). The impact of Brexit on foreign investment in the UK. BREXIT 2016, 24.
Feenstra, R. C. (2015). Advanced international trade: theory and evidence. Princeton university press.
Quaglia, L. (2014). Quaglia, L. The European Union and global financial regulation. Oxford University Press, USA.
