StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

International Operations and Risk Management of Brewin Dolphin Plc - Essay Example

Cite this document
Summary
This research is being carried out to evaluate and present the international operations and risk management of Brewin Dolphin Plc. Brewin Dolphin Plc is a British financial firm which provides services such as investments management and financial advice in the U.K and Eire…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER92.7% of users find it useful
International Operations and Risk Management of Brewin Dolphin Plc
Read Text Preview

Extract of sample "International Operations and Risk Management of Brewin Dolphin Plc"

International operations and risk management of Brewin Dolphin Plc Table of Contents Introduction 3 Business and key markets 3 Corporate and financial actions 4 Financial trends 5 Sales growth 6 Profitability 6 Operating profit margin 6 Net profit margin 6 Efficiency ratios 7 Return on equity 7 Return on capital invested 7 Dividend payout ratio 8 Risk management 8 Exchange rate risk management 8 Political risk management 10 Firm based 11 Country based 11 Conclusion and recommendation 12 Reference list 13 Introduction Brewin Dolphin Plc is a British financial firm which provides services such as investments management and financial advice in the U.K and Eire. The company has over 35 offices in the U.K and the Eire region. The company remains committed towards providing expert financial services. Earning the trust of client through efficient services has remained an important aspect for the company. However, increasing regulatory policies and changing demands and nature of financial services requires Brewin Dolphin to continuously innovate. Brewin Dolphin charges clients on the basis of the value of their services. Following fair and ethical practices in terms of charging prices has remained important for the organization. A personal approach is adopted by the company in providing financial services to the clients. Brewin Dolphin‘s clients also include a number of charitable trusts and non-profit seeking institutions (Brewin Dolphin Plc, 2013). Business and key markets Brewin Dolphin manages £ 28 billion worth investments of clients in the U.K and Eire (J.P Morgan, 2013). Since its inception in the British financial sector, the company has been successful at growing rapidly. Moreover, since the market in which the company operates is growth oriented, it is expected that the firm will be able to grow sufficiently even in the future (H.M Treasury, 2012). Figure 1: The U.K wealth management industry (Source: AT Kearney, 2012) Investment management firm in the U.K are seen to grow in size and revenue even though recession had considerably weakened the economy. Post recession, many firms and individuals began becoming aware of the fact that securing financial advice and expert management advice was necessary to safeguard wealth. Moreover, the recession had triggered more regulatory practices to be introduced within the industry. Almost 10 to 15 percent of the industry segment is occupied by the portfolio management and investment firms. The major revenue however is received from the banking firms which operate in this sector. The investment management firms of the U.K account for earning almost £ 12 billion on an annual basis. Apart from steady flow of income, the investment management sector of the U.K also accounts for a significant number of job opportunities (Skeoch, 2014). The government of the U.K ensures that the investment management sector remains stable. The failure or fall in revenues in this sector directly impacts the overall economy of the nation. Overall, the investment management sector accounts for 1 per cent in the overall economy of the U.K (Agnew, 2014). Corporate and financial actions On the basis of the growth report of Brewin Dolphin, the company has been able to efficiently enhance its returns in the year 2013 as compared with 2012. In the segment of advisory dealings, the revenue of the firm has considerably declined. The company considers that in order to continue achieving success and also overcome its weaknesses, it is essential to simplify and concentrate on the primary services. The primary activities of the company mainly include portfolio management on a discretionary or advisory basis. Advisory dealings are essentially Brewin Dolphin’s secondary activities (Brewin Dolphin Plc, 2013). In the recent times that company has included financial planning services as part of its primary activities. The company’s growth strategy for the coming years are to maintain adequate capital reserves so that financial market opportunities can be maximised and risks can be covered. Additionally, the company also plans to increase their dividends alongside of earnings, so that greater investments in shares can be attracted Orlitzky, Schmidt and Rynes, 2003). Financial trends The financial performance of Brewin Dolphin Plc has been studied on the basis of ratios and has been depicted in the following table. Figure 2: Important ratios of Brewin Dolphin Plc 2013 2012 2011 2010 2009 Sales 5.74% 2.09% 10.00% 18.17% 2.82% Net profit margin 7.44% 6.83% 5.34% 8.98% 7.32% Operating profit 13.35% 11.00% 8.62% 12.40% 11.10% Return on Equity 11.07% 11.59% 9.51% 16.59% 13.05% Return On Invested Capital 11.04% 11.57% 9.48% 16.29% 12.65% Dividend Payout Ratio - 91.03% 114.52% - - (Source: Brewin Dolphin Plc, 2013) The financial condition of Brewin Dolphin has been analysed on the basis of sales profitability, efficiency and dividend payout ratios. Sales growth Since 2012, the company has been successful at increasing its sales volumes (Garrison, Noreen and Brewer, 2003). The increase has been mainly caused due to the introduction of more number of services in the primary activities of the firm (Gitman and Zutter, 2011). Profitability Operating profit margin Net profit margin Both net profit and operating profit position of Brewin Dolphin is seen to be favourable (Nissim and Penman, 2001). It is essential that the firm acquires high profits so that adequate dividends can be provided to shareholders. High profits also facilitate greater investments (Ross, Westerfield and Jordan, 2008). Efficiency ratios Return on equity Return on capital invested A high and positive ratio of return on equity indicates that the company is able to generate profits out of its investments (Brigham and Houston, 2011). Similarly, positive returns on invested capital also indicate that the company has been investing in profitable projects and therefore has been successful at generating high revenues (Will, Subramanyam and Robert, 2001). Dividend payout ratio The companies dividend scenario is seen to be weak. This is one of the main reasons why the administratiors of Brewin Dolphin have strategically detemined to recover their dividend position in the coming financial years (Vanhorne, 2000). High invetsments and expansion of business activities had declined excess earnings, due to which adequate returns could not be provided (Heaton, 2002). Risk management International organizations are bound to face risks arising out of differences in the economic and social policies. International organization, owing to their size and wide scope of services spread across different nations cannot avoid facing risks existing in the external environment and also due to factors which are unpredictable (Glaum, 2002). There are some risks which arise out of lack internal organizational efficiency. These can be effectively managed through proper managerial actions. However there are certain risks which are beyond the scope of the organization to prevent from occurring (Cornett and Saunders, 2003). Although such risks cannot be avoided or perceived in advance, it required that company formulates suitable plans for mitigating the effects of risks. In the current study, two important categories of risks faced by Brewin Dolphin Plc have been discussed. Exchange rate risk management Being a firm which is engaged in financial activities internationally, the exposure to exchange rate risks is high for Brewin Dolphin Plc. Although the company’s operations are restricted to providing financial services in the U.K and Eire, differences in the economic conditions of the two regions and the exchange rate variations between them effect the operations of the company. Such risks arise when revenue, profits and payments are held in foreign currencies or stock. Due to such exchange rate risks, the firm may lose the revenue it expects to receive from a particular investment or a business transaction. This may impact the overall cash flows and profits of the company (J. C. Hull and J. C Hull, 2008). The weakening of the U.K economy and its exchange rates during the recession period had negatively impacted the revenues of Brewin Dolphin and the company had faced considerable losses in a number of its international transactions. The prime types of exchanges rate risks faced by Brewin Dolphin Plc are transactional risks, translational risks and economic risks (Marshall and Weetman, 2007). Transactional risks arise when the organization is required to receive or make payments in a foreign currency. When the exchange rate fluctuates negatively, the firm ends up paying a higher amount or obtaining lower revenue. Such transactional risks had significantly impacted the organizations commercial transactions in which the final settlement is received in the U.S dollars. The U.S dollars accepted as the currency in which currency is converted, in a number of international business dealings. Also, since recession had caused the value of the U.K pound to decline in respect of other currencies, business activities of many financial firms similar to Brewin Dolphin, operating in the U.K had suffered immensely. Being in the financial sector Brewin Dolphin is required to transact with a number of financial services companies across the globe on a day to day basis. Revenues received for the financial services offered by the firm such as stock broking, portfolio management and investment making gets impacted due to fluctuations in the exchange rates (Holzmann and Jørgensen, 2001). Translational risks are also adequately associated with the business activities of the company. Such risks arise when the income statements and balance sheets denominated in the foreign currencies are converted into pounds by the company. In case of Brewin Dolphin, since it operates only in the Eire region other than the U.K, it is mainly required to convert Euro into pounds. During such translation the values of assets, liabilities and the net income of the firm may decline (Hull, 2012). Being an international firm, the company is required to consolidate its annual reports with its subsidiary firms located in other nations in order to estimate the current financial position and mitigate and for providing accurate information to its stakeholders (Linsley and Shrives, 2006). Such risks are usually relieved at the end of the period. They are seen to impact the values of the stock of the company majorly. Translation risks also arise when the statements of the company are denominated in the U.S dollars. Another significant exchange rate risk impacting the business of Brewin Dolphin is economic risk. Economic risks refer to the difference arising out of the actual cash inflows and the estimated values of future cash flows. The values of cash inflows are determined on the basis of suitable discounting rates. These rates may vary when the exchange rates fluctuate. Such risks depend upon the economic conditions existing in the host nation’s economy (Brown, 2001). Although exchange rate risk cannot be prevented from occurring as it arises out of economic conditions as a whole, the impact of such risks can be mitigated fully or partly through suitable financial derivative tools. Brewin Dolphin is mainly seen to adopt two important types of hedging policies. In the first method, the company constantly updates the value of the currency to be received or paid in the contract in respect of the changes in the exchange rate. Hence if the exchange rate declines since the period when the contract was made, the company receives protection against paying more (Godfrey, Merrill and Hansen, 2009). However if the firm is required to receive currency, a decline in the exchange rate reduces the profits and keeps it the same as it was while entering into the business deal. In other words, such hedging tactics fixate the profits arising out of financial transactions irrespective of the movement in the currency rates. In the second method, the company enters into a hedging contract with the foreign firms in respect of offsetting the loss or gain from the transaction. Apart from the hedging tools, Brewin Dolphin also makes use of futures, forwards and options contracts to mitigate the risks which arise of currency rate fluctuations. Since Brewin Dolphin mainly functions in the U.K and the Eire region, the company is required to consider the difference is exchange rates existing in Euro and British pound. In the recent times it has been observed that the exchange rate of British pound as compared with the Euro has been declining. This has negatively impacted the revenues earned in British pound (Embrechts, Lindskog and McNeil, 2003). Political risk management International organizations are required to operate in a number of nations and as a result are required to comply with a number of governmental norms and regulations. New government policies or the relationship shared between the government of the host nation and the parent nations of a firm critically impact the functions of multinational firms. The decisions taken by the governments of the host nation may negatively impact the organizations activities. Being a multinational company Brewin Dolphin is also required to face such risks. In general, there are two broad categories of political risks which impacts the functions carried out in a foreign nation by the company. These are micro and macro political risks. Micro risks are essentially those which impact all multinational firms operating in the particular host nation. Macro on the other hand is essentially those risks which impact the multinational firms operating in a particular segment or industry and not all the firms. In the current section of the paper some of the political risks faced by Brewin Dolphin have been analyzed (Lo, 2001). Firm based Firm based risks are essentially those political risks which impact the activities of Brewin Dolphin alone. This includes the relationship which the company shares with the government. The company may adversely impact its relations with the government if it does not follow the established rules and regulations. Firm risks also include the changes in government polices leading to a loss in the profits of the firm. In order to mitigate such risks, the company may enter into contracts with the government which fixate business dealings. It is observed that firm based political risks arise mostly when the government objectives are not in line with the objectives of the organizations. Hence before setting up businesses in foreign locations, Brewin Dolphin carefully analyses the overall policies of the foreign government and accordingly the company sets up its strategic business units. In order to mitigate political risks the company is seen to set its organizational objectives considering the interests of the government of the host nation. This however creates a differentiation in the objectives of different sub units of the same company. Brewin Dolphin also communicates its major actions and future plans to the government so as to ensure their acceptance of the same (Christoffersen, 2012). Country based Such risks arise when the firms activities impacts not only its relations with the government but the society as a whole and causes the government to take severe actions against the firm. Indulgence in corruption related activities or delivering services which are not coherent with the economic progress of the host nation leads to such risks. In order to mitigate such risks the company is required to compete in the U.K and the Eire region in a highly legitimate manner (Pramborg, 2005). Fraudulent practices not only hamper the company’s ties with the government but it also makes it lose its reputation in the market. The company ensures that its policies of functioning do not impact the society in a negative manner. Brewin Dolphin is also seen to indulge in a lot of charitable works in its locations of operations (Abraham and Cox, 2007). This has facilitated the firm to obtain higher recognition and acceptability in both the U.K and the Eire region. Since Brewin Dolphin operates mainly in the U.K and the Eire islands, it is required to concentrate upon the manner in which the political authorities operate in these two regions and how it impact the overall activities of the organization. Although there have been a number of conflicts between the governments of both nations, in the recent times the political relations between Eire and the U.K have remained strong. This positively impacts the business operations of Brewin Dolphin (Bradley and Moles, 2002). Conclusion and recommendation Brewin Dolphin is likely to face many risks as the company’s activities are associated with a financial services market which frequently undergoes changes. Economic conditions and social developed either enhance or reduce financial activities. Firms such as Brewin Dolphin are required to bring about changes in their services offered and the manner in which they function, according to the changes occurring in the economic sector. One of the primary risks that the company faces arises out of fluctuation in exchange rates. Since the main activities of the firm are related to managing finances, changes in the exchange rate impacts the manner in which the company handles its finances. Risk mitigation tools such as hedging, futures, options and forwards are important for the company to fixate expected revenues and avoid them being affected by conditions existing in the external environment. Additionally the company is also required to follow the established rules of the governments of both the U.K and Eire nations for mitigating political risks. Reference list Abraham, S. and Cox, P., 2007. Analysing the determinants of narrative risk information in UK FTSE 100 annual reports. The British Accounting Review, 39(3), pp. 227-248. Agnew, H., 2014. Regulation transforms UK wealth management business. [online] Available at: [Accessed on 5 December 2014]. AT Kearney, 2012. Wealth management in the U.K. [pdf] AT Kearney. Available at: [Accessed on 5 December 2014]. Bradley, K. and Moles, P., 2002. Managing strategic exchange rate exposures: evidence from UK firms. Managerial Finance, 28(11), pp. 28-42. Brewin Dolphin Plc, 2013. Annual Report and Accounts 2013. [online] Available at: [Accessed on 5 December 2014]. Brigham, E. and Houston, J., 2011. Fundamentals of financial management. Connecticut: Cengage Learning. Brown, G. W., 2001. Managing foreign exchange risk with derivatives. Journal of Financial Economics, 60(2), pp. 401-448. Christoffersen, P. F., 2012. Elements of financial risk management. New York: Academic Press. Cornett, M. M. and Saunders, A., 2003. Financial institutions management: A risk management approach. New York: McGraw-Hill/Irwin. Embrechts, P., Lindskog, F. and McNeil, A., 2003. Modelling dependence with copulas and applications to risk management. Handbook of heavy tailed distributions in finance, 8(1), pp. 329-384. Garrison, R. H., Noreen, E. W. and Brewer, P. C., 2003. Managerial accounting. New York: McGraw-Hill/Irwin. Gitman, L. J. and Zutter, C. J., 2011. Principles of Managerial Finance 13th Edition. New jersey: Prentice Hall. Glaum, M., 2002. The determinants of selective exchange risk management–evidence from German non‐financial corporations. Journal of Applied Corporate Finance, 14(4), pp. 108-121. Godfrey, P. C., Merrill, C. B. and Hansen, J. M., 2009. The relationship between corporate social responsibility and shareholder value: An empirical test of the risk management hypothesis. Strategic Management Journal, 30(4), pp. 425-445. H.M Treasury, 2012. The UK investment management strategy. [pdf] H. M Treasury. Available at: [Accessed on 5 December 2014]. Heaton, J. B., 2002. Managerial optimism and corporate finance. Financial management, 1(1), pp. 33-45. Holzmann, R. and Jørgensen, S., 2001. Social Risk Management: A new conceptual framework for Social Protection, and beyond. International Tax and Public Finance, 8(4), pp. 529-556. Hull, C., 2012. Risk Management and Financial Institutions. New Jersey: John Wiley & Sons. Hull, J. C. and Hull, J. C., 2008. Fundamentals of Futures and Options Markets and Derivagem. 2008. New Jersey: Prentice Hall. J.P Morgan, 2013. The Wealth Management Report. [pdf] J.P Morgan. Available at: [Accessed on 5 December 2014]. Linsley, P. M. and Shrives, P. J., 2006. Risk reporting: A study of risk disclosures in the annual reports of UK companies. The British Accounting Review, 38(4), pp. 387-404. Lo, A. W., 2001. Risk management for hedge funds: Introduction and overview. Financial Analysts Journal, 1(1), pp. 16-33. Marshall, A. and Weetman, P., 2007. Modelling transparency in disclosure: the case of foreign exchange risk management. Journal of Business Finance & Accounting, 34(5‐6), pp. 705-739. Nissim, D. and Penman, S. H., 2001. Ratio analysis and equity valuation: From research to practice. Review of accounting studies, 6(1), pp. 109-154. Orlitzky, M., Schmidt, F. L. and Rynes, S. L., 2003. Corporate social and financial performance: A meta-analysis. Organization studies, 24(3), pp. 403-441. Pramborg, B., 2005. Foreign exchange risk management by Swedish and Korean nonfinancial firms: A comparative survey. Pacific-Basin Finance Journal, 13(3), pp. 343-366. Ross, S. A., Westerfield, R. and Jordan, B. D., 2008. Fundamentals of corporate finance. New Delhi: Tata McGraw-Hill Education. Skeoch, K., 2014. UK can rule the world in asset management. [online] Available at: [Accessed on 5 December 2014]. Vanhorne, J. C., 2000. Fundamentals of financial management. New Jersey: Prentice Hall Books. Will, I., Subramanyam, K. R. and Robert, F. H., 2001. Financial statement analysis. New York: McGraw-Hill Internation. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“International Operations and Risk Management of Brewin Dolphin Plc Essay”, n.d.)
International Operations and Risk Management of Brewin Dolphin Plc Essay. Retrieved from https://studentshare.org/management/1665074-please-give-me-a-topicgo-ahead-group-plc-295
(International Operations and Risk Management of Brewin Dolphin Plc Essay)
International Operations and Risk Management of Brewin Dolphin Plc Essay. https://studentshare.org/management/1665074-please-give-me-a-topicgo-ahead-group-plc-295.
“International Operations and Risk Management of Brewin Dolphin Plc Essay”, n.d. https://studentshare.org/management/1665074-please-give-me-a-topicgo-ahead-group-plc-295.
  • Cited: 0 times

CHECK THESE SAMPLES OF International Operations and Risk Management of Brewin Dolphin Plc

Dolphins as a Part of the Toothed Whales Family

Nevertheless, their circulation is not random – each species of dolphin has become specialized to thrive in a specific niche, and each species of dolphin has a special role in the niche (Earthtrust.... In most cases, large dolphin groups are mixed in terms of sex and age, while smaller groups can be nuclear (comprising of a single adult female and male; a bachelor group (comprising of younger and adult males); or a nursery group (comprising of several females and young)....
2 Pages (500 words) Research Paper

Argument papers for ( dolphin slaughter)

That brutal behavior cans clearly appears in dolphin… Around 20,000 get killed in cold blood by fishermen in Japan each year.... Dolphins' environment has been interrupted with ignoring the fact that dolphin is one of the smartest animals in the world.... When killing normal animals is unacceptable, how could killing dolphin slaughter returns for different reasons like money or food.... With all respect to Japanese people and their culture, dolphin slaughters must be stopped; because humans are not the only smart beings in the world and human cannot decide who should live or who should die....
4 Pages (1000 words) Essay

Multi-National Operation and Risk Management of Renishaw Plc

Renishaw plc is a medical device manufacturer.... Renishaw plc offers services in 35 key markets, including Australia, Europe, United States, and Japan among others.... The company is founded upon the fundamental belief that the success of its operations will largely be based on its patented ad… This is coupled with high quality manufacturing and above all, its ability to provide large customer support in virtually all its markets worldwide....
11 Pages (2750 words) Essay

Finance and Accounting: Brewin Dolphin Holdings plc

The purpose of this report is to discuss the political and exchange risk management of brewin dolphin....   According to the paper findings the table shows the division of revenue between financial planning and investment management services indicating that investment management fees is a major revenue generating factor of brewin dolphin.... This essay presents brewin dolphin Holdings Plc which is a company that is based in the United Kingdom and conducts its business in the field of investment management....
10 Pages (2500 words) Essay

Risk Management in Brewin Dolphin Holdings Plc

This shows the extent of local market coverage by the brewin dolphin plc.... The object of analysis for the purpose of this assignment is brewin dolphin Holding PLC (BDH), a company that offers investment services to its client.... brewin dolphin Holding offers private investment advice to its richly diverse customers.... The subsidiaries include Brewin Nominees Limited, North Castle Street (Nominee) Limited, and brewin dolphin Limited (that manages investments)....
15 Pages (3750 words) Essay

Risk Management in Brewin Dolphin Holdings plc

This discussion, Risk Management in brewin dolphin Holdings plc, presents brewin dolphin Holding PLC which offers a wide variety of investment management, execution confined and financial advisory services targeting families and individuals.... BDHP is one of the largest personalised investment service providers in the UK, and they are in the management of portfolios on a discretionary and advisory basis.... hellip; According to the paper BDHP's main business activity is investment management....
12 Pages (3000 words) Essay

International Money and Finance - Brewin Dolphin

brewin dolphin holds a prominent position among various renowned financial planning and investment management companies in the United Kingdom (brewin dolphin, 2013).... It was indicated by authors such as Clare and Gang (2010) and Busse and Hefeker brewin dolphin has functions in the UK, Republic of Ireland and Channel Island.... In other words, degree of currency imbalance is less for the firm (brewin dolphin, 2013).... In this regard, management of foreign exchange exposure in the UK depends considerably on restrictions on net open position of working balances of firms....
5 Pages (1250 words) Essay

Ocean Fishers Tuna-Dolphin Issue in the Pacific Ocean

The author of the current project aims to study the environmental implications and describes the ethical issues involved in the tuna-dolphin issue in the Pacific Ocean by exploring the background, international opinion, and policies relevant to the issue … Dependence of man on plants and animals for his dietary requirements renders human interference with the natural processes unavoidable.... Several disagreements complicate the international opinion and render an in-depth discussion of the issue imperative....
8 Pages (2000 words) Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us