Consultancy Services in Contemporary Markets

Introduction

In the context of contemporary business, every organization always tries to expand its business in domestic and internal markets. Therefore, companies take professional and legal advice from the different external consultants and law firms (Corbett and Smodis, 2018). This report is going to investigate different business conditions and professional characteristics of a consultancy firm named Tread Brinland LLP which is considered by its management in a wide range of business processes. This report evaluates different factors of contemporary market trends that are considered by a law firm in the facilitation of best of services to a variety of clients in an appropriate manner such as economic conditions, foreign trade, liquidity management and many more.

Question 1

a. Analyzing the effect of an increase in the Bank of England base rate on the Real Estate’s sector

In the context of contemporary business operations, an organization considers different sources of finances to attain distinct financial requirements that include debt, equity, retained earnings and many more. Therefore, the cost of capital plays a key role in the selection of the sources of finance. In this regard, debt financing is being addressed as the most popular tool of funding which is not only considered by the businessmen but also by the general citizen to attain distinct personal requirements (Chen and et al., 2018). In the context of personal borrowings, an individual uses debt financing to purchase cars, houses, and other costly goods. Therefore, the cost of debt financing and interest rates are playing a critical role in influencing the borrowing decision of companies along with individual borrowers. Therefore, the base rate is being considered as the most important elements that influence the cost of capital or interest rates. The base rate is the minimum lending rate determined by the central banking authority of the country below which banks are not allowed to lend to its customers. It directly affects the interest rates of the bank. This is because loan pricing among banks will be determined by adding base rates with reference to credit risk premium (Garmaise, 2015).

Characteristic of base rate

It is an important indicator of the current economic condition of a country because the base rate is significantly influenced by the monetary and fiscal policy of the country. In the context of developed countries, the base rate is relatively low however under-developed countries keep the base rate a little high.

This rate controls the flow of cash and public spending in a country. This is because if the base rates are high then citizen spends fewer funds through which government authorities can control the inflation rates (Bessler and Kurmann, 2014).

It influences the bank’s liquidity because it also controls the repo and reverse repo rates. Therefore, banks restructure the lending and interest rates for different types of loans and advances.

It plays a key role in ensuring transparency in the credit flow and lending management.

For influencing the real-estate sector corporate practices, the base rate of the Bank of England plays an important role to influence the interest rate related to housing loans, mortgage, and other lending-related expenditures. The increase in interest rate influences the cost of borrowings that would enhance the purchase cost of a variety of properties from the houses to different commercial properties (Muhmad and Hashim, 2015). This is because buyers have to pay extra funds to attain the increased cost of interest that should be considered by the purchaser while taking purchase and mortgage decisions. In the context of the real estate industry, bank rates are playing a key role in influencing the sales of different products associated with the real estate sector such as houses, shops and other properties (Olszewski, 2012). The increment in lending rates directly affects the demand for housing and other commercial properties in the UK. Therefore, the developers and builders have to reschedule their long term investment and project decisions. This is because different banking and investment companies facilitate funds for a wide range of residential and commercial development projects in the form of housing societies, shopping malls and many more. Therefore, the reduction in the demand for properties also changes the perception of builders towards the construction of different projects because the increase in base rate influences the risk factors in their investment decisions (Olszewski, 2012). Moreover, the increase in interest rate would enhance the cost of properties in the real estate market so real estate firms should have to restructure their pricing policy with less profit margin. The reduction in the profit margin would have a significant impact on the profitability and project returns of different real estate companies.

Question 2

a. Analyzing and explaining what the KPIs tell you regarding the liquidity of the firm.

For ensuring optimum business performance, an organization considers different performance indicators to track the financial performance and efficiency of business operations (Ehiedu, 2014). It supports the management in order to compare the financial results with the data of previous years and the financial result of other companies. In the present case of Tread Brinland LLP (TB), the management of TB has focused to evaluate the liquidity position of the company with consideration of different performance indicators.

The present case has described that the company has applied four KPI’s that include net margin, profit per equity partner, and trade-receivable days along with a lock-up period. For determining the cash inflow and the liquidity position, the net profit margin has addressed as a great tool to determine the availability of cash and efficiency of the different business processes (Singhania, Sharma and Rohit, 2014). In this regard, the assessment of the net profit margin percentage has determined the net earrings of the company are increased to 33% in 2019 in comparison to the 31% of 2018 that shows an increase in positive cash flow.

On the other hand, the business entity has identified the increase in the lock-up period that determines that the company would find a delay in the receipt of cash from debtors. The reason behind this is that the TB has found the increase in trade receivable days that is reached to 84 days in 2019 with reference to 80 days of 2018. Further assessment of different KPI’s has determined that the management of TB has to manage the shortage of liquid funds appropriately to attain distinct business needs. In addition to that, the management of TB can carry out a detailed assessment of the change in segmental revenue to assess improvement in the company’s liquidity. According to different revenue data associated with the different departments, it has found that TB has gained a maximum boost in revenue from the banking department as compared to other departments (Vintilă and Nenu, 2016). However, dispute resolution has addressed a key source of revenue that encourages the overall liquidity of the business entity. By considering the departmental segmentation approach, a business entity would be able to manage the corporate liquidity with consideration of optimum assessment of different tools of cash inflow.

b. Identifying the additional financial and factual information to gain a more detailed picture of the liquidity of the firm

An organization can check the efficiency of different business operations through a systematic assessment of the liquidity. For assessing a detailed picture about the corporate liquidity, the top authorities of a firm can evaluate a wide range of financial data and factual information such as a change in the value of current assets and liabilities, availability of cash and other sources, increase in the overall revenue of the company, alteration in the period in trade receivables and trade payables days, change in the data related to operating expenditure and many more (Mongrut and et al., 2014).

In this regard, the current ratio is being emerged as a great tool to evaluate the availability of current assets as per the current liabilities. Therefore, a company can check its liquidity position along with the availability of cash or cash equitant resources by comparing the current ratio with standards current ratio of 2:1. Moreover, trade receivables and trade payables days control the time duration within the inflow and outflow of funds (Batchimeg, 2017). It provides significant assistance to business entities in the assessment of the level of working capital. This is because if the trade receivable days are more than trade payable days, then the management of TB has to manage extra liquid funds to manage the early payment to all creditors and vice-versa. Therefore, liquidity management is being emerged as a key element to influence the overall business productivity.

C. Suggesting four system improvements

As per the case of TB, four system improvements have been suggested to the management team for improving the liquidity of the business entity that are mentioned below:

With reference to the present case, the management of the firm should regular investment for the acquisition of the liquid or short term assets. Therefore, the business entity can manage the requirements of funds through short term securities or working capital and. This tool would play an important role in influencing the overall liquidity (Tingbani and et al., 2018).

The business entity should have to develop a good relationship with debtors and other stakeholders to reduce the amount of trade receivable along with the trade receivable days so as a company could enhance the cash inflow. It would support management to improve the overall liquidity.

Management should regularly monitor the current ratio through which a firm can maintain an appropriate balance between current assets and liabilities.

TB needs to significant pay extra attention to assess new sources of revenue and diversification of the business operations to encourage the inflow of funds or revenue (Hutson and Laing, 2014).

Question 3

a. Do the hedging benefits of derivatives in the context of foreign exchange risk out-weigh the risks posed by the speculative use of such derivatives?

Currency risk is termed as an important financial risk that arises from potential changes in the exchange rate of one currency to another during the international trading operations. In this context, the currency swap market seems like an important approach to hedge the risk factors that are incorporated during the international trade-related to currency rate fluctuations. For managing different situations, companies apply different derivatives for hedging foreign exchange risk, interest rate risk and commodity input hedge (Dong, Kouvelis and Su, 2014). Apart from that, the derivative of a currency swap is not only providing the hedging against risk exposure but also ensuring the receipt of foreign finance. In the context of contemporary global trade, hedging enhances the efficiency of international trade practices.

Risk factor associated with hedging

There are several risks identified associated with risks associated with hedging and speculating that could hamper the overall efficiency of the hedging process. The hedging involves a certain amount of expenditures to a business entity that could adversely affect the overall business profitability and efficiency.

In the context of short duration trading, hedging has emerged as a difficult approach for business owners to restructure business operations frequently (Zhu, 2015).

The business entity has to hire a highly expert professional to manage the trading practices that are linked with hedging practices.

It also affects the capital requirement for an organization for handling different critical tasks for managing the future trading options.

b. Explain the difference between management and leadership?

As per the case of TB, the management of the company handles various tasks and corporate planning. In this context, the importance of leaders is significantly enhanced to manage various business operations in innovation. Therefore, every organization tries to assess new leaders in business structure rather than a manager (Álvarez-Díez, Alfaro-Cid and Fernández-Blanco, 2016). There is a very little difference identified between a successful leader and a manager. However, the primary difference between leaders and managers is that leaders have people who are following them while managers have people who are working for them. In the context of the contemporary business environment, a successful business owner should have to cover the characteristics of both so that a particular individual must be a strong leader and manager for getting their team on board to inspire them towards certain visions and goals (Renz, 2016). Leadership is always focused on getting people to understand the vision of the leader and also inspiring others to work with the leader to achieve his goals.

Characteristics of a Leader

Leaders are change agents and also termed as disrupters. Innovation is being addressed as a key element of successful leadership. Therefore, a leader always wants to evaluate new systems and policies for increasing the effectiveness of his long and short term decisions (Thorpe, 2016).

A leader has a unique vision through which a leader can influence the perception and behaviour of other individuals. Therefore, a leadership approach always integrates the perception of people with reference to the goals of a leader. Moreover, a vision plays a key role to influence the behaviour of the followers in the contemporary business environment.

A leader always has a unique set of characteristics and leaders are self –aware of their strengths and weaknesses that would support them in building their unique and differentiated personal brand (Amanchukwu, Stanley and Ololube, 2015). They are always tried to establish their unique position with the authentic and transparent behaviour. This approach supports them to influence the motivation level and behaviour of the followers in a positive manner.

Characteristics of a Leader

A leader always encourages the change in the existing system but managers are always focused to maintain a status quo so manager sticks with the application of those approaches and tactics to get ensure about the corporate structure, processes and maintaining the refinement in the work processes (Amanchukwu, Stanley and Ololube, 2015).

Managers have mimic personalities in which they have certain competencies and behaviour that have been learned from others. Therefore, a manager learns his competencies by following the leadership style of others rather than developing its characteristics.

Managers are always focused to process management to control day-to-day tasks and activities such as resource management, information transmission and anticipation of needs of the people within a work environment. This approach is just focused to follow the rules with reference to business structure (Thorpe, 2016).

In the context of a law firm, the management of TB should have to make good leaders because the company has paid significant attention to the innovation and application of new processes to attain the distinct requirements of the clients efficiently. Therefore, good leadership characteristics among team members would support the organisation to maximize its efficiency.

Question 4

a. Assessment of SWOT or PESTLE in the case of TB

For enhancing the efficiency of the strategic business operations, an organization considers different tools to carry out strategic analysis while establishing a corporate partnership with other companies. In the context of the present case, TB is looking for new partnership so the management of the company has identified two different tools of strategic analysis such as SWOT analysis and PESTLE analysis. These tools have found very effective to provide a wide range of information about the internal and external business environment (Fernández-Muñiz, Montes-Peón and Vázquez-Ordás, 2014). The SWOT analysis assists top managers in the identification of strengths, weaknesses, opportunities, and threats in different business conditions. For example, it determines the internal strengths and weaknesses of a firm through which an organization establishes a wide range of long and short term strategic plans to support the company’s vision. Moreover, this approach also supports managers for carrying out a systematic assessment of the external business environment in the form of market threats and opportunities. This information creates a basis to structure managerial operations efficiently to explore new opportunities and to manage corporate threats. For example, the announcement of Brexit would influence the demand of law firms within the UK and Europe through which client firms can restructure their operations (Sarsby, 2016).

On the other hand, PESTLE analysis has emerged as an important tool through which an organization can perform environmental scanning of the contemporary market trends while establishing strategic partnerships. This tool covers a range of variables such as political environment, the impact of legal policies on the organization’s decision making, assessment of the economic condition of the country, technological advancement trends, and change in social demographics, and alteration in environmental safety practices (Islam, 2017). For example, the emergence of the cloud-based system encourages companies to encourage digital innovations in different managerial practices. Therefore, the assessment of current business trends helps top management of TB in the establishment of new corporate procedures, contingency plans, identification of new business opportunities and assessment of overall organizational capabilities with consideration of the current business efficiency within highly competitive market trends (Pan, Chen and Zhan, 2019).

Therefore, the management of TB or Colleen McNamara should consider both PESTLE and SWOT analysis to carry out a strategic analysis while establishing a corporate partnership with another firm. In this context, the SWOT analysis would determine the efficiency and capabilities of existing business operations and corporate procedures through an organization can direct a long term strategic plans and decision-making process (Schuetz and Schrefl, 2017). Moreover, it also evaluates different factors of the external business environments that could be treated as business threats and opportunities such as the emergence of new companies, new digital innovations in consultancy business practices. In a similar way, the approach of PESTLE analysis would facilitate a great tool through which an organization can restructure its corporate operations and managerial practices by performing a detailed assessment of the legal and political scenario.

Conclusion

The above evaluation concludes that a consultancy firm has to gain an in-depth understanding of different factors of contemporary business through which a law firm like TB would be able to attain distinct information requirements of the client’s organizations. It includes information related to economic conditions, liquidity management approaches corporate decision making and application of different tools of strategic analysis to establish new corporate relationships. Furthermore, it has found that a firm has to consider SWOT and PESTLE analysis as important tactics of strategic while establishing a corporate partnership.

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