External and Internal Factors That Threatens Service Industry - Assignment Example

External and internal factors that threatens financial service industry External and internal factors that threatens financial service industry Financial services industry is the most sensitive and of the great essential in every economy. The financial institutions need proper legislations, and a stable framework to regulate its activities. The stable economies enjoy the state of economic stability. The financial institutions are striving to create awareness about the threats associated with mismanagement, which may cause massive loss and grave cases to this industry.

The factors affecting financial service industries are either e external or internal (Vit, 2013).The financial sectors have a role to play in dealing with the factors affecting them. External factors are the forces that come from outside the financial industries and affect their normal operations directly or indirectly. In most cases, external factors are beyond the industries’ control. The management of financial institutions has no control over them. The factors demand a robust legal framework to regulate.

External factors include demographic, political, technological the size of the industries themselves. The demographic structure is the composition and age of a population. The pupation is the primary market of the financial institutions. The age of population influences the financial services directly. The older and younger population is less productive to the financial institutions because they do not use the banking services very often. They are mainly consumers instead of investors. Some customers fail to honor their financial obligations such as timely loan repayment.

The political environment has a critical role in determining the failure or success of the banking sectors. The government has direct control over the financial through central banks. The countries, the central bank, have the mandate to regulate interest rates. The government may also formulate policies that make it very challenging financial institutions to run their activities seamlessly. The state of political instability destabilizes the banking systems. Because of the advancement in technology, financial institutions face serious financial crimes ranging from money laundering to robbery of banks through technological means such as using guns to rob banks.

Internal factors affecting the financial services industry are forces that emanate from within the industries themselves. The factors include industrial norms, ideologies, and management structures among others. Failure by the management to comply with the norms and ethics of the industries has a negative influence on the growth of the industry. The insider trading and corruption are some of the major internal factors that are a threat to the industries (Vit, 2013). The management only has direct control over internal factors affecting financial institutions.

The management, however, can employ strategies to reduce and limit the possibility of involving in activities that have negative effects on the industry. The management has a responsibility to train all its stakeholders about the corporate norms and ethics to eliminate the chances of occurrence of challenges because of internal factors. The government can stabilize the financial services industries by formulating policies that would promote the growth of the industry. Although the financial services industry face several challenges, governments should work close with the banks’ management to curb all possible loopholes that may hinder the efficiency and flow of operations.

The country with a sound financial institution has upper hands in development strategies. References Vit, G. B. (2013).The Risk in Risk Management: Financial Organizations & the Problem of Conformity. London. Routledge