Critical Analysis of the Departments - Essay Example

?Critical Analysis of the departments Trading Trading is the most significant source of the revenue for the company. The department is mainly dividedinto two main sub business which is propriety trading and execution of trade on behalf of the client. Propriety trading has been the primary source of generating revenue when it comes to investment banks all around the world. Propriety trading occurs when a firm (in most cases an Investment Bank )indulge itself in the trading of stock, bonds, derivatives, commodities and other financial instruments, by utilizing its own funds and money. The main aim of propriety trading is to generate direct profit rather than earning commission on behalf of the clients. It is a general and accepted notion in financial market that propriety trading is much riskier than non-propriety trading as it results in more volatile trading. Financial analyst believes that firms and investment banks usually leave the financial market in ambiguity when it comes to their quantum of propriety trading and non-propriety trading. TPG believes that it has competitive advantage over other players in the market that is way it has its major investment in propriety trading. Certain percentage of revenue, but comparatively lower, is generated from non-propriety trading which is also referred to as the flow trading. In financial terms, the flow trading is conducted by the firm on behalf of the client funds and the firm’s revenue is the commission earned on this trading. The company has been focusing on its flow trading business as well as it is likely to generate more client information which thus supports propriety trading eventually. The trading department of TPG works in close collaboration with Quantitative Analysis and Sales department which provides the relevant logistic support to the trading department. Quantitative Analytics Quantitative Analytics department provides the main support to the trading department which is the major source of revenue for the company. The department is involved in pricing of stocks and bonds through the implementation of various quantitative techniques. The department looks after the investment management, risk management and derivative pricing. It has always been the prime motive of the department to work and strive for the portfolio optimization of the company so that the return is maximized and the return is minimized. In addition to that, the department is also actively involved in the pricing of derivatives and hedging. This function involves an intricate software development and thus the expertise of the IT department is always required to be at the disposal of the Quantitative Analytics department. The derivative pricing involves advanced numerical techniques and stochastic calculus. The department is also actively involved in risk management which involves both systematic and non-systematic risk. The process usually involves a great deal of time series analysis and back testing. Last but not the least; the department also evaluates the credit analysis. Credit analysis basically involves assessing how much the company is levered which in financial terms would interpret as the debt equity ratio of the company. When the debt to equity ratio of the company exceeds a certain percentage, then the department proactively informs the higher management of the company about the situation and alarming them to reduce the leverage of the company. Most importantly, the department works for the development of the trading strategy of the firm. Sales The sales department is another crucial department when it comes to the business strategy of the company. The sales department is responsible for approaching the client and maintaining their information. This department acts as the back bone of the organization and is responsible for setting up the web-site through which the trading with the corporate and non-corporate clients is conducted. This department will require a considerable number of highly skilled and dedicated staff who is able to understand the technical need of the business and will be able to deliver the services up to the industry standards. The sales department will further be divided into “Maintenance of Clientele”. “Support Centre” and “Financial Department”. All of these departments shall have their respective group heads that shall then be reportable to the head of the management team. The financial department will be responsible for all the financial aspect of the company. This will include creating budget, financial statement, cash flow forecasting and allocation of resources. Chief Financial Officer shall be the head of this department who shall oversee all the major transactions with the investors. Routine transactions such as recording of the commission money shall be recorded by the line accountants who shall also be responsible for posting such entries in the general ledger of the system. The financial department will also be responsible for costing of the services in order to maximize the profit of the company and manage the outflow of economic resources. Sales department will be responsible for dealing directly with the investors. This will involve billing the investor’s subscribers and sending them with the bill based on the transaction with the firm, entertaining the complaints of the investors, and resolving them on timely manner. The sales department shall have a 24/7 helpline on which customer can send e-mail or chat online with a representative of the department for the timely solution of their problems. Like every other department, this department shall also have a head and all the salesmen shall be reportable to him. Since there’s already an established market for investment banking, marketing department needs to be fully equipped with the latest marketing tactics and ideas. This can only be possible through a dynamic marketing department. It shall be the responsibility of the marketing department to devise an ingenious marketing plan in order to not only penetrate the financial market, but also capturing a fair share of it. The marketing head department shall be responsible for overseeing the performance of the marketing department and reviewing the marketing plan. Conducting meeting with the major corporate investors shall also come in the job description of the marketing head who shall act as the spokes person of the company on several occasions. Management The partners will be at the ultimate top in the hierarchy of the company. They will bear the ultimate responsibility and thus will exercise ultimate discretion in decision making. Partners will likely be individual having ample experience in running an investment bank or a financial institution before so that they can adequately understand the business need and appropriate strategy. All the department heads shall be reportable to the respective partners of the company. The election of the partners and their performance appraisal will be conducted by a board of directors of the company, who shall be independent. Human Resource Department For any company human resource department is of prime importance. Human resource department manages the most important asset of the company which is the human capital. The basic function of the human resource department includes recruiting suitable candidates for the Trading, Sales, Information technology department and Quantitative Analytics department. The department is further subdivided into three major departments which are ‘recruitment’, ‘training’ and ‘career development’. The recruitment department screens suitable candidate for the placement within the company based on a predefined criteria. This sub department is also responsible for publishing advertisement in the news paper requiring suitable candidates. Several experienced interviewers take the interviews of the short listed candidates. The training department is responsible for conduction various training sessions within the organization so that the individuals in the organization are equipped with relevant and necessary knowledge. The department also emphasizes on conducting workshops so that the technical skills are also imparted to the workforce. Last but not the least the career development department works for the progress of the individuals within the organization so that they are able to grow as a professional individual. The department helps an employee in switching department so that his work does not become monotonous and he is exposed to other nature of work as well. Read More