Name

nInstitution

nCourse

nDate

nBNP Paribas

nIntroduction

nBNP Paribas is a global banking organization with branches in over 75 countries. Its headquarters are in Paris France and its shares are traded on the Euronext Paris (BNP Paribas 1). The current organization was achieved in 2000 through the merger of Paribas and Banque Nationale de Paris (BNP). The institution is one of the biggest financial firms across the world with a customer base of over 30 million in its domestic market as well as in Luxembourg, Italy, and Belgium. The retail bank normally serves in the western parts of the US and the Mediterranean area (Goyer and Real 790). In 2015, its brand value reached EUR 14.7 billion making it the second largest financial institution in Europe and eighth globally (BNP Paribas Fortis 1).

nThe institution resilience

nBNP Paribas has demonstrated it resilience in the market because of growing net income (BNP Paribas 1). In 2016, it recorded a rise of 14.5 per cent in its net income as the flaw in the local retail was balanced by resilience in asset banking where it increased the commodity and energy operations. It also posted an increase in its revenue to 10.3 billion, which represent a rise by 8.5 per cent (Financial Times 1). Furthermore, the banks resilience was witnessed in the US, as its performance was better as compared to largest US financial institution especially in investment/asset banking activities (BNP Paribas Fortis 1). At the times where there were worries concerning the international effect of Chinese economic challenges, the bank performed relatively well relative to other multinational banks. For instance, the equities generated an increase of returns by 21 per cent while the fixed income had flat rate (BNP Paribas 1). Comparatively, the US banks registered 11 per cent in terms of revenue produced from equities while the fixed income reduced by 19 per cent. Furthermore, its branches in Italy and France also contributed to the growth of profits (Financial Times 1).

nThe institution is resilient because it laid plans to reduce its expenditure, and enhance cross selling (Goyer and Real 790). It has also transferred many resources to other banks outside Europe since European banks have been experiencing economic uncertainty and tighter regulation (BNP Paribas 1). The resilience was achieved through the decrease of its commodity and energy business. It also executed new governing rules in the US to enhance its compliance (BNP Paribas Fortis 1). It introduced changes in the corporate governance, which has contributed to the medication of remuneration structure of its officers and Directors, which is now indexed to the price of the share. Moreover, it also initiated the sales approach, which is sensitive, the customers behaviours, preferences and interests (Financial Times 1). The bank has also invested in community involvement, which helps it to contribute to social and economic development intended to reduce discrimination social exclusion and funding for education (BNP Paribas 1). It also adopted environmental conservation by being a signatory to climate principles.

nInternal and external determinants affecting domestic and foreign performance

nIn terms of internal determinants, BNP Paribas pay close attention to knowledge management and organizational culture. The knowledge management concentrates on organizational innovation and learning. It utilizes personal knowledge and converts it into collective information (BNP Paribas 1). For instance, it changed the traditional model, which emphasized on implicit information to modern model, which emphasize on explicit (Financial Times 1). The growth in both the foreign and domestic markets has facilitated banks transformation in knowledge management. Therefore, managers are inspired to reflect and promote the commitment, responsiveness, and creativity of the company. Secondly, organizational culture now focuses on customer-centric attention, valuing individuals and entrepreneurship as well as leading by example (BNP Paribas 1). In so doing, the company has succeeded to inspire its employees as well as increase its customer base.

nIn the external markets, the banks performance has been affected by the regulatory framework in France, which features a high rate of restriction on the presence of foreign banks. Therefore, the market attempts to reduce the number of foreign investors who are attempting to acquire French banks (Goyer and Real 796). Therefore, domestic banks such as BNP Paribas are able to repel unwelcome takeover bids especially from foreign rivals (BNP Paribas 1). However, large French banks like BNP Paribas are easily allowed to acquire financial institutions in the country. Consequently, BNP Paribas is permitted to enlarge its operations hence improving its domestic and foreign performance (BNP Paribas Fortis 1). For instance, it has facilitated the expansion of its asset base, which improves its resilience. Currently, foreign banks have less than 12 per cent in assets in the country. Moreover, it is able to influence positive financial outcomes in the domestic markets (Goyer and Real 795).

nThe impact of post 2008 regulatory reforms and changes

nAfter the 2008 financial crisis, the US government reacted by enacting the Dodd-Frank Act aiming to stabilize the monetary system in 2010 (Guynn et al 1). The legislation led to complex and tight regulatory changes, which affect banks such as BNP Paribas. The reforms have introduced an oppressive operational requirement on banks, which have affected its growth (BNP Paribas 1). In addition, most of the regulatory reforms lack the coherence and interaction needed to address the underlying challenges (Goyer and Real 803). For instance, the interaction among different capital rules demonstrate lacks of coherence with other regulations in enhancing fiscal stability objectives. The regulations have narrowed the liquidity in the financial markets especially in fixed-income markets. For this reason, BNP Paribas faced an increased risk of liquidity in such markets (Guynn et al 1). The reforms have also led to timely supervisions conducted by a series of regulators, which are directed by diverse focus and missions.

nThe short, medium and long-term risks and challenges for the institution

nBNP Paribas uses crowdfunding processes intended to help in financing projects. However, it presents various short, medium and long-term risks and challenges to the company (BNP Paribas Fortis 1). In the short-term, crowdfunding will discourage possible project owners who are unwilling to reveal a lot of information since they will be wary that it may destroy the projects. Moreover, owners of these projects may be reluctant to acquire sufficient funding due to the mentality that financing would be directed to high-advertised ventures (BNP Paribas 1).

nIn the medium term, the company faces risk because most of the start-ups may become bankrupt due to poor investment decisions (BNP Paribas Fortis 1). Moreover, they may also fail to pay for the interests stipulated in the agreements. Furthermore, most projects financed through this mechanism can fail because of incompetency of owners. In the long-term, there are also risks and challenges due to non-existent of effective secondary markets where financiers can re-sell their stakes. Addition, most markets have uncertain tax law and regulations which may affect the crowdfunding initiative and the need for finances (BNP Paribas 1).

nConclusion

nBNP is one of the financial institutions that have reported a better performance in the recent past. The bank has also registered resilience in the markets as compared to its business rivals. The company has implemented different changes, which has increased its competitive edge and the revenue. For instance, it has changed its organizational culture aiming to accomplish customer-focused approach (BNP Paribas 1). The bank was also affected by the post-2008 financial reforms because they reduced liquidity in the financial markets (Guynn et al 1). The implementation of crowd-funding initiative presents a risk because many projects may collapse due to mismanagements.

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nWork Cited

nBNP Paribas Fortis. “Challenges And Risks Associated With Crowdfunding.” Companies.Bnpparibasfortis.Be, 2017, https://companies.bnpparibasfortis.be/en/article?n=challenges-and-risks-associated-with-crowdfunding.

nBNP Paribas. “Extra-Financial Performance : BNP Paribas Up Into Second Place In Vigeo Bank Sector CSR Ratings – BNP Paribas.” BNP Paribas, 2017, https://group.bnpparibas/en/press-release/extra-financial-performance-bnp-paribas-place-vigeo-bank-sector-csr-ratings.

nBNP Paribas. “Social Performance And Microfinance – BNP Paribas.” BNP Paribas, 2017, https://group.bnpparibas/en/news/social-performance-microfinance.

nFinancial Times. “BNP Paribas Buoyed By Strong Performance In Markets.” Ft.Com, 2016, https://www.ft.com/content/519c6ddc-2fc8-11e7-9555-23ef563ecf9a.

nGoyer, Michel, and Rocio Valdivielso del Real. “Protection of domestic bank ownership in France and Germany: The functional equivalency of institutional diversity in takeovers.” Review of International Political Economy 21.4 (2014): 790-819.

nGuynn, Randall D. et al. “The Financial Panic Of 2008 And Financial Regulatory Reform.” Corpgov.Law.Harvard.Edu, 2011, https://corpgov.law.harvard.edu/2010/11/20/the-financial-panic-of-2008-and-financial-regulatory-reform/.