Introduction to Finance

Assignment 2

Submitted By:
Prerna (MFM/21/292)
Shraddha (MFM/21/343)
Rahul M (MFM/21/233)
Pavithra (MFM/21/255)

Masters in Fashion Management (21-23)

1. What is Financial Management?

Financial management is the planning, arranging, directing, and managing of a company's financial
activities, such as procurement and use of cash. It entails applying general management ideas to the
company's financial resources.
Importance of Financial Management in Business
One of the most crucial roles of business owners and managers is financial management. They must
think about the impact of their management actions on profitability, cash flow, and the company's
financial situation. Every part of a business has an influence on the company's financial success, and
the owner must assess and regulate these operations.
1. Acquisition of Funds
The procurement of essential funds for the firm is the responsibility of financial management.
Obtaining required finances is a vital aspect of financial management that requires a low-cost source
of funding.
2.Proper Utilisation of Funds
Financial management, of all, is all about properly allocating and utilising cash. This financial
management approach aids in the improvement of a company's operational efficiency. When utilised
correctly, it may lower the cost of capital, raise the firm's value, and improve the company's overall
financial condition.
3.Financial Planning
Financial management enables a company's financial requirements to be determined and financial
decisions to be made appropriately. Another key part of business issues that aids in the promotion of a
company is financial planning.
4.Increase the Value of the Firm
In order to increase the wealth of investors and businesses, financial management is necessary. The
ultimate goal of every firm is to maximise profit and profitability, which leads to increased investor
wealth and contributes to economic progress.
5.Improve Profitability
Profitability is the primary issue of every commercial organisation, and it is solely dependent on the
firm's effectiveness and appropriate use of finances. Financial management aids in increasing the
profitability position of the organisation by using powerful financial control devices such as
budgetary control, ratio and trend analysis, and cost-volume-profit analysis.

2. How rapid shift in technology and customer expectations is changing the way
financial institutions used to operate?
Technology-led product and service innovation will be in full swing, as businesses use FinTech
(Financial Technologies) to build new business models. This is evident from the fact that the FinTech
market is constantly expanding. According to a report, it was valued at $127.66 billion in 2018 and is
expected to reach $309.98 billion by 2022. Many financial institutions' processes are rooted in how
banks have always done business, and they frequently serve the needs of the bank rather than the
needs of the customer. Banks have changed this dynamic by making the customer experience the
starting point for process design. They have to first understand what their customers want, as well as
how and when they want it. Instead of being a major cost centre, operations are a driver of innovation
and customer experience in the coming years.

Fintech companies have reached a point where mobile banking is omnipresent, insurance transactions
are conducted online, and tech-savvy customers prefer digital wallets. Cloud computing technology
enables financial institutions to accomplish all of this in a seamless manner. The digital-backed
sharing economy never sleeps, and customers equipped with smart devices want to communicate and
transact 24 hours a day, seven days a week.
Automation and artificial intelligence, which are already important components of consumer banking,
influence operations much more deeply in the coming years, delivering benefits not only to a bank's
cost structure, but also to its customers. Digitising the loan-closing and fulfilment experience, for
example, expedites the process while also providing customers with the flexibility and freedom to
view and sign documents online or via their mobile app. The same goes for call centres as well.
Customers can now get instant, efficient automated customer service powered by advanced AI instead
of waiting on hold or being bounced between different representatives. AI and advanced analytics also
help with dispute resolution. Customers can now contact their bank at any time via the internet,
mobile, or email and receive prompt, real-time responses.

By automating various processes, human bias in decision-making is reduced to almost zero, and errors
are predicted to be reduced to near zero. This will free up time for operations employees to assist
customers with complex, large, or sensitive issues that cannot be resolved through automation. These
employees also have decision-making authority and the ability to quickly resolve customer issues.
Predict demands for specific products and services can be made using discrete profiles of customer
segments and customer behaviour based on dozens or hundreds of variables. Banks can create detailed
profiles from a variety of data sets, including online interactions, geographic information from cell
phone usage, and aggregated payment behaviour, and then use analytics to predict the needs and
desires of their customers, down to the level of a single individual in some cases.

Using analytics on large amounts of customer data is said to transform issue resolution, taking it to a
more discrete level and making it proactive rather than reactive. Instead of a bank addressing an error
or customer problem only when it reaches a certain scale or frequency, the software can help detect
errors that occur with just one customer, such as a miscalculated fee or a credit card payment made
twice.

Financial services providers are investing in access delegation frameworks such as OAuth2.0 (Open-
standard Authorization), which protects them from third-party attacks and assists them in developing
robust APIs (Application Programming Interfaces). These technologies and frameworks not only keep
data secure, but they also assist businesses in meeting financial regulatory standards.

Lastly, roles that were previously laboured in irrelevance and without contact with customers will
now be intensely focused on customer needs, performing critical outreach. The professionals will also
have a background in technology, data, and user experience, and includes digital designers, customer
service and experience experts, engineers, and data scientists. These well-paid employees concentrate
on innovation and the development of technological approaches to improve the customer experience.
Therefore, they also have a thorough understanding of a bank's systems as well as the empathy and
communication skills required to manage exceptions and provide "white glove" service to customers
with complex problems.

3. Do you think Cryptocurrency is a threat to traditional currencies?

In recent times organisations and finance models have undergone various changes. Once a change in
the currency pattern has been seen to be more technical. The introduction of crypto currency has been
a revolutionary change in the fin tech industry. A crypto currency is a sensually encrypted string of
data that denotes Certain units of a currency. A peer to peer network called Blockchain essentially
monitors and organises the entire crypto currency system. The Blockchain therefore forms a secure
ledger of all the transactions happening such as buying, selling and transferring.

Crypto currency was invented by Satoshi Nakamoto in the year 2008 and was the first decentralised
form of digital currency. It was to create a cash system without any intermediaries such as
government on any financial system or for that matter a company. In the initial days the value of
bitcoins were just a bit more than one cent however in today’s time bitcoin is one of the fastest assets
which reached a market capitalization of 1 trillion.

In the Indian market more than 15 million investors have invested in the crypto currencies which
amounts to almost 1500 crore. More than 350 start-ups are operating in the block chain and crypto
currency space. Digital currencies have been adopted by three major countries which are China,
Cambodia and Bahamas. However the use of crypto currency has been seen to be a controversial
process. It can be seen that the entire crypto currency market is gaining huge mass with almost 2
point2 trillion amount and half of this is done with bitcoins.

Similarly stable coins has been one of the recent integrations which many companies are trying to
implement into their social media platforms for buying and purchasing. Stable coins are being looked
at by central banks like taxi unions look at associations such as Uber and Ola. These are creating a
potential threat in the user base.

One of the biggest threats that crypto currency has on the existing currency pattern of India or for that
matter other parts of the Globe, will be the stabilisation of the central economy. The private crypto
currencies have been designed in a way that does not restrict the production of the distribution of
currencies unlike the central financial system. For example RBI regulates the distribution of finance
or currency which if altered by crypto currency will not be regularised. The private crypto currencies
have been designed in a way that does not restrict the production of the distribution of currencies
unlike the central financial system. For example RBI regulates the distribution of finance or currency
which if altered by crypto currency will not be regularised. This will create economic disruption and
the stability in the Indian financial system or the financial system followed by any country would be
unstable. Therefore it is rightfully a problem for the existing currency which is in use or is in
circulation within the Indian financial system.

Not only this one of the major factors that could affect with the introduction of crypto currency
towards the conventional currency would be the exchange rates. With introduction of crypto currency
and the irregular flow of bitcoins will essentially create turbulence in the exchange rates. Therefore
the geopolitical constraints is also a major threat of crypto currency towards the conventional
currency as per the bank for international settlements.