Introduction
The finance industry is one of the most important sectors not only for the economy of a nation but also for the global economy. Its operations ensure the health and actual performance of the world economy. As a result, financial managers have an enormous task to cope with the drastic changes and the numerous challenges that take place in the economic environment. In the banking sector, continued development of technology and the changing needs of the consumers have created significant concerns for the financial managers. To achieve abnormal profits, professionals in the finance industry have undertaken unethical practices that have been integral to the global financial crisis. This corruption has created much criticism for the banking and other related financial institutions. In this regard, the following discussion provides some of the challenges and ethical issues that may arise in financial management.
Changes in Economic Environment
One of the biggest problems affecting financial management is the drastic change taking place in the economic environment. A brief history of the origin of banks shows the significant change that has occurred over the years. Modern activities that are now referred to as ‘banking’ were provided by organizations such as Champagne Fairs back in the 12th and 13th Centuries (Jordan, 1996). This was a method of providing members of the society with financial services. Issuing of tokens each representing coin, bullion, and plates to the participating merchants as a means of settling deposited gold. Goldsmiths would also accept deposits of gold for safekeeping and issued receipts that would later be used as a form of currency. In centuries to follow financial institutions would come up to provide safekeeping and security, certified and insured quality while also enabling participating merchants to perform seamless transfer of payments (Jordan, 1996). These practices have now been broadened by the separation of services like banking and goldsmiths resulting in significant changes in financial management.
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The banks now provide services such as enabling exchange, funding enterprises, transfer of purchasing power, risk management, monitoring the performance of borrowers and providing information on the demand and supply of credit. As commercial banks provide such services, so do similar financial organizations (Jordan, 1996). In this regard, it is evident that the firms providing these services may not survive into the future. As noted by the financial institutions of the past such as the goldsmiths, they are now non-existent as they have been served by significant regulations and changes taking place in the industry. The modern economic environment has seen various organizations take the title of a bank due to the financial services offered. In this regard, the future of the financial industry may encounter similar changes where firms offer customers bundled services that may now be currently separate. Additionally, through the changes evident in rethinking the concept of a bank, the same may be evident regarding money. Though it remains the same as currency accepted for the trade of goods and services, its change is evident in practicality where innovative technologies of payment are used to enhance productivity and welfare (Jordan, 1996). Financial managers should be well-versed in these changes to avoid the downfall of their institutions and significant loss of job opportunities.
Malpractice Issues
As the financial industry continues to experience changes in the performance and operation of services, another issue of great concern is the moral nature of the professionals involved. In the past, it is evident that financial institutions were identified as a source of security and safekeeping of monetary gains for the merchants. This was only achievable if the organizations were identified to have high levels of integrity (Oates, & Dias, 2016). They would be entrusted to perform transfers of payments when carrying gold was considered quite risky. However, this has changed in the modern economic activities. The global financial crisis has called attention to numerous cases of malpractice by banks and related financial institutions. There have been numerous ethical scandals including Goldman Sachs fraud, the London whale by JP Morgan and LIBOR manipulation among other financial institutions that have collapsed due to similar practices (Oates, & Dias, 2016). Such cases illuminate the ethical and moral depletion among professionals in the financial industry.
The financial service industry is among numerous others that are considered to uphold high levels of morality. The institutions are deemed to be trusted for the public consumers to transact with the organizations. However, the numerous scandals taking place have shown that various finance executives engage in high-risk investment without the knowledge of their customers (Oates, & Dias, 2016). This practice results in the loss of public confidence that identifies the corporations as lacking the responsibility and concern for the hard-earned money. The public outcry has trickled down to business schools that are now criticized for their failure to enforce the moral education into practical means (Oates, & Dias, 2016). There is growing concern that such failures may result in an immoral generation of the future where the ethical practice is blatantly ignored. This malpractice issue could affect the financial service corporations as the professionals they employ could drive down the positive image upheld by most companies.
Conclusion
The financial service industry is one of the sectors of the economy whose future is on the fringes. One major challenge affecting this business community is its continued transformation. As depicted in the discussion, the finance industry has experienced drastic changes since its inception in the 12th and 13th Centuries. The changes are about the practices, operations, and activities that chartered corporations can offer. The regulations that are outlined by governments also determine the extent of services provided by these institutions (Oates, & Dias, 2016). Therefore, financial managers should keep up with the changes to ensure they maintain profitability and deliver on consumer expectations. The ethical concern of malpractice could significantly affect this future where professionals in the financial institutions could damage the image of the company for their personal gain. This occurrence has called for business schools to take part in educating future generations of acceptable moral and ethical practices.
References
Jordan, J. L. (1996). The functions and future of retail banking. Economic Commentary , Federal Reserve Bank of Cleveland. Retrieved from https://www.clevelandfed.org/~/media/content/newsroom%20and%20events/publications/economic%20commentary/1996/ec%2019960915%20the%20functions%20and%20future%20of%20retail%20banking%20pdf.pdf?la=en
Oates, G., & Dias, R. (2016). Including ethics in banking and finance programs: teaching “we shouldn’t win at any cost”. Education+ Training , 58(1), 94-111.
