Hsbc Case Study Essay

1307 Words Sep 9th, 2012 6 Pages
1) What problem did HSBC face in this case? What management, technology, and organization factors were responsible for the problem? Did HSBC management correctly identify the problem?
HSBC Holding, with headquarters in London, is one of the world's biggest and most successful banks. Like many others, the bank ran into problems during the global financial crisis of the late 2000s due in large part to its heavy exposure to the U.S. subprime mortgage market. HSBC not only originated mortgages, but was also buying subprime loans from other sources to increase its revenue. Many of these loans didn’t even require any down payment and were given to quite a “risky” category of borrowers with blemished credit histories. In some cases borrowers
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Why did HSBC still run into trouble? If HSBC had a solution to the problem all along, why was the right solution not used?
Information systems are believed to benefit the process of decision making and help employees at all levels within a company. However, due to different factors they might not always have a positive effect or might not be used in the right way. First of all, data inaccuracy and incompleteness could be the issue. Information that HSBC had on its borrowers was insufficient and incorrect in some cases, especially when it came to stated-income loans. Managers could also have had an impact on bad decision making. Even with accurate information systems, there’s a possibility that HSBC managers were able to see only certain aspects of the matter, leaving absolutely no attention to others. They underestimated the risks of investing in subprime loans in search for higher revenue. Management wanted to make sure that the company’s capital was not all tied up as a cushion against defaults from that type of investments. HSBC risk management systems were based on overly optimistic assumptions and simplistic data of what might go wrong. In my opinion, all of the aforementioned reasons prevented the company from using the right solution.
3) What solution is HSBC relying on to deal with its problem going forward? Will these solutions be sufficient to turn the subprime mortgage business around? Are there additional factors for which HSBC has not accounted?

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