Contemporary Issues in Financial Management: Aviva Insurance Company. Essay Example.

2021-07-20 10:35:18
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Aviva is a UK based insurance company. It is UKs largest insurer and also the fifth largest insurance groups in the world. It has been on the market for over 300 years. It combines general insurance life insurance and asset management business under one powerful global brand.

Financial management is the effective and efficient way of managing funds to accomplish an organizations objectives. Management comprises planning, organizing, leading, staffing and controlling an organization for the sole purpose of achieving a particular goal (Moyer, McGuigan, et al. 2011).

Contemporary Issues

Corporate Social Responsibility

It is the continuing duty and commitment by a business to maintain a balance and behave ethically and contribute to the economic development while at the same time improving the quality of life of the employees, their families and the society at large. Corporate social responsibility enables sustainable competitive advantage, new customer base and markets, good stakeholder relations, reputational risk and media interest and assessing of business performance through social environmental as well as traditional financial terms (Margolis, and Walsh, 2003). Aviva insurance company can use its decision making to ensure little government involvement in its activities. Corporate social responsibility can be done by abiding by the laws, regulations and by paying taxes. Implementing the corporate social responsibility through decision making reduces government regulatory intervention, gives them a competitive advantage over rivals, helps in better enhancement of the brand with the customers, enables the company get cheaper capital and see higher employee morale and commitment towards the company. It is a helpful tool that allows a business to survive over a long period.

Economic Pressure

During difficult economic times, business is defined by its effective management at the premium. In difficult times the difference between profit and loss can be effectively countered through proper governance. Aviva came out and promised to pay higher dividends during this period of Brexit. During Brexit, Aviva experienced tremendous pressure with shares falling more than a quarter, but it countered this sad state of affairs by considering other ways of returning money capital returns such as buybacks and paying out half its profits which is half of seven billion euros as dividends in three years. This move boosted its share price and in the long term making it to generate more profits than focusing on the negative impacts of the economic environment. It generated 1.5 billion euros and paid over 40 percent of the profit as dividends in 2016 (Ft.com, 2017). It came about because of ethical decision making within the companys management. These right decisions enable it to survive even in the harshest of economic times. Aviva also anticipates to boosting its profit by 5 % higher in five years time. Avivas liquidity ratios can also be used as good examples to bring out its commitment to profitability even during tough financial times. The current ratio in 2005 was 1.1 while in 2006 was 1.8 times. The current ratio is calculated by taking current assets and dividing them by current liabilities. It shows that Aviva improved its profits in 2006 as compared to 2005 by reducing the number of liabilities. The current ratio should be close to two to show how a business is doing its operations. The current ratio is deduced by dividing current assets less stock against current liabilities. Avivas quick ratio in 2005 was at 0.4 times while in 2006 it was at 0.6 times. Also looking at the companys quick ratio, we can deduce that it underwent a tremendous growth in 2006 than 2005 showing that it is making significant steps towards profitability as time goes on.

Globalization

Globalization is the process of unifying a people from different parts of the world together to function as a single entity together. As we know, the world is a global village which has been made possible through technological advancement in recent times. Globalization is also the process of combination of social economic political and technological forces that is through migration spread of technology trade foreign direct investment and capital flows. Aviva has taken steps of globalization which help it identify economies with cheaper costs and buy parts at reduced prices. Globalization helps in getting a broader customer base and also makes its benefit by offshoring and outsourcing work from anywhere. Aviva has recently invested in Asia, India and Sri Lanka by moving call center jobs there because they were cheaper to install than in the UK this move has dramatically boosted the profit of Aviva insurance company. Aviva has also opened branches in India that provide insurance services to the people. The step has increased its customer base because it can reach out to its customers through many platforms of online communication. It has led to increased profits for the company.

Customer Service

Customers form the backbone of organizations. Organizations need customers to exist though it is a challenge maintaining customer with the changing online trends. Aviva insurance company has embraced this perfectly well enabling it to have a more comprehensive customer base. Aviva realized that by increasing their customer service, for instance, answering more than 80 percent of their calls in 20 seconds. It has employed systems thinking as a way to improve customer satisfaction (Beyond philosophy, 2017). They have promoted response to customer needs by advertising their new methods of service delivery to them for better service delivery. It has already installed a command center which helps to get the needs of their customers before interruption or degradation. It has also launched online customer services in a bid to increase customer base and satisfaction. It also reviews and rates customer service thus enables it to work on areas that might have been left out to ensure complete satisfaction .Aviva chose to stand out to its customers to avoid potential insurance fraud. It also replaced child seat standards after car accidents in a bid to make a significant emotional impact on the victims. It has gone an extra mile to provide for accident victims and their families thus earning it a flood of accolades. These changes in customer satisfaction have seen it make profits in millions of shillings.

Employees satisfaction

It is a measure of how workers are happy with their jobs. Keeping good morale of their employees enables them to work efficiently stay loyal and are more productive. Aviva is trying new techniques to ensure that it keeps its employees satisfied. It has embraced training as part of a way to enable that their employees get to know current trends in the market and also how to treat customers well. This move aims at increasing their competitive advantage in the market. Human resource management at Aviva is approachable easily and considerate to employees concerns. Transparency to its employees has enabled the company gain a competitive advantage over its biggest competitors in the market. Salary is paid on time, and it is a fair salary that meets standard specifications.

Change

Change is necessary for any given business because of the constant fast moving environment. A company that lags behind regarding adapting to the fast-moving environmental changes are most likely going to fail and in the process lose profits. Changing businesses also keep loyal customers and attract more to their customer database. Change can include advancement in technology, culture, opportunities growth among others. Aviva is also adapting to change. It recently brought its UK businesses together, life insurance, health insurance and general insurance under one joint leadership led by Andy Briggs as CEO. Aviva has also placed its overseas businesses in France, Canada, India, Ireland Spain, Turkey and Poland under one joint leadership to improve management and cut costs (Moodys.com, 2017). Aviva has undergone a significant transformation in recent times and its now entering the growth phase. It has a fixed balance sheet focused on business that turned the operation performance around. Aviva also needs to change by differentiating its business to adapt to the current UK situation with the Brexit vote gaining momentum. Aviva would likely benefit from increased synergies following the acquisition of friends life in 2015 while restructuring and integration costs would decline.

Organization Ethics

Organization ethics is how a business behaves and responds ethically to internal and external triggers or competition. When a company wants to invest it has to look at the funds it is ready to invest in the business. There are also many different investment strategies and styles to ick for instance growth regional income and value that can be used to meet goals. Ethical funds restrict a company from investing in specific products or companies like alcohol, tobacco, and arms. Excellent investment opportunities are those that bring in a vast amount of profit while being ethical (Lev, 1974). There are many ways to invest ethically, for instance, investing in an oil company that produces renewable energy and not necessarily investing at all because oil industries might lead to pollution of the environment. Aviva has invested heavily in the ethical business. Its profits are therefore not questionable as they are obtained ethically. Engaging in ethical investments boosts the companys reputation and image to the society making it more trusted.

Mergers and Acquisitions

Mergers are the combination of two companies to form one while acquisitions are the taking over of one company by another. The main reason for mergers and acquisitions is to create more value and profits compared to being run on itself. Mergers and acquisitions take place by exchange of shares for assets, changing shares for shares, purchasing assets and common shares. Mergers can either be through absorption or consolidation. Aviva acquired Friends for Life in a share deal worth $8.8 billion (Bray, 2017). This agreement saw the increase in the amount of profit that the company would get. Friends for life own 26% of the shares acquired through the merger and Aviva owns the rest. This deal makes Aviva the largest life insurer in Britain UK, and it would have more than 16 million customers under the merger which is a huge step toward profitability. By combining the two companies, the deal would create the largest UK insurance, savings, and asset management business, delivering additional scale and efficiency company (P.S., 1995).

Innovation

Innovation is the use of an idea, method better. Organizations have embraced the use of innovations as a way of enabling their existence being felt. Innovations could be an advertisement for the products their services etc. (Aviva.co.uk, 2017). Aviva has embraced innovation through the fin-tech startup community (Innovation, 2017). These startups have helped it save time looking for physical documents by storing the customer's data.

Conclusion

Contemporary issues in financial management like corporate social responsibility, economic pressure, innovation, change, globalization, customer service, employee satisfaction, mergers and acquisitions and organizational ethics have enabled companies like Aviva to continue existing in the market and operate by getting to know how to use them effectively to their advantage. Corporate social responsibility points out how a company should behave and at the same time do a very profitable business in the market. Innovation points out on how being able to implement better ideas can result in maximum profit and competitive advantage among the other competitors in the m...

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