# HSBC’s direction in question after Elhedery’s sprint to CEO contender Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2018-03-13 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: HSBC's Journey From War-Torn Lebanon to CFO Meta Description: Follow Georges Elhedery's journey from war-torn Lebanon to becoming the top CFO at Europe's largest bank, HSBC. Investors are surprised, and the bank URL: https://financedigest.com/hsbcs-direction-in-question-after-elhederys-sprint-to-ceo-contender-2html ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/fd130318-4-1737287617517-compressed.jpg) _Simon Underwood is a business recovery partner at_ [_Menzies LLP._](http://www.menzies.co.uk/) ![Simon Underwood](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/simon-underwood-1737287617508-compressed.jpg) Simon Underwood While it is fair to say not much is expected from this week’s Spring Statement, the Office for Budget Responsibility (OBR) has indicated that economic forecasts could be upgraded ‘significantly’. With the economy performing better than expected, could more interest rate rises be in the pipeline? Since the Brexit vote, the Monetary Policy Committee (MPC) has attempted to protect UK businesses and workers from the impact of uncertainty and a [slowing economy by allowing inflation](https://www.financedigest.com/spains-12-month-inflation-slows-down-again-in-december-to-5-8.html "Spain’s 12-month inflation slows down again in December to 5.8%") to rise. However, if economic forecasts are upgraded again, this could encourage the [Bank of England to raise interest rates](https://www.financedigest.com/investors-trim-bets-for-peak-bank-of-england-rate.html "Investors trim bets for peak Bank of England rate"), currently at 0.5 per cent, to keep inflation under control. As well as reassessing their approach to borrowing and applying the usual rules of good business practice, it is essential that B2C businesses consider the potential impact of an interest [rate rise](https://www.financedigest.com/u-s-job-growth-picks-up-in-june-unemployment-rate-rises-to-5-9.html "U.S. job growth picks up in June; unemployment rate rises to 5.9%") on consumer behaviour in order to guard against any negative impact on their revenues and profit margins. An imminent interest [rate rise](https://www.financedigest.com/european-banks-cash-in-on-rising-rates-as-clouds-gather.html "European banks cash in on rising rates as clouds gather") would not be unexpected. When the base rate rose by 0.25 percent in November last year, [Bank of England Governor](https://www.financedigest.com/bank-of-england-removes-paintings-of-governors-linked-to-slave-trade.html "Bank of England removes paintings of governors linked to slave trade"), Mark Carney, indicated that another hike was likely in March to dampen the impact of inflation. Since then, however, economic data has been showing signs of improvement – with stronger-than-expected growth, a result of increasing productivity, a pick-up in [wage growth](https://www.financedigest.com/dollar-jumps-as-u-s-job-gains-wage-growth-beat-expectations.html "Dollar jumps as U.S. job gains, wage growth beat expectations") and a fall in the level of borrowing. Based on this data, the Bank of England may consider the UK to [need an increase in interest rates to dampen inflation](https://www.financedigest.com/ecb-needs-to-keep-interest-rates-sustainably-high-to-combat-inflation-lagarde.html "ECB needs to keep interest rates ‘sustainably high’ to combat inflation – Lagarde") and believe that the economy is in a good financial position to enable it to afford higher interest rates. For some businesses, a key concern of a predicted interest rate [rise is likely to be the impact on the cost](https://www.financedigest.com/fortum-says-rising-costs-of-nordic-power-trading-are-worrying.html "Fortum says rising costs of Nordic power trading are “worrying”") of borrowing. It remains essential that organisations [carefully evaluate their reason for borrowing in the first place](https://www.financedigest.com/glencore-to-place-nordenham-zinc-smelter-on-care-and-maintenance-from-nov-1.html "Glencore to place Nordenham zinc smelter on care and maintenance from Nov 1"). They should ask themselves whether loans are required to [fund growth](https://www.financedigest.com/impact-com-fiscal-year-h1-2021-1-5b-valuation-150m-in-funding-bigcommerce-integration-69-customer-growth.html "impact.com Fiscal Year H1 2021: .5B Valuation, 0M in Funding, BigCommerce Integration, 69% Customer Growth") or mitigate against current cashflow problems. They should also consider whether borrowing is essential or whether it has simply become a habit; increasing their [debt burden](https://www.financedigest.com/analysis-twitters-massive-revenue-drop-adds-to-heavy-debt-burden.html "Analysis-Twitter’s ‘massive’ revenue drop adds to heavy debt burden") unnecessarily. Applying the usual rules of good business can also play an important role in mitigating against the potential impact of an interest [rate hike](https://www.financedigest.com/stocks-shed-gains-treasury-yields-jump-as-fed-signals-rate-hikes-could-come-soon.html "Stocks shed gains, Treasury yields jump as Fed signals rate hikes could come ‘soon’"). As well as reigning in spending and implementing effective cash management policies, this should involve [keeping creditors close and considering the effect of late payments](https://www.financedigest.com/the-late-payments-toolkit-how-to-keep-the-cash-flow-strong.html "THE LATE PAYMENTS TOOLKIT – HOW TO KEEP THE CASH-FLOW STRONG") on the entire supply chain. Bearing in mind the bigger picture will help [companies to ensure that cashflow issues do not undermine relationships with key](https://www.financedigest.com/key-ingredients-to-formulate-and-communicate-a-successful-company-ethos.html "Key ingredients to formulate and communicate a successful company ethos") suppliers and customers. In real terms, a rise of 0.25 or 0.5 per cent is unlikely to make a material difference to most businesses and lenders could choose to absorb [costs](https://www.financedigest.com/esg-prepared-why-ignoring-esg-is-a-costly-business.html "ESG Prepared: Why Ignoring ESG is a Costly Business") into transaction rates rather than passing them onto businesses anyway. However, a number of high-profile administrations in the retail [sector signal the need for organisations to prioritise the impact of a potential rise](https://www.financedigest.com/guess-what-public-sector-adoption-of-e-invoicing-on-the-rise.html "GUESS WHAT? PUBLIC SECTOR ADOPTION OF E-INVOICING ON THE RISE!") on consumer buying behaviour. As well as feeling the effect of the ‘clicks to bricks’ phenomenon and high property rents and business rates, high-street names such as Toys R Us and New Look have recently experienced a decline in [consumer spending](https://www.financedigest.com/as-consumer-spending-increases-convenience-and-security-have-never-been-more-important.html "As consumer spending increases, convenience and security have never been more important"). In the event of an interest rate increase, [retailers across the board are likely to see changing consumer](https://www.financedigest.com/the-future-of-retail-and-the-ways-that-retail-has-changed-for-consumers-during-the-pandemic.html "The future of retail and the ways that retail has changed for consumers during the pandemic") behaviour having a greater impact. This drop in [consumer spending will impact](https://www.financedigest.com/the-impact-of-consumer-spending-on-the-market.html "The Impact of Consumer Spending on the Market") the turnover of B2C businesses. It is vital that businesses take potential interest rate rises into account when developing long-term [pricing strategies](https://www.financedigest.com/global-compressor-controllers-market-outlook-2021-pricing-strategy-industry-latest-news-research-report-analysis-and-share-by-forecast-2028.html "Global Compressor Controllers Market Outlook 2021, Pricing Strategy, Industry Latest News, Research Report Analysis And Share By Forecast 2028"). As well as considering what consumers are willing to spend, businesses should also [keep in mind what they can afford to charge and still achieve a profit](https://www.financedigest.com/commerzbank-keeps-outlook-as-lower-q3-profit-still-beats-expectations.html "Commerzbank keeps outlook as lower Q3 profit still beats expectations"). According to GertjanVlieghe, a member of the Bank of England’s Monetary Policy Committee, more than three interest rate [hikes will be required over the next three years in order to bring inflation](https://www.financedigest.com/hungary-ramps-up-rate-hikes-as-war-stokes-inflation-risks.html "Hungary ramps up rate hikes as war stokes inflation risks") down to the target rate of 2 per cent by 2021. However, MPC member Ian McCafferty has also emphasised that with a great [deal of uncertainty still prevailing around the outcome of the Brexit negotiations](https://www.financedigest.com/s-africa-negotiates-deal-with-eu-to-clear-citrus-blockage-at-ports.html "S.Africa negotiates deal with EU to clear citrus blockage at ports"), decisions to increase rates will be made on a case-by-case basis. While interest [rate rises](https://www.financedigest.com/bank-of-england-set-for-second-hefty-rate-rise-in-a-row.html "Bank of England set for second hefty rate rise in a row") would require businesses to review their approach to borrowing, it is also important for them to take a holistic approach to maintaining healthy revenues and profits. By continuing to prioritise the importance of cashflow and staying one step ahead of any changes affecting consumer buying behaviour, businesses can navigate interest [rate hikes](https://www.financedigest.com/central-banks-ease-off-on-rate-hike-push-in-october.html "Central banks ease off on rate hike push in October") smoothly whilst protecting their all-important profit margins. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---