HSBC accepted the loan of the wholesalers based on their income and credit scores which has to be HSBC standard, but due to the extreme competitions for mortgages and also for the HSBC analysts and executive level decision, they started giving state-income loans. For these sorts of loans borrower just needs to declare his or her income with providing any documentation to verify. As a result, they can easily get the approval of the loans which are much higher than their actual afford.
Therefore the people who were Dealings with the loans and customers did not verify the information supplied by the customers properly, therefore HSBC suffered crisis. For analyzing applicants for credit cards, card loans and fixed rate mortgage, HSBC used a credit rating from air Isaac Corp. of Minneapolis called a FIFO score. But, FICO scoring systems had not a good tool in terms of predicting the performance. As FICO score were unable to effectively make the differences between loans where borrowers got their own money down or loans without any down payments.And these sort of systems HSBC used also responsible for their problem.
Information Technology is important for new competitiveness for today's enterprise in the international marketplace. Role of information systems and technology is really important for today's business. However, HSBC used sophisticated systems and tools for analyzing their business but Proper implementation is also so important for business success. According to Laudon, K. & Laudon, J. (2007) "Information system at the strategic level of an organization that addresses unstructured decision making through advanced graphics and communications.
" Executive Support Systems serves the organizations strategic level. According to Laudon, K. & Laudon, J. (2007) "Information system at the management level of an organization that serves the functions of planning, controlling, and decision making by providing routine summary and exception reports. " In the case of HSBC, MIS was so important, as they support structured decisions, at the operational and management control levels, and also used for planning purposes of senior management staff.
But their management information system was not used properly in terms of providing loans.Decision Support Systems (DSS): According to Laudon, K. & Laudon, J. (2007) "Information system at the management level of an organization that combines data and sophisticated analytical models or data analysis tools to support semi-structured and unstructured decision making.
" The major difference between a DSS and any other information systems is that it contains complex mathematical models to suggest the organization regarding a changeable situation or an ill-structured problem area. Computerized system which records the daily routine transactions essential to conduct the business successfully.These systems serve the operational level of the organization. The following chart shows a symbolic representation for a payroll:- Source: Baradon, D. "project management for modern information systems". P-275 In the case of HSBC, their TPS was not used properly either as their operational level used systems which was not performs in terms making transactions and approving loans to the customers.
Reasons of HSBC into trouble in spite of having sophisticated information systems: So, it has been clear that information systems can play a vital role in business world.Information systems are important in all sectors like operational level, knowledge level, management level systems and strategic level. HSBC got sophisticated information systems and analytical tools. However, due to the intense competitions for mortgages, they ignored lots of facts in terms of accepting loans for the borrowers. They also did not use their systems properly, they have their software but they did not use it as they were more interested about their profit and interest.
Why did not right solution not used?HSBC got the solution regarding the problem of mortgages loan crisis but they did not use the right solution, as they were more interested about making business profit. All the times they were searching for good business opportunities. They accepted state-income loans without determining whether it met their standards. For these sorts of loans borrower just needs to declare his or her income with providing any documentation to verify. As they were paying attention only with their higher interest.
Therefore, HSBC did not use their right solution to face the problem.
