Corporate agent

From CEOpedia | Management online

Corporate agent is a company that offers financial services to other corporations or governments. This is a type of trust nterprise. Corporate agents can provide different types of services for corporate clients, for example: payment of dividends or interest, stock trading, check clearing, tax collection. Usually banks provide additional services to corporations and thus work as corporate agents. This helps them to find additional sources of revenue. Banks can generale additional revenue through activity as corporate agents. This gives them stable revenue base, higher than at from the retail banking sector. Usually corporate agents provide non credit services (Sponsler, T. H., 1978, p. 35, 349).

Advantage of corporate agent

The corporate agent acts as trustee on behalf of another entity, therefore it has to be a trust company. However it is worth nothing that trust companies often provide services to individuals, while corporate agent cooperates with corporations only. Clients of a corporate agent have access to specific reporting tools. Using agent services is usually only for large financial companies or institutions with complex financing needs. The corporate agent represents multiple corporations, therefore it is a large player on the market. Thanks to this, it may have access to the most advanced technologies on the financial market, that are not available to single company. It can also employ more specialists with extensive knowledge about markets, which gives the customers additional value.

Model of corporate agent

Owner of a business (so-called principal) hires an employee - the corporate agent to run a business on behalf of the owner. Corporate agent does all work and the owner gets all profit. In this way, ownership is separated from control (Stout L.A., 2012, p. 5).

Corporate elites are not something new, but ways in witch corporate agent gain ascendancy to positions of power differ across cultures and nations. Power of elites function through governance networks to promote organizational and institutional goals (Maclean M., Harvey C., Chia R., 2010, p. 1).

That the cooperation between the corporate agent and the corporation would be effective and successful there must be trust and good communication. Communication is sharing import ant information. Main treat and risk may be poor communication. The situation in which one side is better informed than the other is recognized in economics as the principal-agent problem. It can happen, that corporate agent will try to maximize his own benefit even that this will cause more damage to the client (Ceric A., 2012, p. 767).

Examples of Corporate agent

  • Private Bank: Private banks offer their services as corporate agents to businesses and governments. These banks provide services such as asset management, investment banking, and other financial services.
  • Investment Bank: Investment banks also work as corporate agents. They provide services such as underwriting and issuing of securities, mergers and acquisitions, and other financial services.
  • Stock Exchange: Stock exchanges are also corporate agents. They provide services such as listing and trading of securities, market data and analysis, and other related services.
  • Financial Consultancy: Financial consultancies act as corporate agents to businesses and governments. They provide services such as financial advice, financial analysis, and other related services.
  • Insurance Companies: Insurance companies are also corporate agents. They provide services such as risk management, policy management, and other related services.

Limitations of Corporate agent

A corporate agent can provide a wide range of services to its corporate clients, but there are some limitations to this. The following are the major limitations of corporate agents:

  • Regulatory: A corporate agent must abide by the legal regulations of the country they operate in, which can be restrictive.
  • Cost: There can be high costs associated with corporate agents, such as salaries, technology, and compliance costs.
  • Limited Expertise: Corporate agents are limited in terms of their experience and expertise to provide services to their corporate clients.
  • Reputation: Corporate agents must maintain a strong reputation in the market in order to attract corporate clients, and this can be difficult to achieve.
  • Limited Resources: Corporate agents may have limited resources and capabilities compared to other financial institutions.
  • Risk: Corporate agents are exposed to certain risks if they make incorrect decisions, such as misappropriation of funds from corporate clients.

Other approaches related to Corporate agent

Introduction:

Apart from providing services to corporate customers, corporate agents can use a variety of other approaches to generate revenue.

  • Asset management - Corporate agents can provide asset management services to their corporate customers. This includes portfolio management, risk management, and asset allocation. These services help corporate customers to manage their assets efficiently.
  • Investment Banking - Corporate agents can also provide investment banking services to their corporate clients. This includes the offering of financial advice, underwriting of securities, and mergers and acquisitions assistance.
  • Custody Services - Corporate agents are also able to provide custody services to their corporate clients. This includes the safekeeping of assets, such as stocks, bonds, and other investments, on behalf of corporate customers.
  • Advisory Services - Corporate agents can provide advisory services to their corporate customers. This includes providing financial advice and assistance on different aspects of corporate finance and investments.
  • Credit Services - Corporate agents are also able to provide credit services, such as loan origination and loan servicing, to their corporate clients.

Summary:

In addition to providing services to corporate customers, corporate agents can also use a number of other approaches to generate revenue, such as asset management, investment banking, custody services, advisory services, and credit services.


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References

Author: Iwona Tuleja

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