1. Major Issues and challenges arising from external environment

Analysis of the external environment includes understanding political environment, economy of the country and legal, social, technological factors which affects the businesses of Sri Lanka.
Political –
The political instability of Sri Lanka has negatively affected the growth of banks and other industries. Since the political decisions are directly affecting the banking industry, the high volatility nature of the Sri Lankan political environment has hindered the smooth operation of banks. The frequent and highly influencing financial policy changes have become a great challenge for the process of financial decision making. (Sanjeepan, 2017)
Economical –
The relatively low GDP growth rate (3.1% for the year 2017), increasing cost of living, crisis of stock market, devaluation of the Sri Lankan rupee and instability of financial system can be identified as main emblems of downward trend of Sri Lankan economy. (Fernando, 2016)
Social –
Recent surveys have identified that the new generation do not have an interest of owning / holding any assets / liabilities and they tend to spend their earnings on vacations and other activities which provides experiences. This is an indication that there will be a clear decline in taking loans and opening saving accounts in the banks. The growing diversity of ethnic groups has also emerged various trends ex- Islamic banking . (Fernando, 2016)
Technological –
With the rapid growth of the technology, new technologies and facilities are being introduced by the competitors. This has become a major challenge to HNB as they need to keep providing innovative features and facilities for the customers.
Environmental –
HNB is facing the challenge of working on CSR projects and adapt to environmental friendly procedures and activities. The growing concern on environment protection has introduced various concepts on environment protection such as paperless work spaces, zero waste concepts etc.
Legal – As many banks and financial institutes failed and committed financial frauds (ex- Pramukha bank, Golden Key), the concern on the security of investments has grown tremendously and the central bank of Sri Lanka is closely monitoring and controlling the commercial banks of Sri Lanka.