Friday, November 21, 2008

Who is asking you to become interested ?

One of the prime reason of Global financial meltdown is excessive importance of self-interest and ignoring the higher interest .

The root of the problem is the lack of self regulation . The irony is these is what the Government expected , when they outsourced the regulation job of the credit expansion to the Bank itself . It started from 1980's when there is a group of policy changes from Global powers to facilitate free market . The banks where given complete freedom and they where asked to do there own risk management practice as if they don't do it , they will loose money.As it happens in all cases , when the power went to the banks they became greedy.So , they didn't cared for risk management , and they went on expanding credit crisis , which lead to global credit crisis 2008.

When the consulting community alerted the banks on possible setback , they might have said " I am not interested".

There are seminars and workshops and synopsium which focused on the issue of ethics . People laughed and joked and said ... " Come on lets do business , we are not interested to hear this "

Unfortunately, I was workshop leader for some of this workshops where I explained the collective mal-practice has a ripple effect over the entire community .

Nobody is interested to hear my theory .

Why ?

Bcoz , there are only few people in the world , who has the time to think about the things which can effect us collectively . We have become urgent oriented community and not a importance oriented community . So until unless somebody does not hard press , we don't understand the importance of something which can effect us.

Sometimes our conscience has to be interested to go beyond our self-interest.

Tuesday, November 18, 2008

New Bretton Wood

Year 1944.

Sixty-four years ago at a conference in Bretton Woods, New Hampshire, the foundations for post-war international finance were laid.

The year in which Bretton Wood conference was held and two global financial institution World Bank and IMF were created.

There where expectation that G-20 summit will lead to a new Bretton woods . However , the expectation were not met in the G-20 summit these year at 14th and 15th Novembor.

However , the leaders are concerned , as the amount of bad debt increases in US market which have crossed $1 trillion which created ripple effect in the entire global economy.

Suddenly the regulators have started finding out the fallacy of the financial risk management practices of Financial institution which originated these scale of Bad debt which has paralyzed the entire the global economy.

What kind of new regulatory systems can be implemented which maintains the free-market environment and also does not lead to excessive amount of bad debts that will lead to toxic assets?

G-20 didn't have the answer and it requires the financial rules to be rewritten to create the answer.

How to grow business in 2009 ?

Business Growth in 2009 ?

Yesterday , I had a chat with one of my old business friend . He made a interesting comment , which to be honest scared me a lot .

Here is his comment about Business Growth from 2009-2011

If you can survive next 3 years , you can survive next 300 years

I was little taken aback with the statement . Honestly ,upto yesterday , I have never thought of my survival strategies beyond 3 months . These days the environment changes so fast, that planning beyond 3 months is something which is obsolete . There is need to redesign the plan .

Infact , I called him up to fill a survey which we are conducting in North and Eastern India for United Nations Conference for Trade and Development (UNCTAD) and and getting somewhat very frustrating responses.

And over to it this statement . The market sentiments are very low these days and often you have scores of rejection of anything as simple as filling up a survey response .

I pondered and found, that there is general negative statement, which is ruling the market these days.

We need understand that the market is symbol of our collective requirement . The collective requirement of the human society has not changed, only the interfacing structures, between the requirement generator and the provider has changed .

The new structures are replacing the old interfacing structure . The new structure has already evolved . And the process of transition is on .

The business all over the world needs to adjust to these new realities in order to succeed .There has to be comprehensive understanding created about how the global market will operate now onwards.

We will discuss about these new financial paradigm on which the business can also grow in the upcoming post.

Monday, November 17, 2008

Risk Management and Merchandise Export Finance

Market liberalization has brought profound changes in the way price risks are allocated and managed in merchandise export sectors. Price risks increasingly are allocated to third party organization like factoring companies rather than absorbed by the merchant. The success of market reforms crucially depends on the ability of the emerging small and medium size export sector to make full use of the range of modern marketing, financing, and price risk management instruments.

The merchandising export sector have two process to address while risk management in export .

A) Avoiding Risk by making proper Buyer assessment
B) Recovering money through recovery agency.

On this avoiding risk is a more cheaper solution as presently the recovery agents all over the world is charging 25% of the money looking at the griming market situation .

Obviously there are political and war risk and at the same time there is risk of the buyers bank becoming insolvent . At certain cases however it is seen that there is a deliberate attempt of the buyer not to pay looking at the tough market condition now.

Still small exporter could implement better risk management practices to solve this problem. They can start with correspondence and then put up the case with the relevant authorities and after that they could even file a legal suit under Export Insurance cover and at the end hire a debt collection agency.