ie business school

What do you believe are the greatest challenges facing the sector or industry you would like to specialize in at IE? What role do you hope to be able to play in this sector or industry in the medium term?

The Financial Sector is a very dynamic industry, and the financial innovations have totally changed the face of the industry. However, this sector also faces major challenges, be it a country specific problem or the recent global crisis.

According to me, the recent Global Economic Crisis is the biggest challenge the financial sector is going through.

What started out as an AMERICAN problem in 2008 has spread like a GLOBAL epidemic .

The crisis became an ECONOMIC crisis but started in the FINANCIAL sector.

As the common saying goes, “When America sneezes, rest of the world catches a cold” became a Reality.

,

What Caused Global Financial Crisis??

Easy MoneyPolicy

Capital Inflows

Eager Home Buyers

InnovativeBanks

Rating Agencies

AmbitiousMortgage Brokers

Securitization

MBSs

EscalatingHouse Prices

Gov’t SponsoredEnterprises

Greed of Investment Banks

Bank Regulators

The best of times

A “Global Saving Glut”

=Housing Bubble

+ Sub-Prime Lending

+ Derivatives(CDS,CDO, MBS)

+ Leverage

+Greed of Credit Rating Agencies +Large Global Imbalances

= FINANCIAL DISASTER

Effects of the Global Financial Crisis

Stock Markets Crash….

‣Many of the world's stock exchanges experienced the worst declines in their history, with drops of around 10% in most indices

Collapse of Housing Bubble Housing Prices fall sharply

House bought as investments hit hardest

Boom in construction and heavy machinery bursts.

Boom in commodities and raw materials comes to an end as economies contract and companies cut back on expansion plans,

Oil falls sharply from $147 to $35,

Collapse of Commodities bubble and Oil speculation

Unemployment and Global Poverty‣Worldwide unemployment

‣ Funding for poverty programs reduced sharply

‣ Sharp reduction in salary packages

Lehman Brothers Bear Sterns AIG Circuit City Nortel Fannie Mae Countrywide

Financial Freddie Mac General Motors Chrysler

Corporate Bankruptcy & Bailouts

Major auto companies go bankrupt worldwide,

TATA buys JLR from Ford,

Many auto components suppliers and auto dealerships shut down,

Auto sector sales fall sharply,

Auto Industry – GM, Chrysler bankrupt

Export driven emerging economies like Brazil, China, India suffer due to decreased demand from US and Europe,

Protectionism rears its ugly head, as countries strive to stimulate demand for their own products,

Effect on Exports of Emerging Economies and Protectionism

How to Prevent Global Financial Crisis??

Governments should work with, not against, market forces.

Market transparency and in the assets that are being traded.

Market participants should be given thorough understanding of hybrid securities and their associated risks.

Encouraging more national saving.

States Market:

Ensuring financial product safety system. Preventing money laundering

All financial transactions should either pass through organized exchanges, or be subject to some sort of strict reporting requirements to regulators.

Preventing the private sector from resorting to the public sector to resolve their problems.

Creating distinction between monetary policies and fiscal policies, taxation policies and for spending policies.

Taxpayers should not be required to bear any cost of a financial meltdown.

:

StatesRegulations:

Develop and ensure higher accountability standards.

Sticking to the budget.

Improving the allocation of credit by increasing capital requirements for high-risk banks and lowering requirements for low-risk banks.

Need to make sure that financial firms are not too big or too small to fail.

Having the plans and the legal authority in place to deal with insolvent financial institutions.

StatesBanking:

Preventing CDS(Credit default swaps).

Increase diligence on credit and loans .

Increasing percent of bank legal reserves .

Specializing the banks (investments and commercial) due to the risk control

Logical competition on clear platform

Reduction of costs.

Banks :

Encourage long term focus rather than short term.

Discourage excessive risk taking

Reduce conflicts of interests with stakeholders to provide realistic and clear financial reports

Private sectors : Modifying incentives for executives to:

Encouragements of logical risk taking to contribute to productive activities.

Controlling the amount of consumptions Directing expectations

consumers : 

I believe that ethical training has become necessary in the present world.

I will make sure that such code of ethics

are implemented .

Complying with the CFA Institute’s Ethical and Professional Standards is one of the measures that can solve the problem.

My Role in Preventing Global Crisis....

My Role in the Financial Sector...

Out of various options in the Financial sector like Auditing, Cost Accounting, Insurance, Banking, Foreign Exchange services.....

I want to specialize in Investment Banking

Out of various options in the Financial sector like Auditing, Cost Accounting, Insurance, Commercial Banking, Real Estate Finance I want to specialize in .....

Quantify the value of a new partnership or acquisition

Right price and terms for the deal

New entity structure and management

Merger &acquisition

Available options– loans, equity, bonds, combination

Cost of capital assessment

Repayment schedules and tax implications

Raise Capital

Portfolio Management Managing the Portfolio for Individuals ,

and Institutional Investors on the Basis of their...

Investment Policy Statement & Long term Capital Market Expectations.

Intermediaries between companies and the buy-side, corporate finance and sales and trading, research analysts form the hub of investment banks.

Research