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It is not really a good idea to follow the financial sections of the
international news media on a daily basis these days—all gloom and
doom, and nobody seems to have a clear and credible plan as to what
is going to happen next in the global financial meltdown. The matter
is turning into a “self fulfilling prophecy,” because it has
been said that there is going to be worldwide recession, it actually
happens. This demonstrates to my mind the lack of materiality,
insight, thought, on which investment or for that matter lending
(credit) decisions are frequently based. People do not seem to have
the strength of their own convictions when things go awry, the banks
just don’t know what to do other than to keep going to governments
to help them out of the mess that they have created. At the last
count, nearly $10 trillion (or $1,500 for every person on the
planet) has been offered to the banks by governments desperate to
avoid financial disaster; but despite this the banks are still not
lending. Stocks and shares are being sold all over the place,
Japan’s Nikkei index dropped 7 percent in one day and even the
Philippines stock market dropped by more than 12 percent in one day,
thanks to the BDO relationship with Lehman Brothers.
Unfortunately governments or even the IMF doling
out money to the banking/insurance sector is but a temporary relief
(hopefully) and even that cannot go on forever, look at the amounts
already paid out! Whilst we should all hope that the various
government (mega) efforts will stabilize the sector, attention
should be given to the way in which it has historically operated,
and in particular the quality and depth of investment/lending
decision making. The “lemming syndrome” works excellently in the
financial sector (lemmings are small furry animals found in arctic
regions which move around in groups and have been said not to leave
the group despite the fact that they frequently throw themselves
over cliffs to their doom—there is by the way an element of
misconception in this.) Young traders in stock exchanges frequently
watch older more experienced players to see what they do, and then
follow unthinkingly. Bank lending is frequently governed by
“strategies”, Filipino banks should now lend 8 percent of their
loans to micro enterprises—why 8 percent?—shouldn’t bank
employees be forced to decide for themselves what is a good loan
prospect regardless of whether or not it fits within the magical
percent?
My suspicion is that the financial sector is
largely populated by “followers” and that people capable of (and
authorized to) make their own decisions based on their own knowledge
are few and far between. It is of course also fair to say that many
people involved in the sector have scant knowledge of the workings
of business, yet are in a position of considerable influence when
deciding whether or not to support a particular business or
initiative. It has been the fashion for some time now to manage by
strict adherence to rigid processes and guidelines, people are not
encouraged to think for themselves, in fact they are positively
discouraged—I know this very well from my own experience with a
major multinational. Current management systems (and the Philippines
is a prime case) breed followers. I guess it is seen as dangerous
for people to be encouraged to think for themselves, particularly
where money is involved, good decisions may be made which are not
those of top management! But of course people must be qualified to
make their own decisions, what time is wasted when the HR manager
has a right to be consulted over what technical systems should be
used in engineering work.
Sadly there are many elements to the poor
quality of decision-making in the financial sector and it is
difficult to imagine how educational systems and management fashion
together with the cultural considerations can be changed in the
foreseeable future to encourage people to take and be accountable
for their own decisions.
Mike can be contacted at mawootton@gmail.com
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