Talent-development, the driving force behind economic growth

1649.jpgDecember 2009 | By Cristina Simon, Professor at IE Business School

Attracting and leveraging talent is the challenge now facing Peru if it wants to keep up the sustained economic growth of the last decade.

There is no doubt that a country´s economic development is linked closely to the evolution of its labour market. The problem that so often arises is the difference in speed of both concepts. At the present time, Peru is a magnificent example of this lack of synchronisation between the economy and the human capital that is there to keep it in place. As a result, a ´talent voidâ?? alert has recently appeared and could slow down the so far unstoppable force that has driven the country down a road of sustained growth for almost a decade.

The continuous progress of an economy generates an often very brusque change in the type of human capital that is required. This need for more intellectual work has become more evident in Peru in detriment of unskilled labour: in 1993, the EAP (economically active population) comprised 50% unskilled workers (with no academic qualifications or with primary education only), but the proportion fell to 26.2% in 2007. This figure clearly shows the shift in employers´ requirements and the need for trained, employable personnel, a concept that was christened with the name of ´talent´ in the United States at the end of the 1990s.

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The crisis and the future

1654.jpgDecember 2009 | By Manuel Romero, Professor at IE Business School

The subprime mortgages unexpectedly sparked the financial crisis, but the resulting raging fire took hold because there was so much more fuel lying around to add to it. How can we rise from the ashes?

The first thing to be considered is the background to the crisis and the essential causes of it. Perhaps the best example has been the strong sensation of liquidity experienced by all the players on the market, which has led to excessive leverage and a significant undervaluation of the risk associated with excess debt and a significant overvaluation of assets that has given rise to clear consequences that include a lack of coherence and macroeconomic consequences such as negative saving rates in the USA and investment records in China in excess of the GDP. All the market analysts expected the system to break down as a result of macrospeculators such as the hedge funds and the CDS (Credit Default Swaps), but neither of the two originated the crisis.

The origin of the crisis actually came from an unexpected trigger, more specifically, the heavy default produced by ´sub-prime´ mortgages, which were none other than loans awarded to the so-called ´NINJAs´, i.e. people in the USA with no income, no job, and no assets, that had been securitised, which means that those who awarded the loans just sold them on the market, in many cases leaving nothing showing in their balances. One of the surprising aspects is that a market as small as the sub-prime mortgage market was the detonator of this entire situation.

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The chaos of internal bank controls

IE Focus Newsletter November 2008November 2008 | By Jose Estevez, Professor at IE Business School

The collapse of Lehman Brothers or the fraudulent activities of a broker at Société Génerale reveal the chaos that reigns in banksâ?? internal control systems. The world economic recession and, in particular, that of the banking and financial sector is giving rise to serious problems. Lehman Brothers was considered as one of the financial institutions with the best contingency plans and yet it was not enough to save it from collapse. Another clear example is that of Societe Generale, where internal controls were incapable of detecting the fraudulent activities of one of its brokers.

Some experts suggest that the internal controls of many institutions are nothing more than “mere plans on paper”, that they are not operational, that they have never been tested and that employees “ignore them”, with no monitoring process in place as far as the institution is concerned. This is paradoxical, since a control system is characterised by the presence of elements that make it possible to influence the way in which the system works. A control system must guarantee stability and, in particular, be impenetrable as far as model errors and interference are concerned. Furthermore, it must be as efficient as possible and comply with a preset criterion. Normally, this criterion consists of control over input variables being possible, thus preventing sharp practices.

We are all familiar with the theory, but why has it not worked in financial institutions? The real situation is that, in some cases, it has worked, but while they were earning succulent profits, many consultants and managers ignored breaches of their internal controls. There is also another reason why it has not worked: the lack of good institutional information management.

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Economic Uncertainty: 1,500 directors analyse this topic on annual conference at IE Business School

IE Business School received 1,500 alumni from 30 countries at its Annual Alumni Conference held in Madrid on November 21. This yearâ??s conference focused on â??Business in Times of Economic Uncertaintyâ??, analyzing the challenges brought by the US crisis, its impact on the world economy, the stance taken by Europe, the advance of emerging economies,…

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International View of Corporate Social Responsibility

IE Focus Newsletter November 2008November 2008 | By Joaquin Garralda, Professor at IE Business School

Corporate Social Responsibility now forms an integral part of the corporate DNA, but like humans, CSR comprises different ethnic groups. Around the year 2000, large multinational firms began to understand that if there was political instability, corruption and social malaise in less developed countries and they did not have minimum levels of health and education, poverty would become structural and the effects of the situation would not be limited to the said countries, but would also affect developed markets in various ways.

In addition, supranational political bodies began to recognise the need to support the business community in order to reach the “Millennium Development Goals”, a United Nations initiative created to eradicate world poverty. One example of this recognition is the United Nations Global Compact initiative, presented to large international enterprises by Kofi Annan in a meeting at the Davos World Economic Summit (Switzerland) in 1999. For the enterprise, signing this initiative means trying to include the 10 principles (respect for human rights, labour rights, the environment and anti-corruption processes) in all their transactions, regardless of the country in which they operate. The ultimate goal is for businesses to set voluntary limits to their procedures in environments where institutional fragility or the lack of control over resources could lead to behaviour not in keeping with a more human and sustainable world.

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One step further towards technological innovation

1630.jpgNovember 2008 | By Yanire Braña, Professor at IE Business School

Itâ??s true that science and technology are the future, but some still face too many obstacles when it comes to accessing todayâ??s knowledge. The development of technological innovation is one of the main factors for guaranteeing long-term economic growth and minimising associated risks and entry barriers.

The responsible use of science and technology requires first of all solving or at least minimising the associated risks and problems. By the same token, the promotion of technological innovation also requires that the current tension among the players involved in the production of science and technology be solved, and that common ground for understanding among social, scientific and political interests be found. However, with a view to approaching innovation from other standpoints, it is our responsibility to reconcile science with society. In this particular case, the Minister of Innovation, Cristina Garmendia, has recently highlighted the need to combat the new forms of social and economic exclusion generated by unequal access to the knowledge society in which we live.

Indeed, unequal access to knowledge, which is largely due to the lack of technological know-how or resources, should be the first barrier to be overcome. The current gender gap regarding the use and adoption of technologies in Spain reveals an urgent need for measures and initiatives aimed at supporting women´s progress in the world of science and technology.

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