Financial Turmoil: What more can we do? Will it be enough?

IE Focus Newsletter November 2008November 2008 | By Jose Maria O’Kean, Professor at IE Business School

The financial crisis has led to a raft of measures by governments across the world. Most are correct but insufficient.

These are the two questions to be asked after the battery of measures we have taken to mitigate the financial crisis over the last few days. The purchase of toxic assets, the reduction of intervention interest rates to create money, the increase in the amount of deposits guaranteed by the Guarantee Fund, the direct intervention of the state in banks, assuming their commitments, the injection of liquidity by purchasing healthy assets, the injection of equity in banks with state holdings in their capital, the award of guarantees to banks so that they can fulfil their function of giving credits to families and enterprises to protect the real economy from asphyxiation, the ECBâ??s increase of the number of banks that can access direct finance due to the fact that the interbank market is not working…

The spectacle being written by economic history and which we are witnessing first-hand has astounded the global economic environment and created panic in a good number of individuals who have watched their real and financial wealth diminish, together with expectations for future income from their pensions.
What more can we do? In my classes I tell my students that we live in a world similar to a baroque altar. It is laden with decoration and components, but we can´t see what holds everything up. We are incapable of differentiating the structure from the surface; we only perceive the visual impact, the grandiosity of it all. I think that if we look for the essence, we encounter two problems: the value of financial assets has fallen because they were overvalued and the financial system is no longer financing the real sector of the economy due to the danger of recession it involves. In the first case, as a result of the wealth effect, families will stop consuming and start saving and, in a recession, that is the worst thing that could happen. Consumption is 60% of the aggregate demand.

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High growth rates: an mixed blessing for family businesses

IE Focus Newsletter November 2008November 2008 | By Cristina Cruz, Professor at IE Business School

Peru is seeing an increase in wealth that brings many opportunities for family businesses, provided that they put their house in order. The Peruvian economyâ??s sustained growth at rates of over 6% in recent years constitutes a scenario of huge opportunities for the country´s family businesses, which make up more than 85% of the countryâ??s business fabric; however, it also involves numerous challenges.

In such a dynamic environment, competitive advantages evolve rapidly, the economic cycles of enterprises are reduced, and corporate success requires a management model based on two fundamental pillars: willingness to change, in order to capture new ways in which value can be created; and continuous training in order to adapt the company to changing market requirements. Why is this particularly difficult for a family business?

The problem facing many family businesses is that the traditions and resources that were once a source of competitive edge occasionally create inertia and prevent the development of new strategies required to play on markets that are becoming more and more competitive. By the same token, the obsession for maintaining control in the family means that shares used to finance growth, such as mergers, the sale of part of the capital or being floated on the stock exchange, may be considered as a sign of failure instead of a step towards the creation of wealth.

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IE 1-2-1 meetings in Jakarta

IE provides to Indonesian candidates the unique opportunity to learn more about IE and the Master programs in personalised meetings on Thursday, October 30, 2008. Find more detailed information in the presentation below. IE 1-2-1 – Jakarta, October 30, 2008 View SlideShare presentation or Upload your own. (tags: jakarta ie_business_school) If you for some reason…

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Trends in educating future business leaders

1596.jpgOctober 2008 | By Joaquin Garralda, Professor of Strategy at IE Business School

 

The training of future business leaders comprises more than equipping them with knowledge. It is essential to instill them with values in order to combat bad business practices.

The directives included in the Bologna Accord seek to converge the various higher education systems in Europe and lay down design principles which most leading Spanish business schools already apply in their master degree contents and activities.

One of the key issues is the search for a balance between the academic point of view and the interests of the companies that hire the students. Accordingly, Bologna recommends asking employers about the skills and knowhow they consider relevant in the recent university graduates they hire. Leading schools have applied this principle since they first began. The ability to do so is based on two facts: One, they are fully integrated in a highly entrepreneurial environment owing to the academic and education activities they carry out with managers and companies; and two, as leading schools they help manage their students´ careers given that they are very aware of the needs of enterprise and integrate them into their programmes.

A second issue highlighted in the Bologna Accord is that the pedagogical focus should shift to achieving expected results. These results include the personal skills associated with behaviour and capacity for action as key factors. There may not be a specific programme for certain cross-skills, which may be developed across several academic subjects.

Hence the significance of skills workshops in the sessions of a master programme has increased; however, these skills should not only be developed thought dedicated sessions, but rather they must be integrated into other subjects in such a way that certain forms of behaviour are reinforced.

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