barton et al - dangerous markets; managing in financial crises (2003)

[...]... has a self-interest in anticipating, weathering, and prospering in a financial crisis There are certain general principles and action steps that we always recommend in the early days of a crisis, such as being better prepared, understanding and managing your cash position, minimizing your operational risk, conducting scenario planning, preparing to divest unproductive assets, and maintaining the confidence... sowing the seeds of a future crisis Too often, we find fundamentally weak banking systems, especially in emerging markets where the banks play a disproportionate role in the national economy compared to less volatile capital markets Too often, these weak national systems are linked inefficiently to global capital markets, increasing the cost of capital locally to all borrowers—individual consumers, businesses,... early warning signs in the banking and real sectors and analyzing their potential impact, managers can spot financial crises before they build to value-destroying levels in their companies or their countries PART II: EARNING THE RIGHT TO WIN Financial crises can be anticipated and better managed tactically in their early days, based on the learnings that we take away from our client work in both the private... a crisis—which are almost always borne by taxpayers in 8 INTRODUCTION an allocation of pain: intervening, closing, and recapitalizing failed banks; paying off depositors and sometimes other liability holders; experiencing the surge in corporate and personal bankruptcies; and funding social programs such as extended unemployment benefits and retraining programs Second, there are the indirect opportunity... years, we think there are at least five major categories of readers in both developed and emerging market economies who have a direct self-interest in reading Dangerous Markets: first, CEOs and senior management teams at banks, other financial institutions, nonbank corporations, and family-owned businesses; second, boards of directors; third, investors of all types, including large institutional investors,... funds, mutual funds, and foreign direct investors such as private equity firms and corporates investing in businesses in other countries; fourth, public policy officials, including ministers of finance, central bankers, heads of bank supervisory and restructuring agencies, officials at multilateral financial Introduction to Dangerous Markets 5 institutions, and legislators who must approve changes in laws... companies that were determined to use the crisis as an opportunity to leapfrog their competitors Later, they joined other McKinsey colleagues in Singapore, where McKinsey served the Monetary Authority of Singapore (MAS) and the Financial Sector Review Group, working beside private sector participants in the quest to turn Singapore into an Asian financial center In Indonesia they were joined by Roberto,... real impact of financial crises upon individual lives Consequently, there is an urgent need to end, or at least significantly reduce, the impact of future financial crises In our global and increasingly interconnected world—where financial mismanagement leads rapidly to economic destruction, lost growth, and diminished national and individual wealth—there is no credible alternative to taking action Dangerous. .. ensuring the right balance of governance and oversight, and maintaining a high level of accountability and transparency The NPL recovery experiences of Sweden and Norway are excellent case studies coming out of the financial crises in Scandinavia in the early 1990s PART IV: BUILDING FOR THE FUTURE Financial crises present the private sector with a unique opportunity and a financial self-interest in resetting... for well-governed companies in emerging markets Moreover, our ongoing research reveals that executives in emerging markets can expect as much as a 10 to 12 percent improvement in their company’s market value in exchange for improving corporate governance along multiple dimensions As a consequence, the private sector has a real self-interest in enhancing corporate governance standards following a crisis . the Future 13 PART I Understanding Financial Crises 17 CHAPTER 2 Recognizing New Global Market Realities 19 Increasing Risk of Financial Crises 22 Why Financial Crises Are on the Rise 27 You Can. Manage Financial Crises Proactively? xi Why We Wrote Dangerous Markets xv Acknowledgments xix CHAPTER 1 Introduction to Dangerous Markets 1 Financial Storms Are Destabilizing 2 Financial Crises. signif- icant work.” Charles H. Dallara Managing Director, Institute of International Finance, Inc. Dangerous Markets is a ‘must read’ in the current global environ- ment for all serious investors