The global financial crisis has been a baffling experience for everyone, and a humbling one for many governments and businesses worldwide.
Apart from recovering from this massive setback, nations have been struggling to understand the causes of the crisis, the steps to prevent a recurrence and then decide ‘where to from here’.
New Zealand businesses got the chance of a broader understanding of the crisis recently at a presentation by a visiting economics expert Robin Stonecash, Director, Stonecash Associates, at Innovate 09 with Fuji Xerox.
Robin is a Macquarie Graduate School of Management Visiting Professor, and her current research and teaching interests include strategic negotiation and contracting, applications of strategic thinking (game theory) and behavioural economics to business strategy and planning and individual motivation.
She attributes the financial crisis to a whole range of factors. “Besides cheap credits in the US that created world-wide effects and bundling together of mortgages, it was a result of poor governance. It was also caused by failure of ratings agencies as they could not price the risk,” Ms Stonecash told Business to Business.
“The deregulation of the banking sector in the US and the UK was a big factor. Banks in Australia and New Zealand were better managed, so the downturn didn’t affect them as much,” she added.
Robin began her economic career in government, working for President Carter's Council on Wage and Price Stability in Washington, D.C. and at the US Federal Reserve Bank of Philadelphia. After 10 years as an academic at the Faculty of Commerce at the University of New South Wales, she went to work for the Centre for International Economics, where she worked on government policy and regulatory issues. Since then, she has been an academic and consultant, working at the Australian Graduate School of Management and the Macquarie Graduate School of Management. She also won the AGSM Alumni Teaching Award in 2005.
“There has been a rough consensus recently concerning banks and financial institutions regulations at the G-20 nations economic summit, but more need to be done including the curb on the big increase in executive compensation,” she commented.
“We are in a new world - a global economy now; so there was this flow-on effect, even though we learnt some lessons from the 1929 depression.”
Robin said we now need to consider strategic planning, scenario planning and disaster planning. “The planning process needs to be done more frequently, monitored more closely and with more complexity, looking further ahead,” she explained.
“Businesses need to look at their business plans more carefully. Leaders need to think more broadly, look for danger signs and look for opportunities in them. They need to take tough decisions but not without careful examination of pros and cons, and consideration of long-term effects of actions. Now is the time to innovate, train and develop your people.”