Dangerous Markets: Managing in Financial Crises

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John Wiley & Sons, Oct 2, 2002 - Business & Economics - 320 pages
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A corporate guide to crisis management in volatile financial markets

Current financial crises in Argentina, Japan, and Turkey are being played out on the front pages of newspapers, and these are just the most recent financial crises that have rolled across the globe in the last decade and whose far-reaching impact hurts business around the world. Dangerous Markets: Managing in Financial Crises recognizes that no global corporation or financial institution can afford to ignore the potential of a financial storm and will help top management and financial professionals navigate through this often disastrous maze.

While many books discuss financial crises and their ramifications, none has presented an action plan for managing these storms—until now. Dangerous Markets: Managing in Financial Crises presents a method that allows executives and financial professionals to recognize the warning signs of a financial crisis and act appropriately before the situation spirals out of control. Based on years of research and practice in cleaning up the mess, McKinsey consultants Barton, Newell, and Wilson reveal the warning signs of potential financial catastrophes and provide unique principles that can be followed to shape and manage a strategy for survival.

 

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Contents

Executing Successfully to Capture Crisis Opportunities
142
Leveraging Strategic Opportunities in Financial Crises The Successful Story of NCNB
150
Managing Unique Banking Risks
155
Driving Successful Bank Turnarounds
157
Seven Management Actions
158
Mellon Banks Successful Turnaround
165
Christiana Banks Successful Turnaround
171
Filanbancos Failed Turnaround
173

Understanding Financial Crises
13
Recognizing New Global Market Realities
15
Why Financial Crises Are on the Rise
23
You Can Run But You Cant Hide From Crises
32
Looking Ahead
35
Using Crisis Dynamics to See Growing Risks
36
The Chronology of a Crisis
38
The Dynamics of a Financial Crisis
43
Assessing Value Destruction
44
Banks in Distress
48
Understanding the Impact of Macroeconomic Catalysts Foreign Funding and Asset Bubbles
59
Conclusions and Outlook for Future Crises
67
Ten Warning Signs of a Financial Crisis
75
Estimating Value Destruction in the Economy
78
Why Corporate Sectors Underperform in Crisis Economies
80
Earning the Right to Win
83
Managing the First Hundred Days
85
Taking Five Tactical Steps When a Crisis Hits
86
Developing a Crisis Management Approach
105
Managing the CEO Agenda
108
Painting the Picture of a Financial Crisis
114
How Companies Can Strengthen Funding Before a Crisis
120
Using Scenario Planning in Financial Crises
123
Capturing Strategic Opportunities After the Storm
128
Recognizing Significant Opportunities in a Crisis
130
Moving from Boundaries to Greater Degrees of Freedom
132
Government Stewardship of Troubled Banks
176
Governments Role in Bank Turnaround Strategies
184
Building a Rationale for Official Support in a Financial Crisis
188
Minimizing Costs Through NPL Recovery Excellence
192
Developing WorldClass NPL Recovery Capabilities
194
Special Issues Raised When MPLs Are Managed by Governments
212
Good BanksBad Banks in Scandinavia
218
Building for the Future
223
Strengthening System Safeguards
225
Moving to Global Standards for Corporate Governance
230
Adopting Better Accounting Standards
232
Developing Capital Markets
237
Resetting Regulatory Regimes
242
Building an Effective Legal Foundation
247
Sixteen Elements of Good Corporate Governance
251
Singapores Development as an International Financial Center
253
The Discipline of the Market for Corporate Control Issues for CEOs
255
Designing a New MarketDriven Financial Architecture
257
Recognizing the Limitations of Current Standards and Approaches
258
Enhancing the Private Sectors Role in Setting Standards to Reduce the Risk of Future Crises
260
FSF Compendium of Standards
272
Endnotes
273
Glossary
287
Index
289
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About the author (2002)

DOMINIC BARTON is a director with McKinsey & Company and managing partner of the Firm's Korea practice. He also is a leader in the Firm's financial institutions practice. Barton has advised the Korean Financial Supervisory Commission on restructuring their banking system as well as strategized with the Monetary Authority of Singapore. He led a major McKinsey study on how to transform companies into sustainably high performers and has led numerous studies for private and public sector clients in the financial sector. He holds an M. Phil. in economics from Oxford University, where he was a Rhodes Scholar, and a BA in economics from the University of British Columbia.

ROBERTO NEWELL is a former director at McKinsey & Company where he led projects for governments and private sector clients in financial crisis. Dr. Newell has served clients immersed in financial crises throughout the Americas, including Argentina, Colombia, Ecuador, Mexico, the United States, and Venezuela. He holds a BA and MA from the Universidad de las Americas in Mexico and a PhD in economics from the University of Texas at Austin. A Mexican citizen, he is currently CEO of FESSA (Fondo de las Empresas Expropiadas del Sector Azucarero), a Mexican government entity charged with turning around and privatizing twenty-seven failed sugar mills. With Luis Rubio Frieberg, Newell wrote an award-winning book on Mexico's financial crisis of the 1980s, entitled Mexico's Dilemma: The Political Origins of Economic Crisis.

GREGORY WILSON is a principal in McKinsey & Company's Washington, D.C. office, specializing in strategic issues that affect private and public sector clients in the financial services industry. Wilson has worked on financial sector restructuring around the world, including many recent crisis countries in Asia and South America, and has conducted numerous client studies on policy, strategic, regulatory, and structural issues. He holds a BA in history, and politics and government from Ohio Wesleyan University. From 1974-1976 he attended the Fletcher School of Law and Diplomacy where he studied international business and law. Prior to joining McKinsey, Wilson served as Deputy Assistant Secretary for Financial Institutions at the U.S. Treasury Department during the U.S. savings and loan crisis.

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