PREPARING TO THE FINANCIAL CRISIS Dominic Barton, Roberto Newell and Gregory Wilson
The McKinsey Quarterly Journal, 2002, No. 2
the past two decades, globalization has transformed the financial markets closed under state control in free markets open to foreign investors . Thus, companies have been able to reduce its borrowing costs and investors get more benefit in relation to the risk assumed.
other hand, capital markets, freed from all obstacles, often had economic storms, especially in emerging countries.: More than 60 financial crisis, and a half times that in the 80's.
There are examples of Argentina last year, in Turkey, with the bankruptcy of one of its biggest banks, or in Sweden, where the housing crisis ushered in the red to banks and undermined the contribution of the Swedish krona .
companies, however, do not seem inclined to protect themselves from these crises, although there are many precautions that managers can take:
monitoring indicators potentially hazardous
maximizing liquidity
debt restructuring
can even go further
working on the scenario analysis
tuning methods for managing the crisis.
In these capital markets without borders, in which information and money are as versatile as sudden movements, managers can only rely on themselves to overcome the next crisis.
Stanley Fischer, the IMF, once said: "The IMF predicted, in private, 15 of the last 6 crisis. If we published our predictions, many disasters have occurred. " Thus, managers can not count the IMF forecasts without Official Securities Commissions. EXPLORING THE EARLY SIGNS
ALARM
But, on the contrary, it is possible to identify warning signs, and little time is devoted to analysis. Observers focus on macroeconomic variables such as exchange rates or fiscal deficits. Not that there are important, but they are the last to know, when it is on the brink of crisis. It is at the foot of land economy and banking system which developed the roots of evil, and where to look for early signs. There are key indicators:
KEY INDICATORS MONITORING
The destruction of value for the private sector
In every crisis, the total return on investment has been below the weighted average cost of capital, several years before the outbreak of crisis.
The ratio of interest coverage
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