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Posts Tagged ‘Industry’

Why Management practice is not practical?

In Management on July 24, 2017 at 5:31 am

Practice is a practice that is different from theory. Many of us argue that learning concepts are distinct from its application during practice. In this blog, I will discuss three arguments of practice discussed by academics, industry leaders and my own observation.

Theory and practice

Idea 1: Manager as coordinator and integrator

An academic will define coordination, and integration would be as good management practice for a manager. It does not matter how many hours an employee work. What is important – how a manager is integrating the unique abilities of its employees to achieve the goal. In fact, the success of a manager depends upon how he/she turns people talent into performance. In Physics, a force is called work when there is a displacement of the point of application in the direction of the force.

Idea 2: A Manager as ‘implementer’

Jack Welch (CEO, GE) believed to be a gatekeeper in transmitting the ideas to his managers by choosing right people, rightly compensated and channelizing their energy to implement the idea.

“If you pick the right people and give them the opportunity to spread their wings—and put compensation as a carrier behind it—you almost don’t have to manage them.” – Jack Welch

 Idea 3: A Successful Practical Manager

 In fact, when I returned after completing my PhD from University of Edinburgh, I found that practice requires impractical people. I argue that a short term thinking believes in practical management while a long-term approach leads to a sound management practice. Good management practice is not possible until senior management reward creativity by rightly compensating managers and establish an open and proactive culture.

Contrary to this, a new word for practical is unethical. In large organisations, rules and policies are set by the board of directors. This led managers to reject those projects which fall out of the scope of company’s policies. A practical manager will manipulate the language and may accept all the projects. He may show higher sales in short run and receive the bonus. In long-term also, that manager will gain as the consequences of accepting the projects will be faced by his/her successors. Very soon, rules will remain in paper and manipulation of language in a contract will become management practice. Competitors will also follow and may make it as the industry norm. If everybody is making some mistakes, it is nobody’s mistake.

P-O-L-C framework of management supports managers to respond to the challenge of creative problem solving.

Is something missing in this framework. I observed that management practice in general substantially differ from practical management. Ethics and risk management are important for managers. Ethics support in the decision making of what is right and what is wrong while risk management guides on the consequences. Surprisingly, both are not included in management curriculum at many places considering them as not practical. Planning, organizing, leading and controlling in normal market situation is easy however, it is very challenging in turbulent markets. We need reformist, leaders, veterans who can think, act and implement good management practices.

Corporate practices are full of such issues and to understand these practices, one has to be in business to learn how to do business. Another example could be word ‘professional’. Professionals are the people who are subject matter experts, have undergone specialised training and have capabilities for independent decision making. They are expected to demonstrate ‘ethical code of conduct’. With my current engagements in an Asian market. I found that many people talk about:

“Now a days’ doctors and lawyers have become professional”

I asked them that these doctors and lawyers are professionals from a long time, what’s new about it. They were pointing out the wrong definition of professionalism. From professionalism, they mean ‘unethical’. In this situation, everyone bears the losses due to some short-cuts are taken by others. Management as a practice will not survive until we don’t avoid unethical decision making under the umbrella of being ‘practical’.

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Owner of my own Risk – Me or others ?

In Banking, Finance, Insurance, Risk Management on February 25, 2013 at 8:11 am

When an individual see the Risk – it looks 4 letter words. It is well said “This will not happen to me”, it is unusual not to avoid it. Actually what is the risk? It is a threat, loss of opportunity, unexpected happening of loss. Who is the owner of the risk – individuals themselves? It is the duty of risk owner is to prevent, reduce, transfer and control the risk.

 

It is just a Four letter word – RISK

Corporates also own the risk; risk manager owns the risk of each department. He/she may set procedures/systems to prevent/reduce the risk, he may transfer the risk to the insurance companies. Insurance companies owns the risk of various corporates and individuals but here the system works little different. Although insurance companies manage the risk however the risk lies in the hands of insured, It is also in the hand of GOD which can be seen any time in floods, earthquake. Its invisible based on set of calculations and predictions.

These insurance companies retain certain part of the risk in their hand and transfer the risk to the Reinsurance companies. Now situation changes dramatically – Reinsurance companies accepts the risk of same individuals/corporates from Insurance companies without knowing who actually they are, only based on set of terms and conditions and documentation submitted by insurance companies. The ownership of the risk is still in the hands of insured.

The reinsurance companies transfers this risk to Retrocession companies who practically don’t know the country of origin of the insured at the time of acceptance of risk, only a set of group risk based on certain conditions are accepted. The ownership does not change hands, insured still can increase or reduce own risk. Finally the set of risk reached through derivative market eg; CAT bond to the public. Individual own their own risk. “its better not to avoid risk rather deal with that”

The trillion dollar phone – iPhone 5

In Finance, Technology on September 13, 2012 at 11:58 am

I blogged about Samsung Galaxy S 3 couple of months back and several people wrote back to me with interesting experiences.

I was contemplating of not writing about iPhone 5, since this blog www.finguru.org is about finance not about technology. Ahhh!!! my itch to write about iPhone 5 took-over my right side brain :).

Apple started its conference 6 pm UK time on 12th September 2012 and iPhone was revealed in minutes. My husband has taken the kids for swimming at the local swimming club. Guess what !! he called me around 6.30 and said …… ‘hey dear, do you know what iPhone 5 is here ….’. I said what about the swimming and kids. To my surprise he told me kids are in the pool and he is sitting next to the pool reading live twitter feed on the Apple event (of-course he skipped his swimming). That time I realized, technology craze has taken over every educated men (& women) in western (& eastern) world. By the time I am finishing this blog, the blogosphere is filled with thousands of blog about iPhone and millions of them are underway.

The question is –  What is the financial implication of iPhone in the world? In a recent research note JP Morgan said the new iPhone could add upto half a percentage point towards US GDP annualized growth (US 0.5 % GDP annualized growth = 3.2 billion dollars), which is twice of the total GDP of Bhutan or four times the annual GDP of Somalia. In layman terms, Apple can take over the economies of Bhutan and Somalia by just selling iPhone 5 in one quarter in United States.

The another important growth area would be semiconductor market. RBC Capital market estimates the total revenue of 13.2 billion dollars in 2013 (i.e 4.4% of total semiconductor sales) coming from iPhone. Not to mention the big jump in revenue expected by the mobile companies by introducing 4G network. The overall financial impact of iPhone launch can very well cross $ 100 billion in 2013.

What’s in it for Apple ….. be ready to see the world first company touching 1 trillion dollar market capitalization.

I love Apple more than Samsung because the impact it creates on the financial market and economy of the world, this kind of influence is never seen from any other product or by any other company in corporate history of the world.

The hype, the show and the finally the King of smart phones – The iPhone 5 – The Trillion Dollar Phone.

Comments welcome.

Who are the parties affected by Risk in the organization?

In Risk Management on May 3, 2012 at 7:51 am

In every organization from top to bottom, senior to junior, creditor to customer every body is affected by risk.  Example – Satyam Computers, the liability arise for auditors to pay for misleading financial reports which ultimately affected whole organization and various parties involved with organization at different levels and overall affect country risk as well. The parties who affect insurance contract are –

  • Employees – Employees of the organization are affected in many ways. If a risk of fire arises then they need to safeguard the personal property, organizational property and liability risk. They provide information to external agencies. Daily wagers loose their jobs. Environment, pollution norms, safety norms and other regulatory guidelines are taken into consideration by employees.
  • Suppliers – Suppliers are affected when the supplies are suddenly stopped. Example – Due to fire, factory close down for 2 months. Therefore, supplies are closed down for 2 months.
  • Customers and other recipient of services – Customers are directly affected from the risk arise out of the organization. In the above example, the customers will not get the products from the company for next 2 months which will create shortage of the good.
  • Distributors –   Distributors face market competition and deals with retailers for product penetration. Distributor is a link between retailer and Company. Distributor is affected by delay in delivery, affect on quality, loss in reputation of the company due to risk arise.
  • Regulators – Regulators could be IRDA, RBI, Pollution control board, Waste disposal board which provides guidelines to reduce the risk from time to time.,
  • The Media – Media provides information to public regarding various risk and hazard related to companies.
  • Private investors – the shareholders and the private investors are affected by the valuation of the company. Various credit rating agencies analyse the risk of companies and publish the rating through the media which is used by private investor to analyze the risk of the companies.
  • Banking industry – The companies take debt from banking institution to run its business. Risk associated with the companies are first analysed by the banks before giving loans.
  • Business partners – Business tie ups, partners are affected by each and every risk associated with business as their reputation is also affected.
  • The environment – Risk and hazard in the organization affects environment. Example – Fire spread in the industry and resulted in burning of most of plant which produces chemical oil which resulted heavy pollution and produced gases harmful for masses.

Others – Risk from Politics, Industrial associations and competition also plays vital role.