DANGEROUS MARKETS

DANGEROUS MARKETS

Dominic Barton


CONVENTIONAL wisdom and the bulk of academic literature lead many executives to believe that financial crises are difficult to predict. Conventional wisdom also argues that strategies for survival are hard to pre-plan , since the reasons for these financial meltdowns are specific to a nation , its culture and its politics. Those conclusions would lead managers to believe that the elements of a financial storm are impossible to understand, prevent and manage until the storm actually hits. We disagree . Based on our experience, we believe that the warning signs of trouble are common from nation to nation. To be sure, there are some regional and national variations. Yet, there are also common patterns of buildup and meltdown.
For this reason, we also believe that financial crises can be foreseen, their magnitude can be estimated, precautionary steps can be taken to prevent crises, strategic options can be devised and implemented , and corrective measures can be taken to lessen the storms ultimate impact. Leaders with the foresight to observe and react effectively can manage a crisis strategically before, as well as after, it hits. Given the likely increasing frequency, the unacceptable socioeconomic costs, and the heightened danger of rapid global contagion from one crisis to the next, it is imperative that we take a step back and evaluate the true causes of these events and what executives can do to manage them. Only through such a systematic understanding of financial crises can solutions be found and problems managed effectively.