Global Financial Crisis
Global financial crisis is a management issue that reveals the collapse of stock markets, and large financial institutions. The individuals or institutions that are responsible for financial issues involve those on bail while global financial meltdown affects the live hood of each person within the interconnected world.
However, the issue of global financial crisis in the management can be sorted if ideologues that support models of current economics are not influential, and inconsiderate of concerns and viewpoints of other people. As a result of global financial crisis in the world, some instruments and financial products have become twisted, and complex. This creates an implication in the organization by failing trust of the entire system. The issue of global financial crisis also occurs when financial instruments that involved securitization allowed banks to pool variety of loans into sellable assets hence; off-loading risky loans to others (Green, 2011).
For instance in banks, they experience financial crisis when they convert millions to money earning loans, which become tied up for decades. This result to a security situation where the security buyer receive regular payments that come from all mortgages while the banker off loads the risk. Financial crisis led to banks borrowing plenty of cash, which they lend to enhance securitization. This led to banks borrowing from other banks to sell loans on securities as they could not rely on savers. This created an implication in that bad loans became an issue for individuals who purchased the securities. Further, financial crisis has created a challenge that made some banks to loan a lot of cash so that they could find a way of securitizing the loans.
According to BBC report, financial crisis as an issue in management led to high street banks in order to participate in investment banking, which incorporated selling, buying and trading risk. On the other hand, investment banks that did not involve in such business accessed mortgages and home loans without adhering to the right procedure in control and management. Taking such risks subjected majority of the banks to problems since the financial instrument that would assist in lending securities and reducing risk would backfire. Eventually, when the issue of financial crisis increased globally, individuals started to detect problems, which reduced their confidence. As a result, the rate of lending reduced, and ceased for a period of time, thus this issue resulted to lack of confidence which affects the present.
For instance, increase in financial crisis worldwide made various investment banks to rely on loans that were risky, which could not even attract investors. On the other hand, lenders wanted refund of their money because assets were plummeting in value. Also, financial crisis led to a situation where investment banks had little cash in their deposits that led to the insecure retail funding followed by dramatic and quick collapse. The issue of financial crisis affected banks at a large rate worldwide, and went to extent of involving banks with huge capital reserves to rely on the government for bail out. The down fall of banks made them suck cash out of the economy to reduce their worries concerning loaning and capital growth.
Factors that causes financial crisis in management around the world is when majority of bankers, and managers thought that they were on the safe ground when their institution experienced risks in financial crisis (Savona, 2011). On the contrary, the rise of financial crisis in majority of institution led to high greed rate, misunderstanding, when the management seeks to insure their institutions against risks.
The global financial crisis had also an impact in the UK when it heightened volatility of the investment markets that involved the real estate. Currently, markets that deal with properties are facing a period of exacerbated correction caused by the global contraction in supply of credit. The transformation of global financial crisis in UK had a main impact on a growth of the economy, and this could affect market operations and lending conditions in future. In UK, the initial government steps in responding to the issue were uncoordinated, individualistic and lacked international cohesion. The urge by the government to safeguard economic interest in the nation have failed to restore financial conditions in the UK markets. This, further, resulted to the rise of concerns, and mistrust about stability of banks and business in the state engulfing their operation system.
The response of managers to global financial crisis is evident through the function of small business support SBS
This incorporate micro, small and enterprises that are medium sized MSME, which act as economy backbone to control bank operations globally. Managers respond through MSME sector to the issue that concern global financial crisis. This occurs when they support the MSMEs in addressing the crucial issues that affect the spiraling unemployment, and credit squeeze. Moreover, competent and strong management is essential in solving finance problems that face small and huge enterprises.
Managers also respond to global financial crisis when using crisis response teams set by SBS strategy. This team comprises of senior executives who are highly experienced, and experts who handle the matter by focusing on immediate change in enterprise. Their response involves addressing key management priorities, which incorporates maintenance of high staff motivation and management of human resources. Managers also respond to global financial issues through organizational restructuring that incorporates managing redundancies. In addition, managers respond to the issue by managing finances through figuring out equity or debt. This, further, assists in improving financial controls, restructuring solutions, and strengthening ties that exists with banks.
The response towards financial issues also enables managers to enhance leadership, and long term vision in focusing on competiveness and innovation. In addition, they respond to financial crisis by enhancing their skills in law which is evident when they restructure contracts or agreements with suppliers and customers. Also, managers address this issue when they cut costs at the same time enhance quality. They create demand of services and products through innovative marketing and product development (McLean, 2005). Through working in teams, managers seek for experts, and qualified local consultants to handle finance crisis across the world in an appropriate manner.
Managers also respond to this matter through seminars where they hold discussions that revolve around issues in management. These include basics of surviving a crisis, by focusing on market development forecasts, and risk assessment. Further, managers discuss ways of avoiding failures in companies during crisis, cost control, capital pressures during work, optimization, expenditure and finance. The other way in which managers handle finance issues is through preparation of business plans and models, locating essential resources, defining operational and strategic restructuring. Moreover, they address the issue of financial crisis when they develop strategies that enhance effectiveness of personnel, and implement culture in institutions which enhances constant development.
In UK, managers respond to global financial crisis by uniting with the government to address social, economic, and environmental challenges that face the country. Managers also involve the government so that they can respond to modern concerns and development, which involve information on economy and corporate governance. In UK managers in organizations respond to financial crisis by providing a platform, which governments seek answers to common challenges, note good practices, contrast policy experiences, and function to co-ordinate international and domestic policies (Mason, 2010).
The management skills required for managers to respond well to global financial crisis is to locate resources, and adapt flexible measures that could sort the situation in the department. In order to handle financial crisis, there is a need for managers to commit and dedicate the staff in handling the issue directly. For instance, the treasury department needs to focus ahead by incorporating expertise with great experience, and financial specialists to handle new regulatory arrangements. Managers should incorporate management skills that involve stronger staff incentives to apply their skills at the treasury.
This adds value to the organization because managers get in a position to respond well to financial crisis when they pay attention to a variety of issues that will tackle high turnover, and low pay in relation to the public sector. The other management skills that managers should adopt are to incorporate financial innovations to improve risk efficiency in management process. For managers to respond well to global financial crisis, they need to increase rapidly new products, and change structures of markets, which can outpace risk development. For effective management, managers should adopt traditional approaches, which allow individuals to use different instruments in handling such risks. For instance, risk managers should account for liability, and property risks. On the other hand, the treasurer needs to manage financial risks that involve interest, and exchange rates for the organization to run well.
In UK, the management skills that need to be enforced for managers to respond well to global financial crisis are involving organization, and the government to overcome the crisis, and revive economies. In addition, managers strike new balance between the government and the market and also incorporate social and economic strengths to curb finance issues. UK also incorporates strategies that boosts growth, and instill confidence to allow the staff of the organization to handle financial crisis in the country in an appropriate manner.