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07
Jan
2012
There is always a world beyond Financial Projections

Financial consultants, financial analysts or advisors have a great chance to write a new myth in the disciplines of financial projections, modeling or engineering. But what about the period from 1996 to 2006 whereby they had all the brisk chances to present the risk managed business world or economies that anyways conclude over the maturity of risks and we have reached the world in crises.

 

I have written a lot over the causes of financial crises and you must be well aware of the facts and analysis that has been a part of newspapers, TV shows and research journals. I have even termed it as a functional cum financial crisis in 2009 other than a popular term i.e. merely financial crisis or crises.

 

With all the myths of what has been wrong there is another angle. This is the angle that is actually based on the ignorance of consultants, analysts, financial managers and strategy executives of the companies. I state it as “Fundamental Crisis of synchronized management of different scenarios that actually shape the totality”.

 

In today’s world financial profession is still viable. The corporate world and governments are more willing to invest in their risk management framework. They are more concern to know exactly what has been done and what can be done to avoid further crises in future. But the historical findings of recent events explore some exclusive key facts that can define the ignorance and actual cause of what has happened.

 

The time when financial innovations were on high speed, the time when the financial engineers were trying to create a new structure to fund elegant objectives of business concerns every week, the time when opportunities were meant not to be missed the people of financial art focused lesser on control mechanisms of those innovations and pace. They were rather making them merely financially viable.

 

I like to quote a financial analyst who explained it in a beautiful way that if you want to produce cars that runs faster than previous ones; you indeed need to strengthen their breaks. This was the thing that people who manufacture financial vehicles forgot in recent pre-crises age.

 

The risk management was merely focused over the data that was available or that can be generated. The risk where there was no quantifiable data available was ignored. They committed the crime of creating the financial models based on short term standings of scenarios to forecast long term shape of businesses. Some where those so called top consultants were relying more on data than the risk herself.

 

I never like to quote it, even if it is indecent but it really represent the scenario truly that some so called professional use ASSUMPTIONS in the meaning of making “ass of you and me” [ASS U ME]. It is simple that they destroyed their clients first and then they got the same. And the amazing fact is that those professionals were passed out from the renowned business schools of North America and Europe that claims supremacy over business education and training.

 

Even there are instances where the financial model was created in more magical shape without having a look at weaknesses of organizational model to pursue the numbers generated by assuming generally.

 

It is not all about financial consultants that did things in a wrong way. Companies and their top leadership also committed blunders. Even a top financial consultant can produce top mark financial model and risk management framework but inability or lesser focus to strengthen corporate governance can turn things in negative. This is where corporate leadership must hold responsible.

 

No one can practically consider that the information, top framework of risk management or financial model can work without the power of organization to act or react. The organizations that rely too much over a created business or financial model than their governance ability can hardly converts the plan in action. Before creating the scenario it is highly required that companies would focus on what they are actually capable to do other than attractive features in business or investment environment.  

 

I think in the world of today where a lot is offered to learn from what has gone wrong we still have a chance. We must have to create coordination between financial models and business judgments. The more we like to innovate in term of financial products the more we have to focus on control mechanisms for the same. Otherwise an attraction can be distraction.

 

It is indeed necessary that Risk Management has to be deriving by comprehensive quantitative and qualitative analysis. Even it is has to be considered that Risk Management is far superior to Risk modeling or mere measurement of identified risk. The fact of management anyways cannot be completed without proper governance. To understand our governance model we have to work a lot and it must be prior to develop a financial or risk model. A governance weakness can also be a big risk to carry risk management function.

 

 

Conclusion or Central Idea:

Companies need to create a resilient financial and business infrastructure that can respond with policy framework rather than technical framework.  It is a time when the whole business world has to admit that success and long term growth in business is far beyond financial projections. We need to live in totality. If we live in pieces and anticipate totality then the pieces even can go disappear.            


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Dace Johnson Says:

You hit the nail on the head. How can I have an honor to contact you?

07 - January - 2012 03:52:14 PM

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Mr. Omer

Mr. Omer [1982 born] started  his professional career as a commercial / investment banker after achieving Gold Medal in Finance at master level from University of Karachi in 2006.

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