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23
Jun
2009

No matter where you go, from Brazil to Singapore, the buzz all around is Financial Crisis in the world. I would call it financial, if it comes out from the strategically worst financial planning. Actually there was no financial planning but greed and irrationalism that brought the world to this financial dilemma. The crisis must therefore be rationally termed as “Financial cum Functional Crisis”. It affected the companies financially but cause of the failure was functional.

It is obvious that if someone tries to be a part of the speculation regime, the strategy stays behind. It is all about tactics and short term planning. It has happened in the world. Companies like General Motors and Chrysler got hurt. They were interested to earn more by their investment functions than production one. The priorities in business can define success or failure. We can have many good Returns on Investment (ROIs) in the market. Going for higher return will have some risks. If risk is about diversion from main business activity, it will be crucial. Once the speculative investment opportunities prove threatening, We lose our main business as well. Calculations are important part of business but business is not all about calculations.

I was surprised when I came to know that General Tauqeer Zia of Pakistan Cricket Board invested millions of rupees in Bonds and Securities. He was the soldier by profession and Pakistan Cricket Board was not an investment company. This was the national money but utilized unaccounted. I have no other concern but how S.E.C.P. (Securities Exchange Commission of Pakistan) could ignore the trust or board performing investment functions. If they have permission of these activities in memorandum, so why they allowed them? This is again a real example of functional irregularity not financial.

I have given a presentation couple of months before. It was about current business scenario. I quoted one Japanese verse i.e. “Tada Yori Takai Mono Wa Nai” means “Nothing is more costly than some thing given free of charge”. The way financing grew up in last one decade, it looks every thing is free. Credit cards swaps, cars on leasing or any thing, whatever you want. Today every one is thinking about sub prime mortgages in U.S.A. The U.S. banks and financial institutions were financing NINJA (No Income No Job and Assets) folks. They were not interested in seeing who is worthy of having loan. The repayment was not in consideration. Or they probably were thinking that assets shall always increase in their value.

A clear proof of this is the total value of currency, interest, swaps and options in 2006 was US$ 286,000 billion. It increased from US$ 3450 billion in 1990s. On the other hand gross domestic production (GDP) of the world in 2008 was US$ 78,360 billion. The percentage of paper value over genuine production was 8300%. It shows nothing but a lot of air that was present in the system. Air always gets out so it has.

It is not only companies that crossed the limits of their roles but individuals and house holds too. I met a lot of common household women when I was in Realty Sales Career. They had been talking like fund managers. It was the first time when I realized, this ship will sink one day. In Dubai I have seen it happening. They were the people with no rationale and expertise who were known as investors. Finance, Insurance and Real Estate had become FIRE. The FIRE that was available on negligible charges. This poor assessment and tactical way of planning is hurting every one today. People can say whatever they want, but the fat is that this crisis is generated by their own greed.

It is the call of time that the world must learn more. They can get a well controlled financial and business system by defining the roles of all stakeholders. Free economy doesn’t means irrational economy. It is all rationality that brings best out of many investment alternatives available.

Note: Attached is my presentation on Global Business (in March 2009)


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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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