Skip to main content

Do markets have a DNA


I was reading the news article "Former banking bosses say 'sorry' " on the BBC website.

On being pushed by the Treasury committee, Lord Stevenson, former chairman of HBOS, said the mistake the bank made was a failure to predict the credit crunch, which effectively froze access to new funds.

"The fundamental mistake of HBOS was the failure to predict the wholesale collapse of the wholesale markets," he said.


Till now I have been reading of credit crunch and recession in the economy.

Where's the money gone ?

I can relate the credit crunch chain of events to the Oyster Card system in London Underground when it fails due to a technical problem. It results in total chaos . There is no ticket checks since the system has failed and the gates where the card reader is installed kept open. Then there is no difference between passengers with tickets or without tickets and everyone takes a free ride.

I occasionally watch Jeremy Kylie show or Maury Show. The have gradually moved from lie detector to a DNA test to determine the truth. Today DNA test is a precise way to determine the paternity, solve crime and also trace the roots of the family.

What about the markets ? Is there no way trace the money where it has disappeared !!!

Mr Hornby conceded to the the Treasury Committee that the culture, where bankers can receive many times their salary in cash bonuses, did need to be looked at.

"The bonus system has proved to be wrong. Substantial cash bonuses do not reward the right kind of behaviour," he said.


What has happened to the Corporate Governance Standard where there the remuneration committee decides on the pay of executive directors ? Who pays the price for the excessive risk that the executives take for the bank ?

The most appalling case is that of Satyam Computers where the Auditors (Big 4 firm) failed to notice the Cash balances on the Balance Sheet of Satyam does not exist in the bank accounts.

In all the cases, these are best of banks or auditors !!!

The questions I would like to ask:
  • Is the current laws and regulators geared to determine the source of the problem ?
  • Do we require techniques and technology for the market as sophisticated as DNA Tests.
Please share your thoughts on the subject and whether you are affected by the credit crunch.

Regards,


Santosh Puthran

Do you like to be updated in Accountancy ?

Click here to get updates by Email in your inbox
Or

Subscribe in a reader

Visit MA Stores ? You will find something you are looking for ....








You may also like to read

  1. Ethics on ACCA website 11-Feb-2008
  2. Combined of Corporate Governance UK 20-April-08
  3. Strategic Drift
  4. Are you following a tractor
  5. Corporate Governance and Audit in India - BS
Post a Comment

Popular posts from this blog

Learning Curve Theory

Learning Curve Theory is concerned with the idea that when a new job, process or activity commences for the first time it is likely that the workforce involved will not achieve maximum efficiency immediately. Repetition of the task is likely to make the people more confident and knowledgeable and will eventually result in a more efficient and rapid operation. Eventually the learning process will stop after continually repeating the job. As a consequence the time to complete a task will initially decline and then stabilise once efficient working is achieved. The cumulative average time per unit is assumed to decrease by a constant percentage every time that output doubles. Cumulative average time refers to the average time per unit for all units produced so far, from and including the first one made.

Major areas within management accounting where learning curve theory is likely to have consequences and suggest potential limitations of this theory.


Areas of consequence:
A Standard Costing

Throughput Accounting

Throughput accounting (TA) is an alternative to cost accounting proposed by Eliyahu M. Goldratt. It is not based on Standard Costing or Activity Based Costing (ABC). Throughput Accounting is not costing and it does not allocate costs to products and services. It can be viewed as business intelligence for profit maximization. Conceptually throughput accounting seeks to increase the velocity at which products move through an organization by eliminiating bottlenecks within the organization.


Cost (or Management) accounting is an organization's internal method used to measure efficiency. Since no one outside the organization uses such internal accounts for investment or other decisions, any methods that an organization finds helpful can be used.


Throughput accounting improves profit performance with better management decisions by using measurements that more closely reflect the effect of decisions on three critical monetary variables (throughput, inventory, and operating expense — defin…

Resistence to Change - Approaches of Kotter and Schlesinger

The Six (6) Change Approaches of Kotter and Schlesinger is a model to prevent, decrease or minimize resistance to change in organizations.
According to Kotter and Schlesinger (1979), there are four reasons that certain people are resisting change: Parochial self-interest (some people are concerned with the implication of the change for themselves ad how it may effect their own interests, rather than considering the effects for the success of the business)Misunderstanding(communication problems; inadequate information)Low tolerance to change (certain people are very keen on security and stability in their work)Different assessments of the situation (some employees may disagree on the reasons for the change and on the advantages and disadvantages of the change process) Kotter and Schlesinger set out the following six (6) change approaches to deal with this resistance to change: Education and Communication - Where there is a lack…