The newspapers reported Sir Alex Ferguson moaning about the power of TV. The sort of remark you make when untouchable and close to retirement. Now as we know (at least prior to the sale of Cristiano Ronaldo) that the Sky deals are probably responsible for Sir Alex’s big wages. However, he is not the only one. Financial services was or is full of such people. The obvious ones, presumably also with millions, such as Lords Myners and Turner seem to be forever critical of the City.
This brings me on to the more important point, Is it possible to be independent in a review of any aspect of financial services without being totally ignorant of it? The answer is no, This begs the question that if you review decision making then it makes you attractive for your next role in the private or public sector, could this influence your judgement. Politically, this was levelled at Neil Kinnock as he, his wife and family have clambered aboard the Euro gravy train (written with a degree of envy or is that jealousy) and has changed his anti-Europe stance from all those years ago.
Now, as regulators can also grab jobs in the private sector (with possible gardening leave or sabbaticals prior to the new role) this begs the question CAN YOU TRUST THE INDEPENDENCE OF JUDGEMENT OF SOMEONE WHO NEEDS TO WORK? Also, are regulators paid enough and knowledgeable enough? Bribing poor people is much easier!
Objectivity can exist.
Monday, 3 October 2011
Sunday, 11 September 2011
Risk management is rubbish at prevention of future risks
Is risk management rubbish at prevention of future risks? What are the major risks facing financial concerns? Unknowns. What are the unknown unknowns? You may have to use your imagination in any environment and those who predict something are not always that great unless they can demonstrate significant profits from the course they have taken away from orthodoxy. However when orthodoxy goes wrong eg with over-sophistication, no-one ever seems to spot it soon enough.
Let’s flesh this out. One of the biggest operational risks is caused by over-sophistication or in old-fashioned English being too clever for your own good or too clever by half. Companies and managers (like Governments) are far too clever and sophisticated in doing things but eventually it will end in tears as either the systems can’t cope, aren’t properly documented, staff shortages and even sabotages or inexperience, excessive staff turnover and loss of the key intellect and other staff etc may mean for instance the pricing does not work, the derivative is disastrous etc Documentation is only any good if someone else understands it and can be bothered to make that effort. So a thousand page manual is in theory good documentation. However in practice it is a waste of time as who will read it and remember it. Look at the ipod nano.
Risk management is poor as they need to be fully integrated with the (Internal?)Audit Function so that everything is thoroughly and regularly checked and understood. This is more so when companies are involved in joint ventures with financial concerns. The financial concerns should have the expertise (apparently) and the company pays accordingly. Also both parties should be handsomely rewarded. But as we already know (eg LTCM) experts and intellects are not guarantees of success all the time.
Monitoring does pick up many faults…but will it be too late?
Internal Audits need to be more pro-active and thorough. The system’s supposed to do this and it will not always be enough to spot check a few things.
Mistakes happen but the secret is to make ones that don’t matter too much. For instance typos are a nuisance here but unemployment vs. in employment is a huge typo (which I nearly made once in an e-mail).
Let’s flesh this out. One of the biggest operational risks is caused by over-sophistication or in old-fashioned English being too clever for your own good or too clever by half. Companies and managers (like Governments) are far too clever and sophisticated in doing things but eventually it will end in tears as either the systems can’t cope, aren’t properly documented, staff shortages and even sabotages or inexperience, excessive staff turnover and loss of the key intellect and other staff etc may mean for instance the pricing does not work, the derivative is disastrous etc Documentation is only any good if someone else understands it and can be bothered to make that effort. So a thousand page manual is in theory good documentation. However in practice it is a waste of time as who will read it and remember it. Look at the ipod nano.
Risk management is poor as they need to be fully integrated with the (Internal?)Audit Function so that everything is thoroughly and regularly checked and understood. This is more so when companies are involved in joint ventures with financial concerns. The financial concerns should have the expertise (apparently) and the company pays accordingly. Also both parties should be handsomely rewarded. But as we already know (eg LTCM) experts and intellects are not guarantees of success all the time.
Monitoring does pick up many faults…but will it be too late?
Internal Audits need to be more pro-active and thorough. The system’s supposed to do this and it will not always be enough to spot check a few things.
Mistakes happen but the secret is to make ones that don’t matter too much. For instance typos are a nuisance here but unemployment vs. in employment is a huge typo (which I nearly made once in an e-mail).
Sunday, 20 February 2011
Tax Haven or good economy? Barclays
If a country does not spend much on defence, and/or has low wages then it should deserve to do well in world trade and afford low tax rates. More so as the West does not do warfare for economic reasons, (officially? Iraq?). So criticism in the past about the Channel Islands, Isle of Man and Ireland are harsh!
Barclays pays low tax on corporate profits. Well if you have a tax system when losses can be brought forward to relieve tax on future profits...what do you expect!
Barclays pays low tax on corporate profits. Well if you have a tax system when losses can be brought forward to relieve tax on future profits...what do you expect!
Sunday, 30 January 2011
capital comsumption
Accounting for cost - capital comsumption
Note that I use the word consumption and not investment. What do I mean by capital consumption? The purchase of an asset which wears and diminishes in value and efficiency over time is what I cal capital consumption. How should this be done? If the asset works adequately then should there be an annual maintenance charge? And if the asset obsolesces over time? Glad it’s not my problem!
Note that I use the word consumption and not investment. What do I mean by capital consumption? The purchase of an asset which wears and diminishes in value and efficiency over time is what I cal capital consumption. How should this be done? If the asset works adequately then should there be an annual maintenance charge? And if the asset obsolesces over time? Glad it’s not my problem!
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