Wednesday, January 27, 2010
Thursday, January 21, 2010
Awan approached the session as a b-school seminar to those with interests in the subject, but without in-depth background. Many know microfinance to be lending in small amounts to those in less-developed regions, but Anwan's presentation went far beyond that.
He was successful in covering two centuries worth of information in 60 minutes and getting listeners up to speed on an important topic. Participants included CFN members, Consortium students and alumni and others interested in the topic. Awan is based in Yemen and is an expert in the topic based on years of experience in the field.
In the first half, he provided basics and offered a history lesson. What is microfinance? What is the difference between microfinance and what we hear also as "microcredit"? How did both evolve through the years?
Awan described how microfinance dates back to the 17th-18th centuries when community or regional groups came together to provide loans in rural areas to support farming, especially in Ireland and Germany. Over time, microfinance evolved from farm-related loans to expanded efforts to support those in poor regions around the world. Until the 1990's, microfinance's primary goals were social--to "alleviate poverty and suffering" and to increase "productivity and incomes" to those in poor regions and in agriculture.
Awan explained how modern microfinance sprouted, based on the extraordinary contributions of and principles implemented by Dr. Muhammad Yunus in the 1970's, who formed what is now Grameen Bank and later won a Nobel peace price for his efforts.
Awan told how by the 1990's, as commercial institutions learned of both the social and economic benefits, microfinance's goals were expanded to include generating financial returns, as well. This was due to the large number of commercial interests involved (including private investors, fund groups, and commercial banks).
Commercial banks had not been pioneers in the field because they historically avoided the perceived high risks in these loans. (Anwan reminded participants that these "high risk" loans in some areas have had better performance than other commercial lending.) Since the 1990's, many commercial banks, he said, have become participants by "downscaling operations" in certain consumer-related businesses to accommodate microfinance activity.
Banks, institutions and funds learned returns could be reasonable and risks could be managed. Awan said, "There is a focus on a double bottom-line" (a focus on financial returns and social benefits (as measured by "social performance indicators")).
Microcredit is a subset of microfinance. While microcredit refers to lending activities, microfinance today now covers an array of financial services, including providing money transfers, savings and investments vehicles, and insurance to those in the target groups.
During the session, Awan described current issues and challenges in microfinance. For example, "Africa remains the biggest challenge," he said. Balancing on the spectrum between achieving social goals and financial returns will always require attention; many believe it is possible to achieve both.
Anwan also delineated many ways people can pursue in interest in microfinance if they have it--in a career, or as participants, contributors, lenders or volunteers. Because of the novelty of interest and because microfinance is not widely taught as a rigorous discipline in universities, the field hasn't always attracted people in numbers or with sufficient talents.
One of the best known business-model examples is Kiva, the microfinance organization that matches specific borrowers, who tell their stories on its website, with institutions, organizations and individuals who want to participate and lend. Anwan explained how Kiva has been effective.
For those interested in details of the presentation (including a recording or other information), please contact Rachel Delcau at the Consortium at firstname.lastname@example.org. Anwan welcomes follow-up questions.
In Part II of its microfinance series, CFN will present an actual case study Feb. 4 at 6 pm EST. Clint Wilson, based in San Francisco, head of CnCpartners, will explain the business model behind his microfinance organization and will show how those interested can follow up. His business focuses on microcredit and other microfinancial services in the Philippines. Those who are interested should register in at http://www.linkedin.com/ in the CFN group or contact Rachel Delcau.
Tuesday, January 19, 2010
We hear about the long hours in finance--the weekends, the late nights, and the interrupted vacations. They are real. MBA students huddle among themselves to discuss how they will prepare for them. New corporate-finance associates or research analysts brace for the worst--based on epic horror stories about unending workweeks and exhausting days.
In such environment, how do you maintain stamina, perform well and balance work and personal life? Is it possible in many finance roles?
All depends. Traders lead hectic, compact, frenetic daily lives. They get to the office near dawn, and most are long gone by six. But in between, they seldom have time to breathe, get water, or daydream. They operate on the edge and let you know it. So much is at risk, and quick, firm decisions must be made.
The pace of a corporate-finance associate, venture capitalist, or research analyst is a marathon--the stuff of legends. There are deals to analyze and review, client pitchbooks to prepare, dozens of Excel spreadsheets to sensitize, countless scenarios to sensitize for, investments to dissect, and industry statistics to update and present.There is the suddenly scheduled pitch to a new client to win a mandate. There are whimsical, demanding clients who want and expect an update on advice in acquiring another firm or divesting a business. There are demands from senior manager who expect new business, new clients, and revenue growth from quarter to quarter.
There is competition--the inclination or suspicion that another firm is working twice as hard to win the same deal. There is fear of loss--from a losing trade or investment, from a borrower who risks defaulting on a loan, or from a potential client that muddles over choosing between your firm and another.
There are Sunday afternoon conference calls, when friends hope to meet you for brunch. There is the out-of-the-blue "request" on a Friday night from a managing director to work on a new project and get it done by Monday morning. There is the Saturday-morning summons to the office for an emergency meeting to manage a client in difficulty. And there is pressure at 10 pm on a Tuesday night to learn everything possible on a new interest-rate option, analyze it and present it crisply before the next morning.
And there is technology, the advantages of which appear to be disadvantages occasionally. Technology keeps you further plugged to office demands: There is the laptop you haul everywhere to finish projects, presentations and financial models. There is the "Crackberry" you are expected to check every other minute for the latest e-mail demand.
Technology makes you accessible all the time and keeps you attentive to make it possible to finish the 30-page Excel spreadsheet, the 100-page pitchbook, the 150-page industry review, or the 25-page client-business update. Of course, there is the senior manager who hauntingly reminds you she wasn't blessed with such tools and prepared the same spreadsheets with a No. 2 pencil.
As a result, there is a paranoia over errors, mistakes, wrong conclusions, misinterpreted data or the possibility of misvaluing a trade, misunderstanding an investment, or losing the deal to a known competitor.
But all is not an ordeal. Many bask in this atmosphere, buoyed by an electric sense of urgency, the excitement of working on a headline deal, the satisfaction in helping a client rebalance a large portfolio, or the thrill in completing an important presentation.
MBA students from top schools, including Consortium students, should know this pace. They lead a similar life on campus. They understand pressure and mind-boggling schedules. They understand what they need to do to approach monumental tasks in a tight timeframe. What they will want to do is transition from a campus to a corporate pace, where objectives differ and tempers might be swirl or moods swing based on client or market activity or investment performance.
Many who have been at it for years can tell you, if you are fascinated by finance, you don't watch the clock. If you're attracted to the the thrill of the deal, the trade, the client, late-night research on something brand new, you enjoy being immersed in the the project at hand.
If you enjoy your current role and if your contributions are valued, you can tolerate long hours and interrupted vacations. In the heat of the moment and with a specific goal in mind, you find the adrenaline to keep going.
Therefore, if it's possible, find a finance niche or role that will keep your interests and adrenaline alive, where you will be motivated by new concepts, new ideas, successful deals, and meaningful accomplishments. That's not always easy to do. Figure out what motivates you--clients, deals, analysis, research, finance theory, investments? Push to find it. Fascination and interest can keep you going when it's Sunday morning or 10 pm Friday night.
But even so, you still need to find the right work-life balance. Otherwise, you risk physical burn-out. No matter how much you are fascinated, exhaustion and mental fatigue can set in. One senior manager once called it a banker's law of diminishing returns. After long, exhaustive, consecutive hours on a project, deal or analysis, at some point, productivity declines. All work done thereafter is effectively a negative contribution to the team's overall effort. He advises sending the banker home after "x" consecutive hours, because the banker's contributions after that point are harmful to the deal team, the client and the bank. Errors encroach, and there is a noticeable lack of creativity or freshness in ideas.
What can new MBA's and those in their early years do? How do you dare fine-tune work-life balance, when senior managers talk the talk (about work-life balance), but seldom walk the walk (talk it, but still summon you to the office Sunday morning for an all-day project after you had planned a weekend trip to the shore)? Expectations run high, and sometimes it's near impossible to tell a nervous manager while so much is at stake you need to take a break to revive the senses.
Manage this balance carefully, and take it seriously. Get into a habit of separating work and personal life and establishing a cut-off time each day to devote to personal objectives (family, friends, hobbies, etc.). Remember the above law of diminishing returns. Take advantage of having access to work from home.
Discuss the strains on this balance with managers, who too are trying to manage the same.
Become an expert at completing projects and accomplishing tasks efficiently. Develop good work habits to work rapidly. Be adept at prioritizing and managing time. Focus on the task at hand to avoid distractions. Exercise regularly to maintain stamina and be alert always. All this helps you carve time for a personal life and helps you work effectively (and, let's hope, leads to outstanding results).
Don't be a workplace hero; take time off and take vacations. They give you a chance to regain freshness, regroup, rethink and return with an eagerness to get back into the fire.
Most of all, throughout it all, step back from time to time and keep proper perspective about everything. The deal, the trade, the client, the job, the firm. Always.
Tuesday, January 12, 2010
But what are these special, mysterious skills all MBA's, even the best, fret about? What do they mean? What do "technical skills" encompass, and how important are they in interviews and entry positions?
"Technical skills" in finance can be interpreted broadly. They mean different things to different employers, recruiters, banking heads, department leaders, or trading-desk managers. They all say they seek to hire the best among those who are technically proficient. In the first years on the job, they seek to weed out those who are technically weak or deficient.
However, whether the position is in private banking, corporate finance, investment research, brokerage, equity trading, some financial institutions don't define carefully such skills, nor do they always assess competence consistently or fairly. They just expect you to have them. Some firms will delineate and define them specifically and will measure progress against year-to-year expectations.
In general, technical skills refer to a mastery of basic skills and in-depth knowledge in finance, accounting, economics, capital markets, financial modelling and quantitative analysis--subject matter covered in all top business schools. When an MBA interviews for an internship or full-time role, financial institutions want to know if you (a) can demonstrate near-expert knowledge in all such subjects, (b) are sufficiently trained in the area you are interested in, and (c) are versatile enough to master new topics.
Financial institutions don't want to provide tutorials on what they perceive as the nuts and bolts of analysis, deals, trading, investing or research. During interviews or in the midst of summer internships, with a detective's eye, they seek to detect technical weaknesses and reject it. Almost all MBA finance students from top schools are adequately trained for the positions they covet. Therefore, banks, investment firms, brokerage, hedge funds and asset managers will try to select "the best" among an already strong pool.
Indeed technical skills are important in corporate finance, equity research, investment analysis, and trading. They help firms win the deal, value a firm, price a security, solve financial problems, gain a new client, book profitable trades, hedge risk, or make proper investments. In such a madhouse, banks, funds and companies won't take time to teach MBA's the complexities of the task at hand. They want them to hit the ground running.
During the course of a long career, a mastery of such skills will always be important. For many, it will set them apart from the pack. They become "go to" people--experts in a particular aspect of analysis, trading, or deal-doing. However, over time, other skills and areas of competence will become just as important--if not more important: client and sales skills, leadership and management abilities, and business generation.
But technical skills in those first few years must be mastered. Investment bankers, for example, should know coldly the concepts of firm valuation, financial statement and cash-flow analysis, and accounting. Budding traders should have both a textbook and intuitive understanding of markets, market behavior, risks, and market movement. Investment managers should know portfolio theories, optimal asset allocation, and asset classes.
The textbook knowledge from business school will be an invaluable foundation. You will use the principles and basics over and over--especially as a language or a stepping stone to learn new financial products, to manage more complex transactions, or to craft new ideas to help a client.
But textbook knowledge alone won't be sufficient. You have to keep up--keep up with what's new in the field, in the industry, and in economics, markets, accounting and finance. That might entail new theories, new practical applications, new financial methods or instruments, new rules and regulations, new and evolving capital markets, new geographies, or new ways clients use old financial methods.
For example, in accounting today, those technically strong should understand new concepts of classifying trading assets and earnings (Levels 1, 2, and 3) or know the impact of new rules that permit firms to "mark to market" debt obligations. Moreover, the technically strong might have an informed view about new rules (and may not always agree with them).
Beyond what was learned in the classroom, for example, the technically strong will have an in-depth understanding of why there is much ado today about the Chinese currency and the implications of its pegged rates on the U.S. economy.
The technically strong will know inside and out options-pricing theory, bond pricing, and derivatives markets. They will also understand how and why actual market behavior might deviate from finance theory and Nobel-winning equations. And they may have ideas about how the system can avert a collapse in financial markets in the future.
Technical competence also extends to a thorough understanding of client industries. Those who stand out will understand the markets, trends, and outlook of the industries of the clients they advise, the companies they analyze, or the investments they pursue. In turn, they'll understand how clients in specialized industries will have specialized financial needs. (The ongoing financing requirements of an electronic start-up will differ from an established insurance company.)
Business schools don't always tell you, but banks and investment firms often put adeptness at the computer under the broad "technical skills" umbrella. They expect bankers, traders, and researchers to be magicians with spreadsheets, financial modeling, case scenarios, and model sensitization. An MBA may have an expert's understanding of efficient-markets theories, may know all the accounting rules for biotech companies or may have developed a stunning model to compute the precise market value of Facebook, but if he can't work swiftly and confidently in dozens of Excel spreadsheets (all at once), he might be assessed as technically inadequate.
Under the same "technical skills" umbrella, some firms will include written and oral expression. They want to see if you can transfer the information, models, theory, case scenarios and ideas into detailed, practical presentations--something senior managers will comprehend and clients will use. Banks and companies presume if the pitchbook, presentation or summary is incomprehensible, illogical, and shallow, then its author must not have understood "the technicals."
Financial institutions prize creative thought. Those who show it and have an ability to come up with new models, new ideas, new approaches, and new methodology--consistently--will be deemed to be technically strong.
What can the b-school student, the corporate-finance or private-banking associate or trading apprentice do to prepare for this environment--beyond what she has already done the past few years?
In business school, learn the basics well and understand the vast amounts of material. It's not enough to memorize terms and principles and speak in jargon. Master the concepts.
While on the job, polish those skills by embracing and immersing yourself in all technical situations (deals, trading, modeling, research, presenations, investing, analysis, etc.) and by taking the time to do homework to keep up with innovation and new concepts.
Develop useful, ongoing habits to learn new material. Make it a point (by taking extra time) to understand all that happens around you in a deal, with a client, in a trade, in an investment, with a product, or in a transaction.
Network and ask other experts who will take the time to explain, show and demonstrate. That could be a b-school classmate in currency trading, a mentor in bond research, or a colleague in technology banking, etc. Consortium MBA's should reach out to other Consortium alumni or other alumni from the same school. Because of the connection, they will likely take the time to teach and show.
Watch for jargon. In financial institutions, jargon is contagious. Whatever sounds sophisticated and current flies around fast. Some use it because it can be simple expressions of complex material. Some use jargon, acronyms or slang to give the impression they understand something others don't. Some will use jargon to explain jargon. Some use it to hide deficiencies. The finance industry is known for substituting new jargon for old jargon to connote something more favorable than before. (Remember how "junk bonds" became "high-yield securities" in the 1990's?) Learn to sift through jargon and understand the concepts behind the term. Dare to ask questions of those who use it.
In the fast-moving, deal-making, trade-booking, money-moving world of finance, senior managers don't often take the time to evaluate carefully younger professionals. When asked to appraise associates, some rely on rash, subjective judgments of technical ability. Such appraisals might be based on one moment in time, one event, or one impression.
Or they may be based on something having little to do with technical ability (a confusing e-mail discussion, a tepid response to a question in a client meeting, or an imbalance in a financial model). Watch for subjective assessments of technical ability, and when you perceive them to be unfair or balanced, ask for examples while politely asking for constructive feedback to improve.
Most of all, keep up.
Know the latest financial innovations, finance topics, the important issues and priorities throughout the industry, and outlook in capital markets and certain industries. Know about and have a view about impending financial regulation and possible changes in financial markets.
You want to make sure you're in the dialogue or right in the middle of the discussion of deals, transactions, clients, trends, and forecasts. If you're consistently keeping up and are admitted to the dialogue, senior managers will give you the "technically competent" nod.
Wednesday, January 6, 2010
Mentors--who often ask how they can assist those who follow their corporate trails--can help in this effort. Not just CFN mentors, formally assigned by the CFN program, but any informal mentor, senior professional, or Consortium alumnus who has contact with a Consortium MBA student.
With students now indoctrinated into b-school pressures, routines, and workloads, how can mentors help in stage two of the summer-job search?
1. Interviews. Students are looking for help in polishing interviewing skills. They know the basics of preparation, but want to know how to stand out among the crowd, how to make a special impression, how to thrive during tough technical interviews, how to handle seeing 5-8 people in one day, and how to handle nuances (dress, confidence, comfort levels, etc.). Some are looking to rehearse with experienced people.
Mentors who have been on the other side of the interview table and who know exactly what banks, firms, and funds are looking for, can help or guide students before they head to New York, Chicago, Charlotte or San Francisco for second rounds.
2. Plans A, B. Many students have a Plan A and Plan B. Some have a Plan C: They ask, "What if I can't get on interview lists of my first choice? Or what if there are no opportunities in my chosen sector?" Mentors can review these plans with students and help identify opportunties or next steps.
In the process, mentors can help students survey more realistically what's out there. They can (a) provide leads for other (perhaps better) opportunities or (b) help students learn about similar positions (called by something else, but essentially requiring the same interest and skills). A student interested in municipal finance may consider working for a municipality. One interested in mergers/acquisitions may consider corporate strategy at a Fortune 500 company.
3. Keeping Up to Date. Most interviewers tend to refer to current events, deals, transactions, topics, and issues. They expect students to know what's go on and have an informed opinion. While immersed in advanced accounting, intro finance, or macroeconomics texts, students find it a challenge to keep up with evolving issues in capital markets and corporate finance.
Mentors can help students digest the headlines, prioritize important issues or even teach them about the complexities of specific market activity or corporate transactions. A mentor might help a student understand why GE sold its stake in NBC Universal or help him/her understand why even Toyota faces challenges in the auto industry.
4. Off the Beaten Path. As students grapple with finding the right internship, mentors can help students think about the job market in different, novel ways: Have students thought about banks outside the money-center banks or top five? Have they explored business management, risk management, community development, or retail banking? Have they considered opportunities at securities exchanges, securities clearinghouses, regulators, or commodity-trading firms? Or how about finance roles in foreign countries or in major non-profit organizations?
5. Next Year's Openings. First-year students are striving for both 2010 internships and 2011 full-time offers. Hence, companies, banks and investment firms are already projecting what they need 18 months from now. Mentors can help students identify the sectors that will grow and have higher demand for MBA's at that time.
Do firms have long-term plans to grow in private banking, equity research, derivatives clearing, energy finance, carbon-cap trading, cash management, financial brokerage, or inflation-hedge investing? Do firms have long-term plans to grow their businesses on the West Coast, in the Southwest, or in Dubai, London, Seoul, or Singapore? Mentors--especially those in the midst of such long-term planning at their respective firms--will offer clues to help students chase after the right opportunities.
6. Eyes Open, Contacts Fresh. Most of all, mentors help students keep their eyes open and focused and keep their networks and contacts fresh and useful. They make a difference.