Monday, December 12, 2011

Approaching 2012

Trying to project 2012 is like reading tea leaves. Who's willing to make an informed, detailed forecast and be comfortable and confident about it? The variables are too numerous, too complex, too bewildering.  If you are a finance professional, an MBA student or a Consortium alumnus, how do you brace and prepare for next year--a year of turning points and pivots with Europe unable to make up its mind about a corrective course and with U.S. elections hovering?

By now, we have grown weary of the tail end of 2011 and are ready for the year to get going. Early in 2011, business and financial signs were uplifting. We were poised for a sustained upturn until we fell off a cliff in August. Since then, we've feared a repeat of the fall, 2008, with a different set of plots, twists and finger-pointing.

The plot this time revolved around the bickering in Congress about budget deficits and debt levels and bickering in Europe about debt levels and budget deficits. The collapse of MF Global and its unexplained loss of a billion dollars of customer funds caught everybody off guard. Jon Corzine, its CEO, was supposed to have brought Goldman magic to the struggling futures brokerage. Insider-trading scandals, pending financial reform, and general economic malaise complicate the plot.

Markets meanwhile swooned out of control, with a mind wandering on its own, reacting irrationally to whatever announcement, statistic or trend happened to be the worry of the day. 

Financial institutions, rebounding with a blaze with 2010 profits and gearing up to hire in large numbers, began to stumble. Trading losses hurt their bottom lines, and many are still crippled from mortgage-related businesses. It didn't help in late 2011 when the public perceived big banks were creating fees (ATM fees, checking-account fees, debt-card fees, whatever) out of the blue, unnerving retail customers.  Financial institutions around the globe continued to duck slings and arrows from critics, pundits, politicians, and economists.

Nonetheless, amidst this apparent mess, lately there has been a quiet seepage of good news on employment fronts, retail spending, and general confidence. Facebook still wants to proceed with its public offering, and major banks everywhere continue to push hard in certain areas--wealth management, community banking, e.g.

What do finance professionals--both the MBA student and the experienced, senior executive--make of this confusing environment? How then do they approach 2012, when many expect a market holding pattern as Europe endures a few more scuffles before it figures itself out?

For MBA students, including Consortium students across the country, the environment seems like a whirlpool--enticing, but constantly stirring. Students are unsure when and how the waters will calm down. They are forced to adopt a Plan A, then a Plan B, and likely a Plan C.

Financial institutions are sending mixed signals. They want to hire more interns and first-year associates in private wealth management, in corporate strategy, in treasury, in corporate banking, in risk management, and in spots in Asia. But then they change their minds, reduce their expected hiring numbers, or announce large-scale cutbacks in the areas they previously promised to emphasize more.

Students are wooed by major institutions, but they know they must be purposeful and diligent in finding the right spot at the right place.

More experienced finance professionals are thankful they are in substantive roles. But the memory of 2008 is haunting. They endured the crisis, many survived it, some repositioned or rebranded themselves and landed elsewhere. However, they know what can or might happen. Although 2011 is not 2008, they can't help but wonder whether a Euro collapse could be more devastating than a Lehman downfall. How do we, they must ask, prepare individually for what could happen in a way that we weren't prepared before?

Experienced MBA graduates (including many Consortium alumni in finance) know better this time around they should take efforts to manage the uncertainty around them or shrewdly insulate themselves from career risks that may or may not happen.

Experienced professionals, however, could be the ones who guide younger MBAs who are unsure if a financial hurricane or financial sunshine looms ahead. They can compare the current scenario with other periods in recent finance history. Is this a scaled-down repeat of 2008? How do these times compare to periods of market upheaval or market confusion during the dot-com blow-up of the early 2000s or the maddening sequence of Long Term Capital, Russia and Asia defaults in 1998? How is the industry better prepared now (or less so) than in struggling times in the past? Are we in the midst of a real recovery, but we don't see it because we are blinded by the turbulence across the Atlantic?

More senior professionals, in a mentoring role, can advise younger professionals and students on how to focus on daily, immediate tasks and have confidence in what can be controlled--the next project, the next presentation, the new opportunity to learn.

Approaching 2012 is like turning a corner. Perhaps around the bend lie opportunities, optimism, profits and improved times--not the daunting signals of a crushing, long-term slowdown.

Tracy Williams

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