Strategies In Response To The Global Financial Recession Essay

Length: 4 pages Sources: 6 Subject: Transportation Type: Essay Paper: #54580394 Related Topics: Lehman Brothers, Global Governance, Financial Reporting, Growth Strategy
Excerpt from Essay :

¶ … Governance Following the Financial Crisis

Principles of Good Governance Following the Global Financial Crisis

Many high profile companies suffered a downfall following the 2008 global financial crisis. The meltdown spanned across various nations including the top world economies. Accusations on the cause of the downfall pointed to the failure by institutional investors inadequate monitoring of investments. In 2007, the collapse of the subprime mortgage market in the U.S. marked the beginning of the financial crisis. The escalating default rates and the decline in housing prices contributed to the economic meltdown. Companies such as AIG, Freddie Mac, Lehman Brothers, and Freddie Mae filed for bankruptcy protection (United Nations Conference on Trade and Development [UNCTAD] 2010). A series of government bailouts followed various financial institutions including HBOS, Citigroup, and Washington Mutual, amongst others. Key policy makers fault weaknesses in corporate governance that explain the financial crisis.

Following the adverse economic implications, top world economies commonly referred to as the G20 convened a situation meeting in Washington D.C. The meeting endeavored to create an 'Action Plan' for the completion of high priority actions in addressing the crisis. Recommendations from the meetings delved in the appointment of independent experts to look into the case with consultations with various economies and existing bodies (Watson, Vasudev 2012). Focus of the recommendations pointed to various activities such as the identification of the sources of systematic risks engraved in financial systems. Other activities included capacity development to address the crisis and a review of compensation practices about innovation and risk-taking incentives.

World major economies, including the United Kingdom, committed to utilizing the recommendations and principles to foster reliable corporate governance to avoid any future occurrence (UNCTAD 2010). Several consultations and discussions with relevant stakeholders reached various recommendations. For the UK case, board size including the qualification and composition of members reiterated the need for an efficient board. The role of institutional stakeholders heightened the need for the

...

The concentration of this aspect entails corporate governance. Most risk models utilized by financial institutions failed due to various technical problems. The behavioral side of risk management engages the use of the information within the organization. Further, it engages transmission of information to the board for oversight. Recently, attention on this principle focuses on internal controls that relate to financial reporting. It supports the need for external checks reporting.

Remuneration and incentive systems play a crucial role that influences the sensitivity of financial institutions. Recommendations in this aspect endeavored to monitor the company performance with the remuneration for top executives and the board closely. Good governance encourages matching compensation plans with the performance of the company.

Low-level incentive systems have encouraged outsized bets and risk taking. The action plan in this aspect entails a culture of mutual respect and shared responsibility. The principle encourages increased awareness of the status of risk management among staff members that explained the economic meltdown. In the end, strong support for an incentive compensation model should closely relate to the profitability of the firm and the interests of shareholders.

Setting the risk policy as a clear role of the board eliminates the blame game over assigned functions and responsibilities. Poor board oversight encourages distorted incentive plans and the deficiencies in risk management. Having the board to lay out clear strategies over this issue lessens the burdens of failed companies. Risks associated with interest and exchange rates affects boards of both financial and non-financial bodies. Other associated risks include investment and outsourcing risks. The lack of board performance explained the impact on companies including Siemens, Boeing, Airbus, and…

Sources Used in Documents:

Bibliography

Bainbridge, SM 2012, Corporate Governance after the Financial Crisis, OUP USA, New York

de Lange, DE 2011, Cliques and Capitalism: A Modern Networked Theory of the Firm, Palgrave Macmillan, New York

Hodne, Murphy, Ottenbacher, Ruggles 2013. 'Australia and the United States: A Comparison and Contrast of Corporate Governance Practices' Drake University. Available from http://faculty.cbpa.drake.edu/dmr/0301/DMR030105S.pdf (2013)

United Nations Conference on Trade and Development [UNCTAD] 2010. 'Corporate Governance in the Wake of the Financial Crisis' Selected International Views. Available from http://unctad.org/en/Docs/diaeed20102_en.pdf (October 2010)


Cite this Document:

"Strategies In Response To The Global Financial Recession" (2015, September 24) Retrieved January 17, 2022, from
https://www.paperdue.com/essay/strategies-in-response-to-the-global-financial-2154688

"Strategies In Response To The Global Financial Recession" 24 September 2015. Web.17 January. 2022. <
https://www.paperdue.com/essay/strategies-in-response-to-the-global-financial-2154688>

"Strategies In Response To The Global Financial Recession", 24 September 2015, Accessed.17 January. 2022,
https://www.paperdue.com/essay/strategies-in-response-to-the-global-financial-2154688

Related Documents
Global Financial Crisis: An Examination of One
Words: 2319 Length: 5 Pages Topic: Business Paper #: 44926685

Global Financial Crisis: An Examination of One Company's Performance Indicators The global financial crisis of the recent past has been the subject of much commentary, investigation, and debate from people around the globe and from all walks of life. Despite the fact that politicians and armchair policy makers have gone round after round in debates regarding the causes and the ultimate effects of this worldwide economic downturn, the real effects

Organization Behavior Global Financial Crisis the Most
Words: 3459 Length: 10 Pages Topic: Economics Paper #: 31736712

Organization Behavior Global Financial Crisis The most recent financial crisis has badly affected the Global economy. Individuals, businesses, and Governments; every entity has taken its impacts in one way or another (Burger, Coelho, Karpowicz, & Tyson 2009). Since its arrival, financial crisis has posed big threats to the world markets. The countries are trying to overcome the bad impacts of this crisis but have failed to recover their positions due to severe

Qantas the Global Financial Crisis
Words: 1902 Length: 6 Pages Topic: Business Paper #: 10436193

This is a poor use of the company's capital, since the global economy remains weak and since Qantas faces intense competition on numerous fronts. While increasing the debt component of the capital structure would lower the overall cost of capital, it would also increase the risk that the company faces. The operating environment is turbulent, not just from competition but from high fuel costs as well. This implies that

Global Economy
Words: 3911 Length: 10 Pages Topic: Economics Paper #: 42403534

Global Economy Key Player & Background As the spokesperson for an interest group representing an economic think tank, I am issuing this policy statement to detail the implications for the U.S. economy of a sovereign default in the Eurozone. As Reich notes, the financial crisis in Europe is threatening to spread to the United States. If there is a default in Greece, a panic could start in financial markets, spreading to other

Financial Analysis Mcdonald's Like Many
Words: 2973 Length: 7 Pages Topic: Business Paper #: 87490352

Conduct a benchmarking analysis As explained by Prasnikar, Debeljak and Ahcan (2005) benchmarking depends on comparing between two activities of an organization and another. In our case, we shall compare McDonald's activities and those of its competitors, Burger King and Wendy's. • Best practices McDonald's as a main player in the fast food industry is concerned with best practices with the industry. To this end, the corporation has adopted some best practices that

Global Economic Crisis on the
Words: 8527 Length: 25 Pages Topic: Economics Paper #: 88136701

To an average individual within the United States however, the relevance is reduced, with importance only for gathering general knowledge on the country. The jurisdiction of the analysis expands as far as the data is available and does not constitute intrusion on matters of national secrecy. 2. Review of Literature 2.1 Research Tools The primary tool to be used in the answering of the posed questions is that of conducting research. This