SBANC
Newsletter
August
29, 2006
Issue
436-2006
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QUOTE
"You
can't overestimate the need to plan and prepare. In most of
the mistakes I've made, there has been this common theme of
inadequate planning beforehand. You really can't over-prepare
in business!"
-- Chris
Corrigan
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FEATURE
PAPER
Capital Standards
and Risk Alignment in the Banking Firm
The
following paper was presented at the 2006 Allied Academies Conference.
It was written by Guy Ford of Macquarie University and Maike
Sundmacher of University of Western Sydney.
Abstract
This
paper examines the question of how to efficiently align the investment
decisions of
managers in a bank with the risk/return goals of the centre of
the bank. It argues that the
contemporary approach aimed at achieving such alignment, which
involves the top-down allocation
of some proportion of the total bank’s capital against positions
taken by managers, and then
remunerating managers based on the return generated on this capital,
serves as a poor mechanism
for achieving alignment of incentives. This arises when bank capital
is measured in terms of a
predetermined solvency standard, which has at is core a risk-neutral
attitude to risk. If bank
stakeholders are risk-averse, and desire that this risk attitude
be captured in bank investment
decisions, then risk measures used internally for investment selection
and performance reasurement
must diverge from those used to measure total bank capital.
Introduction
This
paper examines the troubling question of how to efficiently align
the investment
decisions of managers in a bank with the risk/return goals of the
centre of the bank. It argues that
the contemporary approach aimed at achieving such alignment, which
involves the top-down
allocation of some proportion of the total bank’s capital
against positions taken by managers, and
then remunerating managers based on the return generated on this
capital, serves as a poor
mechanism for achieving alignment of incentives. Indeed, it is
argued that this approach leads to
outcomes that are against the best interests of bank stakeholders
whom the centre is deemed to
represent.
This problem arises when bank capital is measured in terms of a
predetermined solvency
standard, which has at is core a risk-neutral attitude to risk.
If bank stakeholders are risk-averse, and
desire that this risk attitude be captured in bank investment decisions,
then risk measures used
internally for investment selection and performance measurement
must diverge from those used to
measure total bank capital.
Read the Entire Paper...
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CONFERENCES
AACSB
|
| Who: |
AACSB
|
| What: |
AACSB
International Strategic Management Seminar
|
| Where: |
Montclair,
New Jersey |
| When: |
September
14-15, 2006 |
|
|
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AMA
|
| Who: |
Atlantic
Marketing Association
|
| What: |
Annual
Meeting
|
| Where: |
Francis
Marion Hotel in Charelston, South Carolina, USA |
| When: |
September
27-30, 2006 |
|
|
|
BI
|
| Who: |
Barcoding
Inc.
|
| What: |
The Future of Barcoding and RFID Conference
and Exhibition
|
| Where: |
Schaumburg, Illinois, USA |
| When: |
October 12, 2006 |
|
|
|
China
Venture Capital
|
| Who: |
China
Venture Capital Forum
|
| What: |
Northeast China Investment Summit
2006
|
| Where: |
Marriott Hotel, Shenyang, China |
| When: |
October 20-21, 2006 |
|
|
|
Conference
Organising Committee
|
| Who: |
Conference
Organising Committee
|
| What: |
The Transformations Conference 2006
|
| Where: |
Australian National University, Canberra,
Australia |
| When: |
November 27-29, 2006 |
|
|
|
CALLS FOR PAPERS
ISOBD
|
| Who: |
International
Society of Business Disciplines
|
| What: |
Fall
Conference
|
| Where: |
Flamingo
Hotel - Las Vegas, Nevada, USA |
| When: |
November
5-8, 2006 |
Submission
Deadline:
August 31, 2006
|
|
|
|
ASC
|
| Who: |
American
Society for Competitiveness
|
| What: |
International
Conference on
Emerging Competitiveness Paradigms
|
| Where: |
Goa,
India |
| When: |
January
11-12, 2007 |
Submission
Deadline:
September 1, 2006
|
|
|
|
ACME
|
| Who: |
Association
of Collegiate Marketing Editors
|
| What: |
2007
Annual Meeting
|
| Where: |
San
Diego, California, USA |
| When: |
March
13-17, 2007 |
Submission
Deadline:
October 1, 2006
|
|
|
|
WDSI
|
| Who: |
Western
Decision Sciences Institute |
| What: |
36th
Annual Meeting
|
| Where: |
Denver,
Colorado, USA |
| When: |
April
3-7, 2007 |
Submission
Deadline:
October 1, 2006
|
|
|
|
ASBBS
|
| Who: |
American Society of Business
and Behavioral Sciences |
| What: |
14h
Annual Meeting of the American Society of Business
and Behavioral Sciences
|
| Where: |
Imperial
Palace Hotel and Casino, Las Vegas, Nevada |
| When: |
Februaury 22-25, 2007 |
Submission
Deadline:
December 10, 2006
|
|
|
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TIP
OF THE WEEK
Finding the Right Business
Knowing that he wanted to avoid any business that was high risk
and had low margins, Larry Broderick, CEO of Denver-based SteelWorks
Corp., developed a set of criteria to decide what kind of business
to start. Some of the criteria were related to his personal needs,
but most were about finding the right business model and were based
on his previous experience. Here are few of them:
1. A business that had a broad scope that would insulate it from
market downturns
2. A business with existing customer and vendors
3. A low-tech business but with high growth
4. A market that was not so large so as to encourage major players
but not so small that the company couldn't grow
5. Available float from suppliers; in other words, leeway in having
to pay vendors
6. Manageable seasonality
7. Cost cutting potential
Every entrepreneur's criteria are different because everyone has
unique reasons for wanting to purchase a business and unique experience
that gives them a sense of the type of business that is likely
to be successful. Starting the search with a set of criteria enables
an entrepreneur to quickly eliminate businesses that do not make
sense or are not aligned with the entrepreneur's goals.
Sources of Business Opportunities
Perhaps the best sources of information about business opportunities
are attorneys, accountants, or bankers because the businesses that
they recommend are generally those with which they have had the
most experience. In addition, a long-standing relationship with
an attorney, accountant, or banker means that they know a buyer's
financial status and needs and can better make a match between
a buyer and potential business opportunity.
There are several other sources of information on business acquisitions,
such as the business opportunities section of newspapers like the Wall
Street Journal and trade publications. It is also possible
to find businesses at liquidation auctions, but unless the entrepreneur
is a turnaround specialist, taking on a business that has experienced
severe problems may be riskier than starting from scratch.
Business
Brokers - Of the approximately 240,000 small and mid-sized
businesses that are sold each year, about 3,300 brokers handle
half of those sales. Brokers work for business sellers who pay
a commission of one to 10 percent of the transaction price. The
average sale price of a brokered transaction is $275,000, but it
can run into multiple millions. Business brokers vet their clients
carefully because their reputations are on the line. They want
to make certain that anyone they bring to their client is a serious
buyer who will follow through. Some of the things that a potential
business owner can do to attract the attention of a business broker
are
• Give more information
about themselves and the business than the broker requires to
indicate a sincere interest.
• Demonstrate strong financial qualifications.
• Be willing to move to a new location to take advantage of business
opportunities
• Keep an open mind about the type of business; consider a wide range
of opportunities.
• Be persistent and follow up with the broker.
• Be in a position to respond quickly when an opportunity becomes
available. This means having financial records in order and money
available.
| Kathleen
R. Allen. Growing and Managing a Small Business - An
Entrepreneurial Perspective. Houghton Mifflin Company.
2007. Pages 77-78 |
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The
SBANC Newsletter is provided as a service to the members of our
affiliates: Academy of Collegiate Marketing Educators (ACME), Association
for Small Business & Entrepreneurship (ASBE), Federation of
Business Disciplines (FBD), International Council for Small Business
(ICSB), Institute for Supply Management (ISM), The International
Small Business Congress (ISBC), Marketing Management Association
(MMA), Small Business Administration (SBA), Service Corps of Retired
Executives (SCORE), Small Business Institute (SBI), Society for
Marketing Advances (SMA), United States Association for Small Business & Entrepreneurship
(USASBE), U.S. Department of Veterans Affairs (VA).. If you are
interested in membership or would like further information on one
of our affiliates, please see our web site at http://www.sbaer.uca.edu
SBANC STAFF
Main Office Phone: (501) 450-5300
Dr.
Don B. Bradley III, Executive Director of SBANC & Professor
of Marketing;
Direct Phone: (501) 450-5345
Brandon
Tabor, Development Intern
Garion
McCoy, Development Intern
Casey
Thomson, Development Intern
To subscribe or unsubscribe to the
SBANC Newsletter, please E-mail SBANC at sbanc@uca.edu
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