“limited words, unlimited thoughts”

Over the last few years the world has seen major changes in the process of managing wealth and advisory services. Gone were the days when banks used to be retail shops for investors and depositors to pick products offered on the shelf. Now the world is talking another language of hand-holding. Engaging the client in the whole process has become prima-facie.  One of the key challenges I feel for a bank is educating the client about the investment process. An investment process is as complex as the DNA system of human being. There are so many mental models and psychographic behavior patterns that come into play while designing the perfect solution for the client. Not only we need to understand the future needs of the client based on present scenario but also the future needs based on futuristic scenarios. I believe that the transition of an offering from being a plain vanilla to a complex structured offering with all sorts of options, and payoffs and participation has been faster and more rapid than the transformation of the mindset and the awareness levels of clients. And this leads us to the problem of information asymmetry. We have seen several cases of inappropriate products offered to clients in several cases the risks not being properly articulated which led to huge losses and a loss of reputation loss for the banks the classis case of which is the court case between Bankers Trust and P&G. On the advise of Bankers Trust, P&G had taken a leveraged position of 1:20 in an interest rate swap product structure around a 5-30 treasure bond which paid a fixed rate as against paying a floater on commercial paper. Now the question would arise that why would an FMCG company ever enter into an interest rate swap and that too leverage 1:20. One would understand a currency hedge if most of its earning were denominated in foreign currencies. This is a  problem of a right product to a wrong client.  This leads us into the next process of client engagement which is making him aware of the risks associated with a given solution. An ethical organization would have good disclosure norms which would make the client aware of best and worse case scenarios and the probability associated with it. For example even an offering as safe as a bank deposit has risks associated with it of the bank not paying back in time if there is a run on the bank even though the probability of it would be less than 1%  Thus going forward the key for an institution for sustained business growth and long term relationship is handholding with its clients and constantly educating and informing them about the features and the risks associated with the product. So that no client should ever turn back and say, “Right, you’ve told me everything, now tell me, what’s that catch?”   

  Are you a risk averse or risk loving investor, are generally some of the questions asked by your Wealth Management firm before you go into a Portfolio Investment with them. Is this question in the real sense simple to answer? If you think about it and say you have never had any investment experience before, how would you know what kind of an investor are you? An individual’s attitude towards risk is generally categorized into five types with the mid point being Risk-Neutral. The answer to a certain extent is correlated to what person you are.  Just to clarify things lets set some ground rules. First being the assumption that you are a rational person and a rational person usually undertakes an activity that would maximize his benefit or utility. Second being the asset class for a risk averse investor is usually the risk free instrument. Again in most countries the risk free asset class is usually the Treasury Securities and a retail investor wouldn’t have direct access to a Treasury Security. It would either have to be through a Pension Pool or Mutual Funds. But again the Mutual Fund in turn would carry several risks. So for simplicity sake lets say that the investors choose securities that are almost risk free in nature such as Time Deposits which have insurance. Again lets that there is no limit on deposit insurance and it would be equal to the amount of deposits held. On the other hand the asset classes for a risk loving investor would be equities, real estate, tradable bonds, Futures, Forwards & Options and various non hedged derivative contracts. The investors based on their outlook towards risk would have allocation such as 100% FD’s for the Risk Averse types and 100% equity or its risky equivalent for a Risk Loving types and several other balanced combinations for the other types. Also we are not considering the age factor as age is the natural subsidizer towards risks (with exceptions)  What is being said over here is that the allocation towards risky assets would be in many cases but not all, linked to the kind of risks you undertake in the daily walk of life which would in turn be influenced by your personality type. Now what influences your personality is again a different ball game and there are many theories that have already gone in explaining that. So again what do we mean by personality influencing risk attitude. One of the simplest theories developed describing personality types is by Myers Friedman where he classified personality types based on Type A – who are highly outgoing, very competitive & risk junkies Type B are less competitive and undertake lesser risk and there is the third type which is Type AB. This theory again has its short comings as it does not take into account the several complexities behind a person’s personality. But what it does is gives us a Framework of understanding risk attitudes based on personality types.  So what would we expect from a person who is adventurous, outgoing and loves the uncertainty behind the occurrence of an event and is willing to take a chance? It would ideally be high risk investments, isn’t it? But that again does not mean all sky divers would be equity investors. Whereas some one who like to be sure of an event happening, sees four times left and right before crossing the road doesn’t drive more than 40 miles an hour and is content with what he gets. And of course there would be the balanced types who would be a bit on either side depending on the situation.  This in a very unstructured manner constitutes one of the arms of Behavioral Finance which studies human behavior in context to his investment preferences. So next time your Wealth Manager poses you the question, Are you risk averse or a Risk Loving investor and if you have no clue what to say then just sit back and asses yourself about what you have done so far and the manner in which you have and you will have a better understanding about the portfolio that would best suit your personality type.

Banks have been, in recent times, under the hammer of regulatory bodies for a lot of reasons. Be it non conformity of transactions, fraudulent practices, insecure online banking, credit card scams and more importantly improper knowledge of customer profiles and risk management (both internal and external) Since banks manage something which is so sensitive and integral to humans i.e. money it becomes utmost essential for them to have systems in place that is capable of protecting the interest of shareholders and lenders, both in known and unknown circumstances. With the growing pressure from shareholders and the nature of competitive markets many financial institutions have gone and shopped for risky assets in order to deliver above average returns. Banks are also one of the worst hit sectors in times of economic downturns, since they have a direct impact on monetary flows and are the first to hit in case of defaults. Thus, this puts a whole new perspective for the modern day banker.  The case for social responsibility – with billions of dollars of money floating around the financial system, exchanging hands, it is difficult to recognize the good money from the bad money. What we mean by bad money is what is generated out of illegal activities such as drug trafficking, illegal arms deals, smuggling, acts of terrorism etc. Any society or organization or body wanting to undertake and benefit from these activities would ideally require movement of capital from one place to another. Capital again can be in both, in cash(or its convertible equivalent) and electronic form. Now institutions or individuals who promote these activities are likely to remain discreet at the same time have enough indulgence that they would be able to facilitate and finance the above mentioned. Thus, the most common way of how these people operate is through a series of bank accounts spread over geographies with different banks under dubious or fake names opened with forged documents with simultaneous transfer of funds happening in lower denominations that will not be able to catch the attention and eye of the regulator. Thus for every bomb blast that you hear about, or act of terrorism that you see or any criminal activity, there would be some or more banks in either Bermuda, Cayman Islands or any place as a matter of fact that would have received an incoming SWIFT of wire transfer. Thus to control these acts is to restrict the financing and movement of capital associated with it. Compliance is the modern day norm and so are the practices associated with it such as Know Your Customer (KYC) and Anti Money Laundering (AML). The reason why these have grown in importance is because officials have realized how easy it is to convert bad money into good money by flushing it in the financial system. Banks are being used as washing machines and are therefore indirectly financing these activities. Therefore it becomes the apex obligation of every bank to have policies and practices in place that would be capable of detecting at an early stage and give a warning bell to the regulator The case for corporate governance – banks are in to business of borrowing and lending. It looks very lucrative in times of economic prosperity since banks borrow at cheaper rates and lend at higher. But what happens when the rate of defaults starts to escalate. And also what happens when banks are sitting with a portfolio of collateralized assets which are worth lemons in the market. What happens to the lenders? We have seen many instances in the past where banks have gone bust and defaulted on payments, an example would be few of the central and nationalized banks which defaulted on bonds and deposits during the Asian and Argentinean crises. Thus to protect the interest of lenders and depositors banks have to maintain a minimum capital as expressed in percentage terms for every dollar borrowed.  Thus we can say that, for a given portion of risky assets which the bank owns it would have to maintain a minimum amount of capital or in other words for a given amount of capital it can only own the prescribed quantity of risky assets. This expressed in percentage terms is the Capital Adequacy Ratio (CAR). CAR is the sum total of Tier I and Tier II capital divided by the Risk Weighted Assets. The constituents of Tier I and Tier II capital are the core equity of the bank, disclosed and undisclosed reserves, subordinated debt and more. This is where the role of the bank manager comes into play. Efficient risk management systems and credit policies can help a bank mitigate the risk of a possible default or bankruptcy. Basel II accord which is a set of international banking regulations and also an extension of Basel I which was first issued in 1988, is aiming to bring practices in place which will provide greater stability in the financial system. Thus governance of internal policies and applications and appropriate risk management measures would aid banks and financial institutions to strengthen the pillars of the financial system, control the systemic risk, promote sound regulatory and compliant practices, support the resilience of the financial infrastructure which is quintessential for the broader health of the economy.  Modern day society deserves a safer environment to bank in. They also want the assurance that in the whirlpool of money flying in all directions the wrong sources are not being funded. This places the modern day banker in a whole new paradigm. His role far above than just being a money manager.

What would be the ideal response if you would sit for a lecture given by a PhD in Economics from the Harvard Business School. Wouldn’t it be mesmerizing? Yes!!! Indeed it was.  Dr. Yousef started off by posing a question. That is Dubai into a Boom phase? Inferences were drawn upon to 70’s where the Middle East underwent a transition phase when the oil prices rose to sky high limits. It was dollars pouring in by the seconds which the rise of the black gold and the oil producing nations in return started various benefit programmes for their citizens. Just like anything in this world which is subject to a cycle so are economies and industries. The mid eighties saw the oil price falling and the serious loss of revenues to the Middle East. Suddenly the benefit programmes which earlier used to be like a walk in the park were now more difficult to sustain. Coupled with the Asian crises which also had an impact, left the region with almost negligible growth.  Back again now, with history repeating itself and the oil prices again gaining momentum the big question now is what happens next. Is Dubai still susceptible to the movements in oil prices or are there other means that will ensure that the impact is felt lesser. Although one can say that the Middle East has diversified its revenue streams, with strong emphasis on hospitality, tourism, financials, real estate and other services and manufacturing sectors energy still in a big way impacts the nation’s balance sheet.  Dr. Yousef also drew upon the shifts in economic thinking right from the neo classical era to Keynesian economics when he recited the famous quote of Keynes “In the long run we are all dead.” From where we have come right from the State Controlled era where even the prices of bread that we bought was determined by the state, to the free market economy where the forces of invisible hands interact to form a price-demand-supply mechanism.  Finally Dr. Yousef mentioned that the way for the future would be Knowledge Economies. Knowledge driven societies would emerge as the new parlance and would lead the crowd further into the era of globalization. The move in that direction can be witnessed with Dubai placing a strong emphasis on education, a result of which is the Knowledge Village and the Academic City. Thus we ended with the opening question that was posted to us “Dubai, from boom to bust and back?” still unanswered. Thus it was an interesting session for us as it made us  which posed a lot of questions, the answer to which will only be known to us in the long run.

‘Strategic Marketing’ is essential for pushing sales of products or services or for even developing new markets. There is a need to have a bird’s eye view of the numerous elements that may seem to creep out of oblivion in order to get the right perspective of the market in its myriad colours. Any strategy remains incomplete without the use of right communication at the right time, through the right media. ’Timing’ is also another important factor. For any communication, one action follows the other & if there is no synergy in terms of timing, it will create more confusion rather than making things simple. Having been in the field of advertising, I would like to share one of the most recent & known example of ‘Strategic Marketing Communications’ of Mutual PR agency for one of their clients, Star Cruises that is set as a benchmark for all advertising firms. The agency’s expertise was in handling the marketing communications for IT & Telecommunications companies. They entered into an entirely new domain by signing up with Star Cruises. They had to drift from IT & Telecommunications to lifestyle & entertainment. They took it up as a challenge of establishing cruising as a holidaying concept & thereby creating a market for itself in the country. The client’s brief was clear as to establishing itself in the market with low cost options. Therefore, as the advertising spends was initially very low, PR was the only low cost option to support the market build up in India.  The agency’s strategic planning exercise started with research & identification of the target audience followed by identification of their taste, preference, lifestyle, reading habits, listening habits, TV viewing habits. The service after all was ‘Cruising’ which was synonymous to holidaying in a lavish & luxurious style. People generally recall cruising as an expensive proposition. The strategy was to break into the mindset of the target audience and position cruising as a relevant, exciting & affordable holiday option. Integrating various forms of communications, an aggressive marketing communications plan was devised in consonance with the marketing strategies of Star Cruises. This involved communicating to the various parties who come in the immediate environment of Star Cruises through various types of communication tools. It included media related activities, trade body relations as well as corporate to corporate PR. Media activities were drawn phase wise depending upon the messages based on different activities that were carried out.  Integrating the various media elements & binding them together with the messages targeted at the audience was the key to success. The messages were either bundled together or were disseminated individually depending upon the strength and relevance of the media chosen. One might think as to why a news story appeared in one of the leading financial dailies, which speaks about the idea of cruising. Yes it was the publication’s travel supplement. This was just an example about using media as a vehicle of communication to reach the corporate segment as it was one of the key audiences. The agency through its Planning department compiled a database of the top 50 corporates offering incentives to employees, dealers and keen on holding their board meetings & business meetings in holiday destinations. The agency prepared corporate presentations & initiated talks with the corporates. Follow up stories appeared in the media endorsed by top business tycoons creating more opportunities for corporates to follow. A freelance TV crew was also sent on board Star Cruises, which in turn provided software content to the various TV channels along with regional language channels. Innovative schemes like targeting the ‘honeymooners’ during the marriage season by offering discounts, introducing quiz contest for school children during summer & winter vacation & giving free cruise offer to the winners were carried out. In-film advertising is also fast picking up in India & there was no stone unturned to tap this idea as well. It was implemented through the film ‘Humraaz’ wherein the film was extensively shot on board one of Star Cruises liners.  The basic idea of sharing this example of Star Cruises is to explain the basic tenets of strategic marketing communications as a part of the media activity for any client. However strong the marketing strategy is, it cannot be successful unless it is communicated rightly at the right time through the right media. A thorough understanding as to how the media functions and what type of content goes on to the respective media are necessary for every Advertising & PR professional in today’s world where the audience concerned have less time for leisure & are stressed too.
- Bhavna Agarwal

It was always at the back of my mind to visit Sentosa. But it never happened earlier. Finally I took the courage and the time off my schedule(which was in the week when we did not have any lectures) and headed of to Sentosa. Seeing Sentosa is like seeing gateway of
India in Mumbai. Your visit is never complete until you see it, or I thought so. But unlike Sentosa, gateway of
India doesn’t offer you a wow effect.  

We took the usual Bus No. 93 to Harbour Front and then took the Tour 6 package(the only one available at 04:00pm) which included cable car round trip, underwater world, dolphin show & 4D Magix & of course Café Del Maar(which is implied)  

The cable car ride is a thing to experience, for the 1^st few seconds you do feel a rush of blood as you are plunged from the insides of the 15^th floor of Harbour Tower into the open sky and the initial contact with mother earth gets the blood rushing down your spinal cord (just for the record I am not a person afraid of heights)  

Anyways after 6 ½ minutes we finally arrived at the one and only Sentosa island. The entrance to Sentosa(a brilliant marketing strategy) is through a convenience store that sells almost everything that a person would demand for a day well spent at a beach picnic. So invariably even if your are carrying stuff it is difficult to pass buy without lightening you wallet a bit. There are 3 lines of busses that run (blue, red & green) that takes you through and fro different places on the island.  

Our 1^st stopover was the splendid underwater world. You arrive at a place that makes you feel that it was built to house marine life. The surroundings and the ambience give it a perfect blend to the aquatic life that it captures around. As you enter there is a huge pond which is home to some fresh water fishes and gigantic turtles. At the entrance is the touch area where you can touch fishes that are swimming in a small pool of water. I was surprised that amongst many of the fishes was the sting ray(the one that killed Steve Irwin – the crocodile hunter) At the beginning of it there are different types of fossils displayed as well as over fifty species of crabs. Some of the prominent ones being the spider crap that stretches to almost 2 feet(end to end). As you keep moving ahead you come to the real underwater world. This is what Sentosa is all about.  

It’s an underneath walkway through a huge pool filled with fishes and marine life. You stand on the travellator and it ferries you through an 83-meter long tunnel which is made up of bullet & sound proof acrylic in a semi-circular form that that keeps away marine animals from the land animals (assuming that man is an animal) There is just one word to describe the experience – “Magnificent” Yes!!! That’s how I felt being there looking around on what was the largest collection of aquatic splendor that I had ever seen. Sentosa lets the ocean come to live in front of your eyes and every moment of it is breath taking. As you move through the oceanic jungle you just can’t help wonder the sheer magnitude of living organisms that reside beneath us. Finally underwater world which houses over 2500 marine species offers immense fun & educational value.  

Across different packages that are available from the reception counter perhaps underwater world is the only one which is common across all six of them and for obvious reasons. It is a place that you can’t and shouldn’t miss and any visit to Sentosa is not complete without a detour of this. All rite folks that’s it as far as the 1^st part is concerned. In the 2^nd part I will cover the dolphin show, 4D magix, sounds of the sea, night life @ sentosa and yes!!! The much talked about Café Del Maar. So keep reading.

Charles Darwin, the father of genetics, in his ever so famous theory of evolution stated that as a population inherits traits from generation to generation it gradually evolves and mutates into new or altered species, each stronger and more viable than the previous. Thus, was explained the metamorphosis of man from a four legged, unkempt beast to the gadget savvy, biped of today; the evolution of the tree-swinging, ape-man Tarzan into a civilized John Clayton who left the jungles of Africa in search of his true love, Jane. Surely Charles Darwin must have died a happy man, terribly pleased with himself at this groundbreaking theory he arrived upon. Even today I see this evolution at work but in quite the reverse direction, through a concept we popularly call “Birthday Bumps”. Yes, that one celebrated event that calls on all man-“kind” to abandon any inhibitions whatsoever and get down to showcasing the true,  raw, animal instinct within them! A means to vent out frustration or to get even with someone or plain and simply put, just for “kicks”, this ritual has been around for donkey years now. Originally an Irish tradition, the birthday child was lifted upside down and “bumped” on the floor for good luck. The number of bumps given signified the age of the child plus one extra for good luck. How the rest of the world adopted this ritual no one will ever know!  

As a child I grew up well attuned to this concept. Birthday parties would mean a cake obviously, followed by a truckload of gifts. But the true icing on the cake would be the anxiously awaited birthday bumps! Boy or girl, big or small, scrawny or chubby, every single kid on the block would be there to pitch in his two cents and hurl the birthday child up into the air and then watch with sheer alacrity and joy the laws of gravitation take over as the poor birthday backside bore the brunt of the cold, harsh floor beneath. And my my! The sheer joy one could see on those faces! Those intent and gleaming eyes! That proud look on each child’s face as he returned home joyous of the pain he was capable of inflicting on another human being probably twice his size!  

With time however this tradition began to fizz out. We grew older, birthdays became an event of the past and instead a time to get wasted and brood and wail about turning a year older. Bumping the gluteus maximus aimlessly against the floor somehow lost its old charm and the clanking of beer mugs seemed more like music to the ears.  

But then just as I was turning oblivious to the existence of such a ritual I stumbled into B-school. The one place people go to in order to unlearn all that those gray cells could have possibly assimilated over the years in a desperate attempt to learn matter that those gray cells just refuse to accept now! But in this one aspect unlearning didn’t seem to work. Learning all over again was the order of the day and reliving those good ole’ childhood days seemed the “bottom” line. And here’s where I witnessed what I could only describe as the most horrendous and yet most innovative concept of birthday bumps! Less of bumps and more a combination of hard blows and kicks, this indeed had to be the most torturous and agonizing start to a new year but equally satiating and invigorating for those doing the honors. Once again I saw the big and small, lean and “healthy”, fully clothed and semi-clad, all come together to “shake a leg” and lend a blow or two here and there while the traumatic screams of the birthday “baby” reverberated in the background. And the precision and panache with which the kicks were afforded would put even Beckham to shame!  

One keen observation I have made though is that unlike the old days when we as little girls would be part of the ruffians bumping bottoms or having ours’ mercilessly bumped, as women today we would step back and just watch in wonder as the men got into their element and kicked away to glory. And what if it was a woman’s birthday? Well, then the men would be chivalrous enough to pardon us the pain and trauma and instead pick on the man they all conveniently assumed to be a “close” associate of the woman in question and the shelling would begin.

And thus this concept has caught on like wild fire and every now and then, at the stroke of 12, on a silent hostel night as I burn the midnight oil I hear a sudden uproar of pain and joy combined. “Ouch!” I say to myself and go back to stooping over my books.

                                                                                                    – by Kamal Krishnamurthy, Student, SPJCM

Belligerent are the private equity guys. With every day a deal knocking on the doors of the M&A world, you need to be ready, the next could be yours. It seems like the private equity players are on a shopping spree. Ego, debt and a quest for higher deals is the driving force in this shopping festival. If you think that 2006 was the private equity year with top deal of $37.71bn, where Blackstone acquired Equity office Properties, then how about 2007 where KKR has bought Texas Utility for $44.37bn in the month of Feb and leaving us with little reason to believe that 2007 will not be bigger than 2006. But are we into the enigma of private equity or is it something more than that? With value of US buyouts crossing $410bn in 2006 and banks spreading their arms to bask in the credit that private equity guys want, the debt markets may quiver very soon.                       The balance sheet of most of the private firms looks over levered. This makes the scene look murkier for the investors of private equity groups vis-à-vis the investors of the company whose stakes are being bought out. The prices paid by these fund mangers have bounded across six times EBITDA in 2001 to eight times EBITDA in 2006. No industry is left virgin by these private equity managers. They have penetrated through all the sectors of this global economy, and then may it be semi-conductor or technology which again was a No-No few years ago due to the business cycles they face. That I would say further mystifies the private equity game. If debt markets remains strong in 2007 then the pressure on the private equity managers to pay for more deals, take on more debt and close more deals will continue to mount. Stronger stock markets across the globe are foisting higher prices on the deals. The attractively priced investments now look inflated.  

The growing investment opportunities in the emerging markets are making these money makers sweat out and think about the investment they make. And looking ahead in 2007 and 2008, if debt markets spooked or economies nosedive then it could be a plight for these fund mangers. The heavy balance sheet and Catch-22 situation grappling their neck, could burst the bubble of private equity in coming years. But again the enigma of private equity may work and they may alleviate the impact of such a change and surface as winner again. The enigma of private equity whispers that Private equity could well rewrite the record books yet again for buyouts in the coming years. So keep looking out, you never know, you might just hear the door say Knock Knock!!!  

                                                                            - by Sagar Agarwal, Student, SPJCM

If you thought that Trump was entertaining while he is talking wait till you get your hands onto his book “how to think like a billionaire.” Trump talks about the qualities that make a billionaire, right from soft skills, to instincts, to behaving like one, dressing up like one and finally thinking like one too.  

He talks about the billionaire club and how does it feel being a part of one and what one needs to do to get there. The book is in narrative form so it seems as if he is talking to you. He gives advises on all aspects of life like business, success, money, marriage & on life itself.  

He gives a sneak peak into his day to day life through his business diary and appointments that span the whole week. In this he talks a lot about his meetings, people he is associating with, he is open and honest & praises and criticizes, and yes talks a lot about his gorgeous fiancée Melania.  

He also gives behind the scenes activity of his super hit show The Apprentice and talks about how he feels doing it, what it takes to be one, qualities that he looks for in his apprentice as well as the tasks that the candidates have to go through.  

Donald J Trump is a showman and he is an entertainer, he is loud in what ever he does and loves all the media attention. He doesn’t miss any opportunity of praising him self and about his accomplishments. His is rich and he loves to flaunt his affluences. But he is strong and practical, he talks about what it takes to reach to the top, fall from there(as he did in early 90’s when he was billions of dollars in debt and the media and bankers had written him off and called him a fraud) and then come back bigger and better than ever. Donald J Trump is a developer, an author, an entertainer, a television celebrity, motivational speaker, an American hero, a workaholic and above all a person who loves saying the two most dreaded words “Your Fired.”

It has been rightly said in the movie Glengarry Glen Ross, ABC, which means Always Be closing, you can see shades of that in Boiler Room as well. What I am referring to is none other than the age old practise of persuasion, but in a different connotation. Yes!! You guessed it right. It is indeed powerful persuasion. I have been in sales for more than four years now and have worked in different environments in more than one country. It hasn’t always been an easy ride nor has it been a claim to fame. But so far I have loved the challenge and the thought of being a revenue generator for my organization. The reason I am writing this is just to share a bit of give and take of sales. Be it any company that you are working for and any product that you are selling, provided you are working in a company that works and operates in today’s world of competitiveness, what I have observed is that a Sales Culture would have the most non-humanitarian approach to its employees. I mean the way the managers drive work out of the people is almost unbelievable. Delivery is a must and should happen in all conditions. One eats drinks and sleeps “dhanda” Sometimes the pressure is almost suicidal.