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Strategic Management in the Financial Crisis - Essay Example

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This paper closely examines the issues that led to under par performance in the run up to the financial crisis. There are various issues that have been raised and a major one has been that of the failure of corporate governance as shall be discussed in the paper…
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Strategic Management in the Financial Crisis
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"Strategic Management in the Financial Crisis"

Download file to see previous pages The study Strategic Management in the Financial Crisis explores the period of the great credit crisis that first had a toll on the United States’ financial sector before other parts of the globe had its impact. This may have been because of various issues of failure within companies that even made them fail to meet targets before the financial crisis period. With the resource utilization reaching the maximum limits compounded further by a relatively high wage rate, most enterprises were feeling the pinch in the reduction of their rates of return. The widening of international trade and the strengthening of global capital flows have led to a significant rise in cross-border assets and liabilities, as well as to financial linkages across countries and regions. The key implications of such developments have been a wider spread of shocks and stronger co-movements in macroeconomic variables. There are various issues that have been raised and a major one has been that of the failure of corporate governance as shall be discussed in the paper. It is clear that good corporate governance actually operates effectively in two distinct areas which may include measures put in place to guard against opportunistic or conflicted behaviour by financial technocrats with aims of maximizing wealth. According to good management principles, corporate governance best practice is important and essential for the protection of shareholders and other stakeholders against the often conflicting interests of dealers in the financial sector. Blundell-Wignall et al (2009) point out the need to clarify the responsibilities of regulatory institutions and to restore confidence in the integrity of financial institutions. Independent audits of financial statements provide a check against fraud, and a verified overview of financial evolution of the business. Blundell-Wignall et al (2009) also state that considerable flexibility should be envisaged as regards liquidity management. Quantitative measures and indicators should be integrated into the process in proportion to the degree that they are robust and operational. There is an overall bias in many countries' tax systems which work to encourage corporate leverage. The interface between tax, leverage and excess risk taking is complex. Blundell-Wignall et al. note that the US approach shares the risks of buying toxic assets between the taxpayers and investors creates buyer demand and prevents dumping of assets that would prolong the crisis phase, and is an open-market approach. It is important to foster corporate structures that enhance both stability and competition. The complexity of some corporate groups has been identified in both governance and risk control issues. As a ...Download file to see next pagesRead More
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