Archive for August, 2008

Blind Spots in Banking

Published by Richard Coughlan on August 27, 2008 in Finance and Economics and Business Ethics. 0 Comments

Earlier this month, I spent a few hours in Charlottesville with 70 bankers from across Virginia.  The topic of conversation was decision-making, especially ethical decision-making.  For me, it was an educational morning.  The participants were incredibly candid in their comments about how and why the industry reached its latest low.  With just a bit of encouragement, many were willing to talk about organizational and competitive elements that contributed to risky choices again and again.

I thought of that conversation when I read the August 7 edition of The Economist, which includes a fantastic article entitled, “Confessions of a risk manager.”  It would make an excellent opener in a course on ethics or finance. 

The anonymous author writes, “The pressure on the risk department to approve transactions [in 2007] was immense,”  echoing what I heard during my time with the bankers.  Poor decision-making is likely when time is short and the potential for large financial gains exists.  The possibility of downside risk is ignored or misjudged; trained professionals quit paying attention to crucial cues.

Ultimately, the author provides key lessons from the current crisis: (1) Don’t put too much trust in the rating agencies; (2) Bring back liquidity reserves; (3) Give risk departments more prominence, perhaps by encouraging more traders to become risk managers.

The first suggestion is central to discussions of overconfidence in decision-making.  Know the value of the data that shapes your evaluation of possible choices or temper your confidence in the decision.  The second suggestion is a more mechanical change that would help to create necessary constraints for some decision-makers.  The final suggestion, as difficult as it might be to implement, would provide an important shift in perspective among risk managers and traders.  Frames are not easily adjusted, but we have enough evidence now that the old way of seeing things included way too many blind spots.

And the Last Year Begins

Published by Julie Rosson on August 18, 2008 in Student Experience. 0 Comments

This past weekend I decided to get ahead of the game for once and went to the bookstore to prepare for Strategy and Global IT.  As I walked through the commons, I noticed it was freshman orientation.  It’s always so exciting starting a new adventure.  Many of you just started Opening Residency this weekend and although it might seem like bootcamp with so much information in so little time, you get exposure to some of the great professors you’ll experience over the next couple of years.  The best advice I can give to those of you coming in is to make friends and hold them close, especially you part-timers.  It is those fellow classmates that are going to get you through the stressful papers when you’re already working overtime and they’re going to need you in return.  I ended up randomly sitting next to someone during that weekend at The Jefferson who ended up being one of my close friends throughout the program.  Good for you for taking on the challenge and welcome!

 To you second years, congrats on making it through your first year and Econ!  Hopefully, everyone is finding their rhythm even though I have to say, this is my third year and I’m not sure I’ve found it yet.  For any of you not graduating that have a Capstone idea with a company you work for or with that you will not be interested when it’s your turn, there are lots of students graduating in the next year that are looking for something interesting to work on, so reach out to Debbie Fisher dfisher2@richmond.edu if you have any ideas.  Big thanks to Cara Cox who helped me out!

And finally to those of you heading into your third year and any others graduating, it’s been an adventure so far, we’re in the home stretch and I have a feeling the best is yet to come.  The Capstone is a little scary and it’s going to put our time management skills to the test, but we all know it will get done one way or another.  See you next week!

Reflection on Opening Residency

Published by Marissa Smithson on August 17, 2008 in Student Experience. 0 Comments

Walking into the Jefferson that first morning, just over a year ago, I wondered if this was the right move for me.  I must have talked myself in and out of going through with getting my MBA about ten times that summer.  I didn’t have the time, combining work and school would be too difficult, I was afraid I didn’t know enough.  But, I wanted to get ahead, learn more, comprehend the terminology that was being bounced around in the office, my more rational mind would counter.  In the end, it was the Opening Residency that convinced me completely. 

According to the University of Richmond’s website one objective of the Opening Residency is to “Establish a sense of community among participants in the MBA program and create a mutually supportive environment”  (http://business.richmond.edu/graduate/the_richmond_mba/openingresidency.html).  Goal accomplished.  My classmates and I went through a MBA boot camp: our brains were stretched, thoughts were scrambled, tempers flared, laughter was shared and at the end, we all had one thing in common: we survived to smile and heave a sigh of relief.  Now, we were officially graduate students. 

This Opening Residency objective, has not only kept the learning fun, the group projects endurable, it has given me, at least, a camaraderie that I had not previously experienced outside of athletics.

Designing the MBA of Tomorrow

Published by Richard Coughlan on August 13, 2008 in General. 2 Comments

At a conference of MBA directors a couple of years ago, I participated in a breakout session about the future of graduate management education. Among the questions we explored was this – “What might an MBA program look like in 2015?”

A colleague who was serving as MBA director at one of the leading schools in Europe suggested that we consider the following scenario as a possibility: Admission to an MBA program at a given university could mean that an individual would have a lifetime of learning opportunities at the school. He also said we should think about how to make the education free to the student.

A year later, the same group gathered in Austin, Texas. Our keynote speaker one morning was Scott McNealy, co-founder of Sun Microsystems. He encouraged us to apply “open source” thinking to MBA admissions, in essence suggesting that we allow anyone who had the desire (and the tuition dollars?) to enter our programs. He acknowledged that we might need to establish certain academic hurdles throughout the curriculum and admitted that not everyone who entered would earn a degree, but insisted that the knowledge shared in an MBA program should be available to a wider audience.

These are obviously atypical responses to the question posed in the first paragraph above. Most of us are debating whether an MBA should be 36 credits or 54 and just how many of those credits should be taken as electives. Should the program span 15 months or 2 years, or longer? We’re also trying to decide whether it is best to require that applicants have two, five or ten years of experience before heading to graduate school.

Should the program be designed for working professionals or is the traditional full-time MBA program still a viable model? What should the core components of the curriculum be in the future? Would you require all students to have a course in operations management? What about business ethics?

So, imagine you are named director of a graduate school that doesn’t yet have an MBA program. You get to build it from scratch. You get to decide what kind of student you’ll try to attract and what the curriculum will be. You can also have a say about the length of the program and how much of it is done online or in the classroom.

What would you do? What will constitute “mastery” in business in the future?

I welcome your thoughts.

Olympics, Business, and Ethics

Published by TC Yang on August 10, 2008 in Business Ethics. 1 Comment

With the Olympics currently in full swing, an interesting discussion took place in the 508 Business Ethics class the other day that centered on athletes, and to what extent they are willing to go in order to be successful. Obviously, in this era of baseball steroid investigations, football video taping controversies, and Tour de France doping cases, cheating is a prominent aspect of professional and amateur sports.

But at what point do we draw the line between fair and cheating? There has recently been a lot of controversy around the Speedo Lzr swimsuit that will be worn by many Olympic swimmers, including Michael Phelps. Since February, 38 world records have been broken by swimmers wearing the suit, and the data would suggest that there is a technological advantage for those can afford the $550 swimsuit. http://www.newsweek.com/id/142410

In addition, few would claim that Tiger Woods is a cheater for undergoing LASIK eye surgery to enhance his vision. Similarly, many professional baseball pitchers have seen increased success after undergoing Tommy John elbow surgery, which purportedly can make the tendons in the elbow even stronger after surgery. But is there a difference between these actions and taking performance enhancing drugs? And if so, how much blame can be placed on companies for developing the technologies and financially capitalizing on the athletes that they sponsor?

Much has been made around sprinter Oscar Pistorius and the prosthetic legs that he wears, developed by an Icelandic firm named Ossur. Though Pistorius has no natural legs, he was terribly close to qualifying for the 400m event in the Olympics. But what if Pistorius had qualified for the Olympics and went on to win the gold medal? Would he be considered a role model for disabled athletes or someone who gained a technological advantage? Worse yet, what if 20 years from now, the world’s best sprinters and runners surgically removed their own legs to be replaced by prosthetics that made them run faster? Is this any different than LASIK? Like with many ethical dilemmas, I think there is a slippery slope here, and as soon as something is determined to be acceptable, there is already another entity looking to take it to the next level, and often times these entities come in form of businesses and corporations.

A fellow classmate told me the other day that Tiger is on his way to becoming the first billionaire athlete, and will reach this mark by 2010. Over 80% of his earnings come in the form of endorsements from companies such as Nike, Buick, Tag Heuer, and Gillette http://www.golfdigest.com/magazine/2008/02/gd50. With this much money and glory available to successful athletes, it is easy to see how people can be tempted to gain an unfair advantage, or at least seek out the best possible fair advantage, with businesses lurking in the background to assist.