The Ethical Maturity Index provides an assessment of your company’s compliance with good governance criteria on a scale of 1 to 4. A mature company scores 4 with a  Code of Ethical Practice. Where does your company score? How to achieve that top score is part of a new risk management tool developed and tested on clients by Elena Demidenko and myself.

The following article has been published on July 8 2009.

Exchange rates can exacerbate crisis

From Prof Patrick McNutt.

Sir, Commentary on the financial crisis seldom addresses the significance of exchange rate volatility. That may change soon. Both the World Trade Organisation and the World Bank have warned about the rise in protectionism. China believes that currency issues should be discussed at the Group of Eight meeting this week in Italy.

The question therefore has to be asked: should the issue of exchange rate volatility be part of a co-ordinated solution to our world financial crisis?

The answer is in the affirmative. Big holders of US dollar reserves, such as China, may be rethinking the dollar’s role as a reserve currency. It is a signal of a rethink on currency alignments at a time when world leaders are more focused on fiscal stimulus, regulatory reform and socialising banks’ losses.

As the value of US dollar reserves fluctuate, and trading nations adopt protectionist policies, big holders of dollar reserves may switch to (say) the euro in a signalling game of tit-for-tat policies, and if that were to continue over the next year the dollar’s role as the world’s main reserve currency unit could be compromised.

There is a solution. A managed exchange rate regime, for two to three years, negotiated with agreed rate bands and appropriate escape clauses for governments reliant on fiscal and monetary policy, would be a key signal from world leaders at their meeting in Italy and would help to arrest a nascent uncertainty in this financial crisis.

This is not a call for a fixed exchange rate regime per se; it is a call to recognise that while exchange rate volatility may not have contributed to the financial crisis, it may have the potential now to exacerbate the crisis.

World leaders are emerging as players in a non-cooperative signalling game on currency issues, a game that began at the G20 in April.

Unless currency issues are addressed at the G8 meetings in Italy, “currency signals” will undermine world economic recovery.

Patrick McNutt,
Visiting Fellow,
Manchester Business School, UK

http://www.ft.com/cms/s/0/bb726952-6b57-11de-861d-00144feabdc0.html

Copyright The Financial Times Limited 2009

Abstract from Patrick McNutt’s strategy session.

Management Motivation (ppt)

Economics of STRATEGY as described in Patrick McNutt’s Workshops in Business Strategy

Meaning of STRATEGY (doc)

MBS Talk

MBS Talk 2010 (PowerPoint)

In addressing Manchester Business School Alumni associations in Dubai and Singapore, Patrick McNutt argues that the world economy is now enduring a signalling cycle that probably began in the US on March 12th 2007 and it will continue to oscillate until either a market equilibrium (= continued recession) or a

• Signalling (pdf)
• Signalling 2009 (pdf)

This is a short paper due for publication in 2010. The views are personal. The paper outlines the background to Demidenko and McNutt’s new consultancy tool (available on this web page] for assessing a company’s ethical maturity in terms of ERM and improving the governance gap.

• Ethics of Enterprise Risk Management (pdf)

Nationalised banking structures destroy shareholder value and incur long terms costs for the taxpayers.

• BigBankParadox (pdf)
• BigBankParadox_powerpoint (ppt)
• Drivetime_on_RTE_

Prof McNutt has recently (November 22nd) been interviewed on RTE radio’s Sunday Morning show The Business with John Murray, talking about the Big Bank Paradox. More information about the Black Swan is in the relevant news item on this site, and a link to the RTE interview is below.

• RTE Radio Interview

Patrick McNutt advocated a big bank solution to the on going discussions on consolidation amongst the Irish banks. It is the only solution to ensure the long term sustainability of Irish banking in the EU and Ireland Inc’s competitive advantage in financial services.

• BigBankParadox (pdf)

Patrick McNutt of Manchester Business School addressing Alumni associations in Singapore and Hong Kong has called for a managed exchange rate regime to be on the agenda for the Summit scheduled in Washington DC on November 15th…

• Managed Exchange Rate (pdf)

In a wide ranging review, David Bailey of King’s College, London, comments that [sic] ‘all in all, this is an interesting and thought provoking book; it provides a useful contribution to how economic analysis is used. In places it is akin to a patchwork quilt of ideas and case studies, but certain theme

• Review by David Bailey (pdf)