Nexus Summer 2008

1

Warwick Business School Alumni Association magazine: summer 08

Having studied at WBS, you already know the quality of our expertise and teaching. But did you know that WBS can help you and your organisation at every step of the way?

We offer a range of flexible, post-experience qualifications for individuals, many of whom are sponsored by their organisation.

Find out more about any of our programmes: W wbs.ac.uk T +44 (0)24 7652 4306 E [email protected]

H The Warwick MBA One of the world’s leading MBA programmes. For the ultimate flexibility in work life balance, study full time, by distance learning, or in modular format

H The Warwick MPA The public and voluntary sector equivalent of the MBA, study part time in modular format

H Doctoral Programme To pursue an academic interest in a highly specialised area, study with one of the world’s top programmes

H The Warwick Diploma in Applied Management A broad management course delivered part time in modular format over 18 months

H The Warwick Diploma in Public Leadership & Management An 18-month, part-time modular course for middle to senior managers in the public sector

H The Warwick Diploma in Service Leadership Delivered by WBS academics, at the Singapore Institute of Management (SIM), a modular course for middle and senior managers of customer facing operations

H Financial & Management Accounting A highly focused development course for managers with little or no finance training. Launching Autumn 2008

Release your potential

3

2008 has been a momentous year on many fronts and one I am sure we will all have firmly placed in our minds in the future.

Not only has the impact of sub-prime lending and mortgages been significant, but the importance of strong leadership within business, industry and government is increasingly scrutinised.

Organisations and countries are naturally striving to address increasingly pressing global issues – from liquidity, inflation, interest rates and investments, to climate change, carbon footprint, uncertainty and political instability. As a leading European business school with an international faculty and curriculum, we are working with governments and business leaders to address many of these issues.

Last year the Vice Chancellor, Professor Nigel Thrift, announced a dynamic and challenging, but exciting, vision to firmly place Warwick in the top 50 global institutions by our 50th anniversary in 2015 (Vision 2015). In parallel with the University at large, at WBS we have built upon our strong vision and mission, developing an overall strategic vision with supporting strategies to firmly place us in the top echelon of European business schools where we can seriously compete with the top global schools by 2015.

We have a big challenge ahead of us, but we have never been an institution to rest on our laurels. As we build upon our

message from the dean

embedded DNA of strong innovation a global perspective, we will enhance our research output, through inter-disciplinary initiatives and through dialogue and contribution from business, industry and government. We will develop our curriculum, our delivery and our accessibility. All of this will be developed through completing the WBS building development on campus and by advancing our brand globally through institutional and business partnerships and advancing our global alumni network.

WBS has come a long way in a short period of time and we have the wide community to thank for that – staff, students, friends, donors, associates and you, our increasingly successful alumni body. Thank you. Working together we can achieve so much more which will benefit everyone in the WBS and Warwick community.

So here’s to the challenges that lie ahead and embracing the solutions – from addressing global issues, to advancing the service we offer through your Alumni Association, to securing your help, expertise and support to build our global brand and improving our School offering. From our oldest graduates to our new alumni who have just graduated – we look forward to working with you in the year ahead and sharing a mutually beneficial relationship.

3

focus on finance

One of the key values of WBS’ Alumni Association is our commitment to relevant lifelong learning in business and management.

In this edition of nexus we focus on finance, drawing upon research being undertaken by leading faculty at WBS and from our alumni who are leaders within their field.

development and alumni relationsalumni boardWBS newsholy simplicity?Professor Anthony Neubergercredit crunchPhil Ashdownclimate change and financial marketsProfessor Mark Salmonraising the standardAnne Gunthercrisis and currencyProfessor Lucio Sarnoaligning the objectivesBo Kratzthe credit spread puzzleProfessor Gordon Gemmillhurdles… what hurdlesRob Cooper and Jon Hillraising funds for future leadersWBSS update UK event reviews, SIGs and regional groups Overseas event reviewsalumni newshot off the press

45

6–910

11

12

13

14

15

16

17

1819

20—2223

24–2627

contents

24

23

6 13

20

4

You will have noticed many changes over the past year in your Alumni Association – from staffing to Board activity, and events around the world to academic updates. We are continually striving to improve our service to you and to advance your involvement and support. Our sincere thanks for all your support over the past year.

As we now move towards 2015, we have a clear set of objectives and supporting strategies to deliver greater value and relevance to our global alumni body. There are three key values that will help us to achieve this – lifelong learning, global networking and volunteering. We are committed to provide relevant business and management learning throughout your lifetime – from your alumni magazine to tailored events, specific industry groups to

the development and alumni relations office

on-line forums. We aim to advance the ways in which you can learn from and connect to the valuable research coming from WBS. We now have over 23,000 alumni, over 35 percent based overseas and you are all continually moving and wanting to connect. We aim to connect you better through technological advancements and through ensuring we have active networks and groups around the world.

Finally, as Baroness Julia Neuberger DBE, (Chair, Commission on the Future of Volunteering), reflects, ‘Volunteering plays a vital part in the life of our communities, our nation and our world.’ But only where there is effective volunteer management in place. Many of you have offered to be and are active volunteers of WBS. We want to leverage this immense resource to enable you to advance your Alumni Association through our facilitation and management. To do this the Alumni Board is working with our regional, international and industry volunteer leaders to empower groups to become more engaged and active, bringing value to the alumni body. (Further details of this are shared by Gill Thewlis, Chair of the Alumni Board, P5).

We look forward to working with you to advance your Alumni Association and to see WBS and Warwick grow successfully.

Alison BondDeputy DirectorDevelopment and Alumni Relations

contact details

Alumni AssociationWarwick Business SchoolUniversity of WarwickCoventry CV4 7ALUnited Kingdomt +44 (0)24 7652 2813f +44 (0)24 7652 3719E [email protected] www.wbs.ac.uk/alumni

Pam BarnesAlumni Publications Officert +44 (0)24 7652 4396e [email protected]

Alison BondDeputy Director, Development and Alumni RelationsT +44 (0)24 7652 4176E [email protected]

Kathryn ChedgzoyDevelopment and Alumni Relations Officer (Corporate Affairs)t +44 (0)24 7615 0515e [email protected]

Development and Alumni Relations Administrationt +44 (0)24 7652 2813E [email protected]

Ann JacksonDevelopment and Alumni Relations Officer (International Affairs)T +44 (0)24 7652 8197E [email protected]

Paula KerstenEvents Coordinatort +44 (0)24 7615 0171e [email protected]

Tracy LynchDevelopment and Alumni Relations Officer (Student & Regional Affairs)t +44 (0)24 7657 5835e [email protected]

Faith Plevin Development and Alumni Relations Officer (Corporate Affairs)t +44 (0)24 7615 0372e [email protected]

Ben PlummerDirector of Development and Alumni RelationsT +44(0)24 7652 4188E [email protected]

Charlotte WilkesAssociate Director, DevelopmentT +44(0)24 7615 0075E [email protected]

In–house photography by John Weatherly nexus is the magazine of the Alumni Association, Warwick Business School T +44 (0)24 7652 4306

The views contained in nexus are those of contributors and not necessarily those of Warwick Business School or the University of Warwick

Design by Morse–Brown Design w www.morsebrowndesign.co.uk

4

5

where we are...We all live and work somewhere, and our aim is to get to the point where every alumnus and alumna can access a WBS network close to where they live or work. Manny Coulon leads the group focused on this route

to connecting, so if you’ve volunteered in the past to do something or represent the network in your locality, particularly if you are outside the UK, you can expect to receive some contact soon from Manny’s team.

Manny Coulon FTMBA 1998–99

Rob McCulloch BSc Management Sciences 1972–75

Karamjit Singh MAIR 1973–76

Janet White DLMBA 2002–06

If you would like to help set up an alumni group in your area please contact Alison Bond, Deputy Director at e [email protected]

alumni board

Your alumni board has 15 members drawn from across the alumni community, as well as three student members and five WBS Staff members. Together we are focused on building engagement across the alumni body, with a specific focus this year on recognising our existing active volunteer base across the world, and building on it. To that end we are organised into four working groups, oriented around the main routes alumni can take to connecting with the alumni network.

Gill ThewlisChair of the Alumni BoardFTMBA 1989–90

what we do...Whatever discipline brought us to WBS in the first place, we have current professional interests either in terms of our functional specialism or our industry. There are high concentrations

of WBS alumni in many of the world’s largest global organisations, and so there are many ways of connecting with the WBS network through your professional interests. Nick Jessett leads the team focused on developing new Special Interest Groups and advising the central Alumni Relations and Development team on where to focus their energies in building WBS corporate partnership networks.

Nick Jessett EXMBA 1985–89

Issam Hamid FTMBA 2002–03

David Myers FTMBA 1999–2000

Paul Nicholson FTMBA 1971–72

Ananda Roy FTMBA 2005–06

If you would like more information on joining a Special Interest Group or establishing a corporate partnership, contact Faith Plevin at e [email protected]

who we know...

Whenever we completed our studies at WBS, we were (or for current students, still are) part of a ‘Class of…’ Many of our alumni are keen to stay in touch with or re-connect with the people they knew when at Warwick. We’re going to build a network of class representatives, so that everyone can connect with someone they recognise from their class – however long ago that was. We’re also keen to make sure the existing student body see the value of connecting with alumni whilst still at Warwick. Jemima Tomlinson and Kate Spencer lead this group.

Kate Spencer Current DLMBA student

Jemima Tomlinson EXMBA 2003–07

Cristiano Coppola Current FTMBA student

Paul Edwards WBS Professor of Industrial Relations

Richard Hughes DLMBA 2003–06

Francis Lootes Current Undergraduate and President of WBSS

If you would like to become a class representative or would like to nominate someone from your class, please contact Tracy Lynch at e [email protected]

and bringing the network together…

David Allan leads the team focused on organising the first ever event to bring as many as possible of our active volunteers together on 27 September 2008 at WBS, physically, virtually and in spirit. The programme is evolving but is already packed with activity and we hope to shrink the world with technology so that as many people as possible can take part. The day is intended to become an annual event and a core part of supporting and thanking our active volunteers – we look for-ward to seeing as many of you as possible on the day.

Manny CoulonNick Jessett Jemima Tomlinson Kate Spencer

If you would like to attend the Volunteer Day, in person or ‘virtually’, please contact Tracy Lynch at e [email protected]

David Allan MPA 2000–04

David Sykes FTMBA 1986–87

Mark Whitley FTMBA 1999–2000David Allan

5

nexus: summer 086

a new masters degreeIn January, a new Masters degree, the MSc in Business Analytics & Consulting (MSBAC), was launched, with the first intake starting in October. This 12-month full-time degree brings to ten the number of specialist masters courses on offer at WBS, which together with the non-specialist Masters in Management, are aimed at new and recently-graduated students.

MSBAC will run as a sister programme to the existing MSc in Management Science & Operational Research (MSOR), which has a strong reputation in the OR community and is the longest-running specialist masters course at WBS.

W www.wbs.ac.uk/students/masters

superbrand statusWBS attained ‘business superbrand’ status in a survey highlighted in the UK’s Daily Telegraph newspaper in February. Stephen Cheliotis, Chairman of the Superbrands Council said, ‘It is no surprise that the high regard in which Warwick Business School is held by the international business community has translated into being recognised as a UK Business Superbrand. It is a brand that continues to gain momentum and every year is a more compelling challenger to its often older and more established rivals. As the most improved brand in its category, jumping almost 100 places in the rankings, it is clear that its influence on both experts and business professionals alike is growing.’

w www.superbrands.uk.com/bsb/index.html

WBS news

The ever-present theme of ‘rankings’ brought some pleasing news for WBS. The first ever ranking of Distance Learning MBAs, carried out by the Economist Intelligence Unit, placed WBS third in the world and first in the UK.

It was also good to see that our Full-time MBA rose into the top 30 in the Financial Times’ world ranking, climbing seven places in one year.

Our undergraduate programme continues to remain in the top echelons in the UK.

WBS Dean, Howard Thomas, commented: ‘Media-based rankings are now a fact of life for business schools and universities. Our aim is to be the best European, University-based business school and our rankings show that we are well on the way to this.’

student competitionsWBS undergraduates seem to have been even more involved than usual this year in competing in external business student competitions.

Five teams took part in the IBM Universities Business Challenge, with a team of second years making it through the semi-finals, coming top in their own stream of 8 teams.

Other WBS teams were the Warwick Trio in the L’Oreal Brandstorm competition, and football4future, Frontier, and Potentia Events in the Ernst & Young Profitunity competition.

The Warwick Bears in the Global Management Challenge, who finished in the top eight worldwide, beat over 1,000 students from over 300 teams. All teams were a credit to themselves and to WBS.

winter graduation celebrationsOn 23 January around 620 people gathered at WBS to celebrate the successful completion of study by over 300 WBS students. Winter graduation is primarily for postgraduate students, and many of their families and friends came along and joined the celebrations.

MSc Finance prizewinners Thierry Cambray, Wael Hathout and Chan Tong Ong with Professor Howard Thomas, Dean of WBS

Members of one of the five WBS teams in the IBM Universities Business Challenge

rankings

nexus: summer 08 7WBS news

WBS Dean, Howard Thomas, was confirmed as Chair of both the AACSB (the US-based Association to Advance Collegiate Schools of Business) and the ABS (UK-based Association of Business Schools) for 2007–8. Howard is the first Brit to hold the position at AACSB and the first to hold both posts.

Another busy person is Martin Cave, director of the WBS research Centre for Management under Regulation. In February the UK government asked him to lead a year-long review of the UK water industry, then in April came a request from the Secretary of State for Transport which he could not refuse! Announcing a review of the economic regulation of the UK airport system, she appointed Martin to chair a panel of experts to carry out this review.

In April, Linda Dickens MBE, Industrial Relations & Organisational Behaviour group, delivered the annual Warwick-Acas Lowry lecture on campus to an audience of senior HR managers, trade union officials, employment relations professionals and academics. She reviewed the last 25 years of employment relations and related legislation in the UK, arguing that the cumulative result of ad hoc responses to particular problems has been growing institutional fragmentation, complexity and an increasing lack of regulatory coherence.

Simon Collinson, Marketing & Strategic Management group, was one of a group of experts to speak on new perspectives in Chinese innovation at Demos, the independent think tank based in London. Other speakers represented organisations including the OECD, the Asia Pacific Technology Network, and the China-Britain Business Council. Simon’s two year research project, carried out through AIM Research (the ESRC-funded UK-based Advanced Institute of Management Research) interviewed managers from British, European and US firms operating in China.

Also from MSM, Professor Nigel Piercy and WBS doctoral graduate Ken Le Meunier-Fitzhugh were awarded the US Marvin Jolson Prize for the Best Contribution to Selling and Sales Management Practice for 2007 by the Journal of Personal Selling & Sales Management. This is the second time Nigel has won this award.

Julia Kotlarsky, ISM, was joint author of an article on outsourcing published in the Wall Street Journal this May. A Corporate Social Responsibility paper by Industrial Relations Research Unit’s Paul Marginson and Tony Edwards (IRRU associate fellow) and others, following on from research on multi-national companies, has been placed in the top ten HR listings in the influential newsletter of the US-based Academy of Management (AoM).

Former British Olympic marathon runner and current DLMBA student, Richard Nerurkar has been working in Ethiopia for the past seven years, staging athletic competitions for the Ethiopian public. Working with Olympic gold medallist Haile Gebrselassie, he has set up the Great Ethiopian Run, an organisation which has now staged more than 35 races in different parts of Ethiopia for more than 200,000 participants. ‘These races are more than just athletic events,’ explains Richard, ‘We also use the races as a way of publicising health and social messages.’

BSc Management finalist Philip Craig went to the University of Wisconsin-Madison for an extra year’s study last year, and ended up researching and delivering several lectures to fellow students!

MSc in Management Science & Operational Research students won a cash prize and certificates from business process analysis company The Lanner Group for the best consulting report.

In April, WBS hosted a successful conference organised by doctoral students for doctoral students from three of the world’s best business schools: Judge Business School at Cambridge, the Saïd Business School from Oxford, and WBS itself.

The Lanner Group prize winners

Concentration levels are high at one of the presentations at the doctoral conference

This year’s Warwick-Acas Lowry lecture presenter Linda Dickens MBE (centre)

staff successes student successes

For more news items, features, media coverage and podcasts visit our Press Centre W www.wbs.ac.uk/news/

nexus: summer 088

Dr Qing Wang, Associate Professor of Marketing & Innovation, has been the driving force in launching a new research network to explore key issues where marketing and innovation

meet with regard to fast-growing economies such as China and India. The cross-border research network on Marketing, Innovation and Chinese Economy (MICE) has already received funding for specific projects from the US-based Marketing Science Institute and the Chinese Natural Science Foundation.

Main research themes include: • Firm’s marketing capabilities and

technological capabilities for radical vs incremental innovations

• Consumer characteristics and behaviour for really-new products and services

• Aesthetics of innovation and the effect on adoption intention: exploring cross-cultural differences and similarities

• Innovation and branding strategies of Chinese high-tech firms.

MICE members come from UK institutions including WBS, Cambridge, Tanaka Imperial, and Sussex University, and four institutions in China including Tsinghua and Zhejiang universities. The first workshop, in collaboration with Tsinghua University, took place on 30 March (see P23). w www.wbs.ac.uk/faculty/research/mice.cfm

Variable pay systems or collective bargaining? Research by members of the WBS Industrial Relations Research Unit (IRRU) found two major trends characterising recent developments in pay setting in the UK: the continued retreat of collective bargaining in the private sector, and growing emphasis on variable pay systems (VPS). They looked at these two trends and found a complex relationship, varying according to the type of VPS and features of the firms or organisations involved.

The 6th International Studying Leadership Conference took place at WBS in December, on the theme of Leadership: Purposes, Politics and Praxis. Academics convened for a two-day set of plenary sessions and individual papers. There were 59 papers and over 100 delegates. There will be a special issue of the journal Leadership based on some of the papers, edited by conference organisers Professors John Benington and Jean Hartley, IGPM.

The conference got off to a strong start with an introduction from the Deputy Dean of WBS, Professor David Wilson, followed by an electrifying keynote talk from Professor Jean-Louis Denis from the University of Montreal, who spoke on the topic of The practice of leadership in the messy world of organisations.

Another highlight was the plenary session with David Blunkett, MP and Sir Michael Bichard, in conversation with John Benington, as they reflected on the purposes, politics and praxis of leadership from their respective roles and working relationship as former Secretary of State for Education and Permanent Secretary for Education.

Research by Dr Shahed Imam and Professor Colin Clubb, WBS Accounting group, with Richard Barker, Judge Business School, on The Use of Valuation Models by UK Investment Analysts will feature in the European Accounting Review.

The study is based on semi-structured interviews with 35 sell-side analysts from ten leading investment banks and seven buy-side analysts from three asset management firms; and content analysis based on 98 equity research reports for FTSE-100 companies covered by the sell-side interviewees. They conclude that, while the literature has focused on the technical merits of alternative valuation models, analysts’ actual usage of valuation models also requires an understanding of social and economic context and motivations.

Another research paper from Dr Shahed Imam and Richard Barker, Judge, Analysts’ Perceptions of ‘Earnings Quality will feature in the Accounting and Business Research Journal. This research seeks to understand earnings quality as interpreted by analysts and then tests this interpretation against its actual usage in analysts’ research reports. An inductive approach is used that combines interview data with content analysis, and the findings are interpreted in the light of findings from market-based and other research.

Qing Wang

Research papers by Dr Philip Stern, Associate Professor, MSM, are to appear in two leading international journals. Physicians’ Persistence and Its Implication for Their Response to

Promotion of Prescription Drugs (2008) with R Jarakiraman, S Dutta, C Sismero will feature in Management Science.

Stochastic Modelling and Industrial Networks – Complementary views of organisational buyer behaviour, co-authored with PhD candidate Jim McCabe, in the Journal of the Academy of Marketing Science.

Philip Stern

In their work for the Warwick Local Authority Local Authorities Research Consortium, Acting Director Howard Davis and Maggie Rust, Local Government Centre, have produced a

guide to Understanding the Governance and Accountability of Partnerships. Partnership working is an increasingly vital element of the day-to-day working of local authorities and other local public services.

In early March LGC coorganised a seminar to explore the challenges of urban transport governance facing city regions and other major urban areas in England in the context of the Government’s emerging city regions agenda. Attended by senior officer representatives of the majority of city regions in England, the seminar sought to go beyond merely repeating the key elements of legislation by constructively challenging the Government’s proposals and considering the practical and political issues concerned with its implementation.

Howard Davis

Jean Hartley and Lyndsay Rashman, of the Institute of Governance and Public Management, were commissioned by the UK’s Renew Northwest organisation to see how public

service organisations can share knowledge to bring about regeneration. Their report was published in April, and outlined a knowledge transfer framework including advice on how organisations can adapt the lessons learned by peers and competitors to meet their own specific needs.

Lyndsay Rashman

John Benington Jean Hartley Colin Clubb Shahed Imam

research review

nexus: summer 08 9

An Economic Evaluation of Empirical Exchange Rate Models, co-authored by Dr Pasquale Della Corte, Professor Lucio Sarno and Dr Ilias Tsiakas, WBS Finance group, featured in the top finance journal Review of Financial Studies.

The paper recently appeared as a working paper for the CEPR (Centre for Economic Policy Research). The authors also received an invitation from VoxEU.org to write a short research column. Established by leading economists, this well-respected website provides research-based policy analysis and commentary.

Pasquale Della Corte Lucio Sarno Ilias Tsiakas

research review

Their paper provides a comprehensive evaluation of the short-horizon predictive ability of economic fundamentals and forward premia on monthly exchange rate returns in a framework that allows for volatility timing. They implement Bayesian methods for estimation and ranking of a set of empirical exchange rate models, and construct combined forecasts based on Bayesian Model Averaging. Their assessment of the economic value of the in-sample and out-of-sample forecasting power of the empirical models finds two key results:

• a risk averse investor will pay a high performance fee to switch from a dynamic portfolio strategy based on the random walk model to one which conditions on the forward premium with stochastic volatility innovations

• strategies based on combined forecasts yield large economic gains over the random walk benchmark. These two results are robust to reasonably high transaction costs.

w www.voxeu.org/index.php?q=node/876

Professor John Benington and IGPM colleagues have begun to develop active working links with the new Governments of Sierra Leone and of the Southern Sudan, both of which are struggling to restore democracy and public services after bitter civil war. Warwick IGPM has been invited to contribute to the training and development of Ministers and senior civil servants in each of these two countries.

Sierra LeoneThe elections which swept the All People’s Congress (APC) into government in Sierra Leone in October 2007 have created a historic moment of opportunity for this war torn country to make a significant transition to peace, democracy and economic and social development.

Moving quickly after the elections, John and IGPM associate fellow Mark Sheldrake helped to run a one week workshop for all the new Ministers and their Permanent Secretaries, in Freetown in December. They had the privilege of contributing to a series of Policy Development and Strategic Leadership Forums for the newly elected Ministers and their senior civil servants, sponsored by the Sierra Leone government’s Public Service Reform Programme and Institute of Public Administration and Management (IPAM), and supported by DfID and Public Administration International (PAI). Follow

up action is being planned and a proposal being prepared for a longer term programme of capacity building.

Southern SudanSouthern Sudan is in a very difficult period of transition, with peace and democracy by no means yet certain. After more than 20 years of civil war, the Comprehensive Peace Agreement makes provision for a possible secession of the largely African and Christian South from the largely Arabic and Muslim North. An interim Government of the Southern Sudan has been established, and elections are planned for 2009 and a full referendum in 2010.

Having hosted a visit to Warwick in February 2007 by the Minister of Commerce and Trade in the Government of the Southern Sudan and his Director General of Finance and Resources, John Benington made a visit to the capital Juba in June 2007 to assess the Government’s development and training needs. Subsequently John and IGPM colleagues have been developing pilot programmes of support.

Southern Sudan

Kathy Johnson (a graduate from our Postgraduate Diploma in Local Government Management) has been appointed to work in Juba for a year as a research and policy officer in the office of the Minister for Commerce and Trade, to analyse the context, to assess needs on the ground, and to develop pilot training programmes.

The first of these took place in Juba in February 2008, when John, Jean Hartley and Kathy Johnson ran a one week training workshop on ‘Managing People and Performance’ for the top 50

managers in the Ministry of Commerce. A second workshop on ‘Managing Finance’ took place in June and a third on ‘Managing Projects’ in July.

W www2.warwick.ac.uk/fac/soc/wbs/igpm/

post-conflict reconstruction and governance

Kathy Johnson

The spring 2009 issue of nexus will focus on Entrepreneurship. If you run your own business and would like to contribute to your alumni magazine, then do email the editorE [email protected]

nexus: summer 08 finance10

holy simplicityProfessor Anthony Neuberger examines the reality of the latest pensions policy reform

Now that all the dust has settled, it is time to look back at what has been described by Ministers as the most radical reform of pensions policy since Beveridge. The rhetoric suggests a grand and elegant vision. The reality is rather more prosaic.

Rarely has such care and deliberation gone into an area of public policy. A Pensions Commission, under Adair Turner, has deliberated for three years, produced two major interim reports, and one final report. Evidence has been taken, White Papers have been written, bills enacted, quangos established. The timescale is leisurely. The reforms to the UK state pension system will only be implemented in full by 2080.

It is easy to mock the pretentiousness of the plan. What confidence can there be in any planned sequence of changes unrolling over such long horizons when the Department of Work and Pensions itself has only been in existence for seven years and when, during its brief life, it has had no fewer than seven Secretaries of State?

But the need for reform is patent. The Pensions Commission described the UK pension system as the most complex in the world. Unravelling the complexity is bound to take time.

The Grand DesignSo what is the grand design towards which we are moving at such a stately pace? By 2080 the UK will still have two state pensions: the Basic State Pension and the State Second Pension. They will both be flat rate, but will be computed on the basis of different criteria, with different rules of entitlement. Actually, it is not quite true that the state pension will comprise just two components. There will also continue to be two other components of the pension package – the guarantee credit that declines

with pensioner income, and the savings credit that first increases and then declines with income.

The New Jerusalem to which we are heading looks like a pretty messy, complex sort of place. And that matters.

Pensions policy is intended to enhance social security. It is hard to see how people can get security from a system that is so complex that they cannot understand it. The state provision is intended to complement occupational pensions and private pension savings. The complexity of the state system makes it hard to give sound advice to people on moderate incomes who may well be means-tested in retirement.

Why the system has not really been simplifiedRadical change creates losers. To create a consensus for change you have to buy off the losers. But despite all the rhetoric, there is no consensus to spend more on pensions. True, the expenditure on pensions is expected to rise as a proportion of GDP, but not nearly so fast as the proportion of pensioners in the population. The UK state pension system is notably meaner than almost any other in the developed world, and it will stay that way.

I suspect that the real reason is that Ministers are addicted to complexity. Only because the system is so poorly understood can Ministers

present measures to dismantle past reforms (such as the state earnings related pension) as radical new initiatives. Complexity also makes it easier to provide goodies – by relaxing a contribution requirement here, by adding a credit there – to buy off particular pressure groups without spending too much money.

Complexity is an effective device for keeping costs down. The system will end up delivering what is in fact very close to a flat rate universal pension – the so called Citizen’s Pension. But if there were a single, universal flat rate pension, the pressure to raise the level of the pension would be hard to resist. By having a system of multiple interlocking pensions and credits, the target of campaigners for change is diffused. Any proposal for changing part of the system can be resisted on the grounds of its adverse effects elsewhere in the system.

Our mean and complex state pension system is likely to remain substantially unreformed because there is no desire to spend more on the state pension, and the complexity makes the meanness politically feasible.

Anthony Neuberger is Professor of Finance at WBS and current Head of the Finance Group.

His previous experience includes the Institute of Finance and Accounting, London Business School (1985–2004), the UK Department of Energy (1975–83), and he was a member of Central Policy Review Staff, UK Cabinet Office (1973–75).

Anthony consults for a variety of investment banks, exchanges, government departments and trade associations.

His research interests are: derivatives; commodities; market microstructure; investment management; pensions policy.

the author in minute

Pensions policy is intended to enhance social security.

It is hard to see how people can get security from a system that is so complex that they cannot understand it.

11nexus: summer 08 finance

Phil Ashdown has over 25 years of diverse experience gained within banking and advisory businesses. He is currently Director, Altima Partners LLP and is responsible for building their credit strategies business and is presently raising a bespoke stressed/distressed fund from institutional investors and family wealth offices, globally. Altima currently has in excess of $4.5bn assets under management.

Previously, Phil was Managing Director, Head of Acquisition Finance and Sponsor Coverage for ING Bank in London, where he was responsible for the strategic development of an integrated business model covering, Acquisition and Leveraged Finance, Advisory and Debt Capital Markets. He has successfully led financings for in excess of €20bn, during his career.

Phil became an Honorary Professor at Warwick Business School in May 2008.


credit crunchPhil Ashdown (FTMBA 1996–97) Director, Altima Partners LLP, gives his thoughts on how to prepare for the opportunities

We have just experienced the worst financial markets since the 1930s. The world’s leading financial institutions are successfully repairing their balance sheets having taken combined losses of c.$380bn since last summer. Globally, central bankers, regulators and governments have engineered an unprecedented yet highly successful coordinated approach to address immediate liquidity concerns and systemic risk within the financial system. Despite the dramatic news flow around the credit crunch, stock prices continue on the whole, to be relatively robust (ex of the financial institutions sector). We can, it seems, look back and be confident that the worst crisis to impact financial markets since the 1930s is over.

Or is it? The US economy is fully expected to enter into a recession, or at the very least a period of ‘sub-normal’ growth, since last summer house prices have fallen 14 percent in the USA, some cities have seen prices fall c.25 percent; Main Street is very wary of the impending fall-out from Wall Street. The US Fed economic policies are in complete divergence with the ECB, concerning differences of opinion over near term growth prospects and inflation concerns. In large part this has lead to the rapid appreciation of the Euro/$ rate.

More broadly, currency rates have shifted swiftly since last summer, impacting purchasing power parity, revenue and cost inputs aggressively. The UK is beginning to experience a very real housing problem, with prices now expected to fall by as much as 7 percent this year alone (revised from +3 percent since last summer), the retail and building and construction sectors are now operating under increased economic and financial strain. Globally, financial institutions have substantially tightened their lending criteria, risk spreads and associated costs have risen dramatically.

Availability and cost of finance is a very real issue for consumers and those corporates and sectors facing even just mild stress, both in Euro-land and the USA. Default and distress rates, across all forms of consumer and corporate debt are predicted to increase from record all time lows of 0.8 percent to in excess of 10 percent of total debt in issue, by year end 2009. Whilst globally, commodity, energy and food prices and the

rate of economic growth within the BRICs continue to run at levels outside all historic boundaries. Has there been a de-coupling of emerging markets? There appear to be new fundamental drivers behind commodity, energy and food prices as a consequence of the growth in BRICs. Does this underpin the sustainability of such prices at the current trends/levels? What impact will this have on USA and Euro economies?

There is a paradox and we are I feel, just part way through the consequences of the credit crunch; the eye of the storm perhaps. Immediate concerns of systemic risk and liquidity within the financial services sector appear to have been addressed; much credit should go to the leadership taken by the Fed in this regard. However, we are at the beginning of more fundamentally driven consequences of the credit crunch and their impact upon the wider and ‘real’ economy. Caution is the key watch word.

Those long of assets, at the wrong time (notably 2006 and 2007 vintages) and with too much leverage will be harshly hit as the consequences of the new post credit crunch environment become reality over the next two years. Globally, financial institutions have seen this already (IMF has said losses could reach $1trillion globally). Those in the fortunate position of having locked capital and sufficient cash flow to ride out the next 2/3 years may ultimately achieve the returns

they sought. Nevertheless, it is increasingly likely that at the very least, timing and holding periods will be longer than perhaps envisaged/expected; equity returns will be lower whilst risk has undoubtedly increased.

However, growing realism amongst vendors (either ‘forced’ or ‘willing’) and the substantial availability of liquidity and capital appropriately structured for the new post credit crunch environment will drive many excellent investment opportunities over the next few years. Timing is critical. The adage of ‘avoid the falling knife’ strongly prevails. Some investors are beginning to utilise their liquid resources now, time will tell whether they are right. Most probably, it is the eye of the storm however. Huge opportunity is out there as the feedback mechanisms from the credit crunch impact fundamental drivers across all sectors and asset classes. As more fundamental drivers unfold, vendors and acquirers will be able to undertake robust and diligent appraisal of valuation and assess risk/reward, bottom up.

On balance, it remains a little too early to take advantage… get ready this is undoubtedly an exciting time. Time compression is typically prevalent as markets rapidly adjust downwards and strategic and sustainable competitive advantage can be rapidly built and/or expanded at this juncture, for those ready and bold. Be bold!


Mark Salmon is Professor of Finance at WBS and Director of the Financial Econometrics Research Centre (FERC), which forms part of the Warwick Finance Research Institute. He was formerly Deutsche Morgan Grenfell Professor of Financial Markets at Cass Business School, London. Mark previously held the position of Professor at the European University Institute in Florence. He has been an advisor to the Bank of England for the last five years and has many links with City institutions.

His research interests are: financial econometrics; behavioural finance; asset pricing; knightian uncertainty; risk management; asset management.


climate change and financial markets: risk or uncertainty?Professor Mark Salmon addresses the issue of how financial markets can be best employed to manage the risks associated with climate change

The ability of financial markets to bear risk is central to economic welfare and stability. Growth and economic wellbeing is inhibited if financial markets are unable to transfer resources efficiently from the suppliers of liquidity to risk takers or entrepreneurs. Ensuring a proper return to capital and risk is the function of a market and market stability enables proper long run planning and the efficient allocation of resources to productive activities. These statements underlie the free market philosophy that drives our economy. What happens when this belief system is confronted with global warming?

There is real concern within the insurance industry that the true costs of climate change have not been fully recognised and hence priced (see for instance the Swiss Re, Munich Re, OECD, and World Bank web pages). Equally there has been a growing realisation that the capital base of financial markets has to be employed to manage the risks associated with climate change. The traditional route of insurance and the diversification of risks through reinsurance is simply unable to carry the potential burden. The implications of liquidity failure and default on a large scale within the insurance industry could have a major impact on the global economy.

We are faced with two options; either various climate-related insurance lines, say flooding, are simply withdrawn and environmental risks become uninsurable or we start to use financial markets to manage (and price) these risks. The issue facing us then is, given the uncertainty regarding the physical processes underlying climate change, how can financial markets be best employed to manage the associated risks?

According to the 2003 report by the International Institute for Applied Systems Analysis, more than 700 major ‘natural’ catastrophes occur every year. Since the 1950s alone, economic losses from disasters of either natural or man-made causes have increased 14-fold. Although the developed world generally suffers the greatest absolute economic losses, when seen as a percentage of GNP the losses in the less developed world are 150 times greater in terms of human victims and apparently 20 times greater in terms of economic loss.

The major factors behind these escalating costs are economic and population growth with accompanying land-use changes and movements of capital and people to vulnerable regions. In other words, the main cause is global change and development in its broadest sense. At the same time as such profound and sustained global change is occurring, it is expected that long-term worsening of weather extremes due to climate change will also accelerate if action is not taken. Specific events such as hurricanes Katrina and Andrew in 1992, the Northridge earthquake in 1994, or even the bombing of the World Trade Centre in 2001, have all served to underline the increasingly stretched capacity of global insurance markets. This has in turn sparked an increasingly active debate among actuaries, economists and politicians over how financial markets could, or indeed should, be used to hedge risk that has previously been covered using other channels. A symptom of the debate and of the increasing linkage and possible convergence between the insurance and financial markets has been the steadily increasing stream of financial instruments that contain some form of insurance product and vice versa.

The lines between the industries have become increasingly blurred and this has stimulated the tailoring of products to the risk preferences, capacities and demands of both buyers and sellers of risk based products. Securitisation of risks in both areas has generated a concomitant development in the pricing of products containing both insurance and financial elements, the result of which has been a search for an appropriate class of processes to solve the problem of price determination for extreme risks. Arguably one of the most important aspects in this process is the way in which risk and perhaps more importantly uncertainty are handled in each discipline.

Uncertainty arises when we do not know the probability distribution of random events, risk applies when we assume we do. Finance has critically focused on risk not uncertainty and new methods of financial analysis need to be developed.

The extent to which the redistribution of risks by financial markets (after securitisation of assets) can be a benefit or a danger to society as a whole is a critical issue. How far can we rely on financial markets to efficiently price and transfer risks? The repackaging and reselling of US subprime mortgage debt through CDOs exactly mimics the way in which insurance has traditionally managed or diversified risk through re-insurance. If recent experience has shown us anything it has shown us that we currently can’t price these instruments correctly and rating agencies are unable to properly assign risks so how can we hope that environmental risks will be properly priced and traded in financial markets? Uncertainty is perhaps more important than Risk.

These are some of the issues the Finance group at WBS is currently addressing.


raising the standardAnne Gunther (FTMBA 1989–91), Chief Executive of Standard Life Bank, examines the greater challenges of managing risk now facing the financial services industry

Standard Life has been my working life for the last six years and it’s proven to be far more fascinating than I ever imagined when I moved to Edinburgh. I was heavily involved in the run up to our demutualisation and our Initial Public Offering (IPO) in 2006, an event that wasn’t even on the horizon when I joined in 2002. After IPO, my role began to expand, from focusing on the Bank, our mortgage and savings business, to a wider role increasingly looking across the retail propositions used by Standard Life’s customer base of c.7m.

However, banking activities have become centre stage, once more, as a result of the current credit crunch. It has become clear to the financial services industry, as a whole, that the challenges of managing risk have become much greater with the impact of globalisation which first showed up, truly, in the Stock Market crash following the dot com boom, coming into play across a much wider range of risks than the traditional credit risks associated with banking. 9 August 2007 will remain engrained on many bankers’ memories as the day the structured finance markets, and the asset backed securitisation market in particular, slammed shut.

This market had been widely used by the mortgage industry to diversify funding away from total reliance on the retail savings market and to spread credit risk. In the US, however, the ability to pass on most, if not all, credit risk with the bonds backed by mortgages was taken to extremes, and hence the underlying credit quality of the mortgages themselves became less and less important. Bankers were ignoring the core risk in banking – whether a borrower could repay.

Pundits had been asserting that the US subprime mortgage problems wouldn’t spread to the UK as our mortgage books were great quality and our securitisation issues were different. No-one had thought through the new concept of contagion risk! If one market doesn’t know enough about another market, the safest bet is to assume that it’s all the same. Hence, very quickly, UK institutions could no longer source well priced long term funding through the securitisation markets and the Northern Rock implosion was the all too public face of this. Since then, write-downs of unprecedented size, capital raising of equally unprecedented size and continued suspicion in the markets regarding who still holds the remaining subprime mortgage risks has led to the Bank of England taking the major step of providing an alternative securitisation market to begin to redevelop liquidity and confidence in those instruments.

Meanwhile, further shocks around inflation, stemming from tightening of oil supplies and somewhat associated price rises for food, driven by the rush to bio fuels using up agricultural land and the increasing wealth of and changing taste for food of the Asia Pacific region doing the same, is overlaying a major spectre of inflation risk

Anne is currently CEO of Standard Life Bank with further responsibilities as CEO Designate of their Healthcare division and MD of Customer Relationship Development. Prior to SLB, Anne’s career began at NatWest as a Graduate Management Trainee, before moving to Lloyds TSB, eventually becoming MD of Direct Channels.

Anne holds a degree in physics, a Warwick MBA and an honorary doctorate from Edinburgh. She has chaired the industry trade body of the Council of Mortgage Lenders; is a Trustee of Arts & Business, and is a member of the advisory board of Warwick Business School.

Anne’s weekends are split between houses in Edinburgh and Devon. She enjoys sailing, walking and cooking for friends.


on top of the current liquidity risks. Risk management, always the bankers’ bread and butter, is now unimaginably wider, deeper and more complex than even ten years ago.

Did my time at Warwick Business School prepare me for this? It certainly taught me to think much more globally, and I remember, with mixed emotions, the debates I had with Peter Doyle about the Japanese approach to competing on the world stage. He also taught me the huge importance of brand and brand values; not what a company’s advertising looks like but the overall image projected, ‘the sum total of what everyone thinks and feels about you’. Your reputation is your single biggest asset and the risks I’ve discussed above, or rather lack of management of those risks, are the surest way to destroy your reputation.

My lasting impression of Warwick has therefore changed over the last 12 months as I’ve realised just how much it did teach me and how that has equipped me to help my team manage through a very different environment.

Looking to the future, my widening retail portfolio within Standard Life gives me plenty to think about as we move from a traditional pensions company to a major asset managing organisation, working across the full range of corporate and retail assets.

Pundits had been asserting that the US subprime

mortgage problems wouldn’t spread to the UK as our mortgage books were great quality and our securitisation issues were different. No-one had thought through the new concept of contagion risk!


crisis and currency Professor Lucio Sarno addresses the question of the future of the currency ‘carry trade’ in the light of the subprime crisis in the US

Lucio Sarno is Professor of Finance at WBS and Director of Currency Research, AXA Investment Managers.

He was previously fellow in Economics, University College, Oxford; Research Fellow, Dept of Economics, Oxford University; Rotary Ambassadorial Scholar, Department of Economics, Columbia University, New York. Lucio is currently Research Affiliate at the Centre of Economic Policy Research, London; Consultant, International Monetary Fund, Bank of Canada, Bank of Norway, Federal Reserve Bank of St Louis, USA; Committee Member of the Macro Money and Finance Research Group. He also provides consultancy for several companies in Wall Street and the City.

His research interests are: international economics, financial economics, international money and finance, monetary economics; financial econometrics.

the author in minuteThe subprime crisis that began in the summer of 2007 has its origins in the generation of easy access to credit offered to risky borrowers for purchasing real estate in the US. While the origin of the problem is localised (US-based) and confined to one specific asset class (real estate), the crisis has affected several geographical areas (Continental Europe, the UK, and various emerging economies) and asset classes (eg equities, bonds, currencies), leading in turn to instability of the financial markets and to a recession in the US that will soon spill over elsewhere. The focus of this article is the specific impact these events have had on the currency markets and on the widespread use of the ‘carry trade’ as a simple investment strategy.

The carry trade is a strategy where an investor borrows in a currency with a lower interest rate and uses the funds to purchase another currency that yield a higher interest rate. An investor who adopts this strategy is attempting to capture the difference between the two interest rates. This difference in rates can be substantial, depending on the amount of leverage the investor chooses to use.

The risk inherent in simple carry-trade strategies is that an adverse movement in the exchange rate will wipe out the gain from the differential in the interest rate. According to standard finance theory, based on the simplest version of the efficiency markets hypothesis (EMH), the return from a carry trade strategy should, on average, be zero. This is because the currency of the higher interest rate country should depreciate in the future to offset the differential in interest rates, so that the returns from holding a low interest rate currency and from holding a high interest rate currency should equalise once the exchange rate risk is taken into account.

In contrast to the EMH, there is ample evidence in the data that carry trades deliver positive risk-adjusted returns to investors. Given their intrinsic simplicity, carry trades are used not only by hedge funds, investment banks and other financial practitioners, but also a number of laymen and housewives. Given the huge leverage often involved in carry trades and their potential for disrupting financial stability, these strategies have attracted a lot of attention from policy makers, regulators, academics and the media.

The sceptics have traditionally taken the view that returns from carry trades represent anomalies, puzzles, inefficiencies, which cannot continue forever in a rational world. This cohort includes many academic economists, policy makers and a small set of contrarian financial practitioners. With the advent of the subprime crisis and the huge losses of carry-trade strategies that have followed, these sceptics have typically reacted by saying: ‘I told you so’. The main point of this article is to argue that this reaction is at best premature and, most likely, incorrect. This is because the losses incurred by carry trades (no matter how important one thinks the subprime crisis is) are nowhere near the magnitude that is required to offset the large gains that these strategies have delivered in the past.

Figure 1 below shows the cumulative returns from a simple carry-trade strategy in a portfolio that has been invested in 20 currencies since 1995. Note that the vertical axis shows the percentage cumulative return divided by 100, ie 1 represents a 100 percent cumulative return. If the EMH were correct, the graph of cumulative returns should revert to zero over time. Instead, we note the dramatic positive trend in these returns. This trend has been mitigated by the subprime crisis, but clearly not sufficiently to affect the long-run gains from carry trades or to justify the statement ‘I told you so’.

One thing is for sure: someone who has invested in carry-trade strategies for the past ten years is not going to be concerned about the subprime crisis at this stage and will persist with the same strategy for the foreseeable future. To avoid any misunderstanding, I do not suggest that carry trades are all that one needs to know to be a successful investor. I do suggest that the dismissive view of the disciples of the simple version of the EMH is far too simplistic to be taken seriously.

Policy makers and regulators should continue to think about the destabilising effects of excess leverage and about designing a system which prevents excess risk taking in carry trades, because – given the returns from these strategies – the market is not going to moderate their risk taking without some harder evidence that carry trades are not profitable.

Cumulative returns from carry trades in currencies

Calendar time

08.01.95 08.06.99 06.11.03 05.04.08

2

4

6

8

10

12

0

-2

Cum

ulat

ive

retu

rns


aligning the objectivesBo Kratz (FTMBA 1987–88) details his journey from Sweden via Warwick to Singapore

Leaving the shores of my native Sweden, literally on a boat, I arrived at WBS in 1987 to participate in the full-time MBA programme. The year at Warwick was in many ways an important milestone in my life. Not only did I enroll in a fascinating academic programme, but I also became a passionate ‘cosmopolitan’. The most obvious proof of the latter was the young Taiwanese girl that I met in my Tocil kitchen and with whom I now have two children. I enjoyed all of the courses at Warwick, but Finance and Organisational Behaviour were my clear favourites. Consequently, the memories of Professors Andrew Pettigrew and the late Anthony Steele are particularly strong.

When I returned to Sweden (coincidentally on the same boat), I took up a career in stockbroking and subsequently asset management. Anthony Steele’s words of wisdom came in handy straight away as I got my hands dirty dissecting corporate profit and loss accounts. However, as I subsequently drifted away from managing money into managing people, I had the opportunity to revisit some of the concepts from the Organisational Behaviour course.

Fast forwarding to 2001: I was then heading up the investment function of ABN AMRO Asset Management in Stockholm. With one eye on the needs of my two ‘Eurasian’ children and one eye on future growth prospect for me and for them, I quietly approached my company expressing a desire to work in South East Asia. A few weeks later they came back offering me the position of CEO in Singapore. My acceptance followed swiftly and in the summer of 2001, we sold our house, the Volvo, and bought a one way ticket to Singapore. I found the task of managing a team of many different

races, religions and ethnic backgrounds exceptionally rewarding. I saw the strength in the diversity as opposed to an obstacle. After three years in Singapore ABN asked me to move to Hong Kong to take up a more regional role, which I did for about two years until it was time to move on.

My take from my ten years with ABN is that if you have aspirations and ambitions, do express them, even if they might seem odd and out of the normal. Good organisations appreciate people with ambitions and if you can accommodate each other, a very strong relationship is formed. Also, if your organisation doesn’t appreciate people with ambitions, you are in the wrong place anyway.

Nevertheless, after ten years it was time to say farewell to ABN AMRO. I was approached by Permal in 2006. Permal is one of the world’s largest Fund of Hedge Fund managers. I was asked to further expand and strengthen their organisation and presence in Asia. In addition to being one of the largest Fund of Hedge Fund managers, Permal is also one of the oldest. With 34 years in the industry, Permal brings not only a long track record but also a wealth of experience in an industry that is generally perceived as young.

Going from an organisation of a few thousand to one with just over a hundred

Bo Kratz is Managing Director, Asia, at Permal Group. Bo joined the Permal Group in 2006 and his main responsibility is to oversee and coordinate the business activities in Asia Pacific.

Before joining Permal, Bo spent ten years with ABN AMRO Asset Management, the first five in Stockholm, culminating as Head of the Equity Department. Between 2001 and 2004, he was CEO of ABN AMRO Asset Management in Singapore and before joining Permal, he was Head of Institutional Sales Asia, based in Hong Kong. Prior to joining the Asset Management industry, he spent eight years in Stockholm as a research analyst and a stockbroker.

Born in Sweden in 1962, Bo has a wife Lian and two children aged 15 and 11. His home is now in Singapore. He lists his personal interests as: everything on two wheels, photography, action sports and admits to a craving for adrenalin.


globally was great and again gave me the opportunity to reflect on the behaviour of different organisations, or more importantly of the people within them.

In addition, after 18 years on the buy as well as sell side of the equity markets, I became increasingly convinced that the future of mutual funds and investment products in general lies in aligning the investment objectives with that of your clients as opposed to that of the market as a whole. In other words, creating a stable return that does not necessarily fluctuate with traditional asset classes such as equities and bond, not only makes the private investor sleep better, but also has an appeal for institutional investors such as pension funds and insurance companies. Despite these obvious benefits, we still spend a lot of time educating our clients about so called ‘alternative’ asset classes.

Asia has become my home and the two large international cities of Hong Kong and Singapore both very much mirror the composition of our family. We moved our primary base back to Singapore last summer, but still keep a strong link with Hong Kong. There is so much to do in this part of the world so I am pleased to say that my personal and professional aspirations are very much aligned. Understanding my family helps me to understand the dynamics of the region and vice versa.

After 18 years [in] equity markets, I became

increasingly convinced that the future of mutual funds and investment products in general lies in aligning the investment objectives with that of your clients as opposed to that of the market as a whole.


the credit spread puzzleProfessor Gordon Gemmill is conducting research comparing the distributions of returns which are implied by corporate bonds and by equity-index options in the UK

Gordon Gemmill is Professor of Finance at WBS. He directs the new PhD in Finance, started in 2007/08 and from 2005 to 2007 was Head of the Finance Group.

Before joining WBS Gordon was on the staff of Cass Business School from 1977 – 2004, as Professor of Finance since 1988.

His research interests are: behavioural finance; credit risk and the pricing of bonds; corporate governance and the performance of mutual funds; pricing of derivatives; market microstructure.


During the past year investment banks have been surprised to lose more than $200 billion on bonds backed by subprime mortgages. These losses have mainly arisen on portfolios of bonds known as collateralised debt obligations (CDOs), which the banks thought that they had shifted from their balance-sheets only to discover that they had not. However, bonds backed by low-quality mortgages are rather unusual. One should not infer from recent events that conventional bonds issued by companies are more likely to default than had previously been thought. The historical record shows that corporate bonds hardly ever fail. For example, an AA-rated bond has a 99.75 percent chance on average of being paid in full over the next 10 years. Even if a bond is one of the 0.25 percent which do default, investors can still expect to recover more than half of their money. The default rate does vary slightly with the state of the economy, so can be expected to rise if there is a recession in the next year or two, but an outbreak of ‘irrational pessimism’ in relation to corporate bonds because of the subprime crisis would not be justified.

In fact, the main peculiarity about corporate bonds is not that they occasionally default but that they have high yields given their very low probabilities of default. For example, a typical AA-rated 10-year corporate bond might yield 5.65 percent when an equivalent government bond yields 5.00 percent. The expected loss from default on the AA-rated bond can only account for about 0.05 percent (5 basis points) of its extra yield of 0.65 percent (65 basis points) over the government bond. The chance of default is therefore not the main cause of the extra yield. If we allow for 20 basis points to compensate for the lower liquidity of the corporate bond, there still remains most of the credit spread (40 basis points out of a total of 65 basis points) to be explained. Why is this unexplained risk-premium so large?

Some research I am conducting with Yiran Yang, a PhD student, investigates this ‘credit spread puzzle’. What we find is that the character of the risk-premium on corporate bonds is closely related to the risk-premium on equity. In both markets investors seem to exhibit an extreme form of loss aversion. Kahneman and Tversky noted in 1979 that investors dislike losses more than they have pleasure in gains (work for which Daniel

Kahneman won the Nobel Prize in 2002). When this idea of loss-aversion is applied to investors with one-year horizons for equity investments, Benartzi and Thaler (1995) have shown that it can generate an equity risk premium of about 6 percent per annum. However, the loss-aversion which Yiran and I find to be important is not a simple dislike of losses, but rather an aversion to extreme downside risks.

Our work is based on comparing the distributions of returns which are implied by corporate bonds and by equity-index options in the UK. (For the technically-minded, a corporate bond is equivalent in value to a risk-free bond less a put option on the firm’s assets. It is this put option which we use to imply returns on the firm’s assets). The study suggests that investors do not worry too much about losses of 10 or 20 percent of their wealth, but they will pay almost any risk-premium to avoid losses of 60 or 70 percent of their wealth. One way to see our results is to plot ‘volatility smiles’ from bonds and from long-term index options (the bonds and options being matched with respect to maturity and leverage). The shape of the smile should indicate the extent to which returns on the underlying assets as perceived by investors to deviate from normality. The smiles in the plot shown are both downward-sloping from left to right, indicating an excess

of probability on the downside relative to a normal distribution. The smiles, which are averages over the 1992 to 2002 period, are very similar for the bonds and the equity index. The high implied volatilities for downside events on the left-hand side suggest that investors are willing to pay a large risk premium in order to avoid low-probability disasters, both in bonds and in equities.

The subprime crisis has demonstrated the importance to investment banks of knowing precisely where risk is located but tells us little about the price of risk. The premium required by investors for taking risk is fundamental in determining the prices of all kinds of risky financial assets. The credit spread puzzle and the equity-premium puzzle would both seem to be closely-related phenomena, with both reflecting investors’ complicated downside preferences.

The Relationship of Implied Volatility to Leverage for Bonds and for Equities

exercise price of instrument relative to forward price (leverage)

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1

0.4

0.6

0.8

1

0.2

0

imp

lied

vol

atili

ty

equities

bonds


hurdles... what hurdles?Some thoughts on performance management from Rob Cooper (FTMBA 1994–95) and Jon Hill (DLMBA 1993–98) of Wexner

The WBS Academic Seminar held in March was not untypical of previous events – a mixture of entertainment, the latest in Warwick research, and a lively debate to finish off.

Immediately some of the research was used by Wexner consultants to challenge and evolve the thinking of clients during the following weeks. However, it was an anecdote from the Naked Leader himself, Professor David Taylor, which really stuck in the mind. When interviewing Colin Jackson, the champion high-hurdler, David asked him how he faced the hurdles in front of him at the start of each race – his reply was ‘hurdles... what hurdles?’

This set us thinking. How did this compare with our experience in working with our clients in improving their performance management? As business teams compete in their races, how do they perceive the hurdles, and what is the role of their finance and other measuring departments relative to these hurdles? Does it help or hinder performance?

In recent years, the term Business Performance Management (BPM) seems to have been hijacked by the software houses, and is used to describe their products that can assist in managing business performance. Many organisations, in both the public and private sectors, now have impressive looking dashboards and scorecards that they look at frequently or infrequently. The information demands of these has created a cottage industry in the extraction and cleansing of data. As an FD friend recently observed, his finance department has become ‘the rework centre of excellence’.

But has the performance of their organisations improved proportionately with these increases in information and the power of its presentation? Our experience indicates that the most likely answers are ‘no’ and ‘maybe’. Going back to the hurdle analogy, maybe too much emphasis has gone on the hurdles and how to measure them?

Peter Drucker observed that the fundamental task of management is ‘to make people capable of joint performance through common goals, common values, the right structure, and the training and development they need to perform and to respond to change.’ ‘Managing’ is a verb, implying

action. We believe that this can be enabled by improved tools, but not replaced by them. Truly effective performance management is much more than structured, streamlined systems and processes.

For those of you with experience of coaching, either as a provider or as a recipient, you will know that two of the key foundations for performance improvement are ‘awareness’ and ‘responsibility’. An individual or team needs good awareness of their capabilities from both their own and others’ perspective. They also need good awareness of the components of the performance level that they aspire to, and how it will feel for them. In conjunction with this, they need to take responsibility, both individually and collectively. This is much more than just saying they will do something. They need to fit it into their lives, giving it the necessary priority and changing other priorities accordingly. For those of us who have ever tried to get fit, lose weight, or give up smoking, we recognise that these are not just business challenges, they are life challenges.

In addition to ‘awareness’ and ‘responsibility’, we would add a third key foundation – ‘interference’. Tim Gallwey, in his Inner Game series of books, proposed the model:

Performance = Potential – Interference

Interference comes from within each of us, often based on fear or doubts. It also comes from others, in the way that we interact with each other and the inherited wisdom that shapes our individual and collective beliefs. Awareness and management of that interference can make the greatest single contribution to improvement in performance.

Unfortunately, we observe that much of the measurement and target setting that is

done in the name of ‘Business Performance Management’ can actually increase interference, with the associated deterioration in performance.

We find that a people-centric approach to managing performance is much more successful, focused on increasing awareness, ensuring responsibility, and reducing interference. It will probably take longer than putting in a dashboard or scorecard, will often involve individuals or teams having to challenge and maybe change their individual or collective beliefs, but will progressively embed a performance culture. Colin Jackson was a great hurdler because he looked forward and didn’t focus on the hurdles.

Rob Cooper (MBA 1994–95) is a Director of Wexner and has over 20 years of industry and consulting experience including periods spent at Rio Tinto, British Steel, GKN and Deloitte Consulting. Recent client projects include strategy development and implementation, strategic marketing and process optimisation. Rob has worked in international manufacturing, food and general retail, pharmaceuticals, telecoms, financial services, transport infrastructure and various organisations within the public sector.

Jonathan Hill (DLMBA 1993–98) co-founded Wexner in 2002 and is now Managing Director. He has over 20 years of industry and consulting experience including periods spent at Ford Motor Company, Ernst & Young and Deloitte Consulting. Recent client projects include building board alignment, governance design and a recovery of a transformational change programme. Jon has worked in telecoms, international manufacturing, petrochemicals financial services, transport infrastructure, FMCG, charity and public sectors. W www.wexner.co.uk

two authors in minute

Rob Cooper Jon Hill

18

Warwick Business School’s Corporate Fundraising Dinner

Raising funds for future leaders

18

As the finale to Warwick Business School’s 40th anniversary celebrations, over 100 people gathered in London on 18 January for our inaugural corporate fundraising dinner.

Generously sponsored by Jasminder Singh (Chairman of Radisson Edwardian Hotels), the event took place at the flagship May Fair Hotel. Alumni, friends, associates and corporate partners enjoyed an evening of business and pleasure, whilst raising funds for scholarships in support of future leaders.

David Richards (Chairman and Chief Executive of Prodrive and Chairman of Aston Martin) gave an entertaining and engaging after-dinner speech about the acquisition of Aston Martin and answered questions on subjects such as his future plans for Formula 1.

Everyone had the opportunity to bid in an auction, with incredible prizes on offer, including VIP tickets for the final of the hit prime-time show Dancing on Ice, a football shirt signed by the Arsenal squad and a day with Prodrive and the Subaru World Rally team.

Having been entertained by Rachel Kerr (a Warwick alumna and former Stars in their Eyes finalist) and The Spires Wind Trio, the occasion ended for some in the small hours of the morning.

It was a successful evening with a substantial amount raised generating two scholarships for full-time MBA students who would otherwise be unable to take up their study at WBS. A huge thank you to all the individuals and organisations that supported the event, either through donating prizes for the auction, for ‘goodie’ bags, or by attending the evening.

Sir Malcolm and Lady Bates with Jon Baldwin, Registrar, University of Warwick

For more information on how you can help WBS in raising funds for future leaders, please contact Charlotte Wilkes by email: e [email protected] or by telephoning +44 (0)24 7652 2813. Visit our website at w www.wbs.ac.uk/about/development

I was first introduced to Warwick Business School by a former employer who recommended that I look at the Warwick MBA programme. The scholarship was so important in making

my choice as to which business school to come to that, having applied and received a scholarship offer I didn’t complete my applications to other business schools that I had also considered.

Receiving the scholarship meant that I could concentrate on my academic work and make the most of the learning opportunities at WBS. It greatly reduced financial pressures, and aside from the financial benefits, being a WBS scholar does add to the overall experience, as it has given me the opportunity to participate in other activities at the business school.

Reviewing the programme content and comparing it to a couple of other schools, I formed the impression that WBS was just as good as any of the most highly rated business schools in the world, albeit not as celebrated. Its reputation of excellence was an important factor, and here, I will admit that I did have a look at the FT rankings, too.

Now I am here at WBS I have found that the debates in class, with faculty and other students, have all contributed to my learning experience. Having to work with very different people, as well as gaining an understanding of different perspectives has also enhanced my view of the world.

Being at WBS has also been rewarding in other ways, including the opportunity to make new friends. Stepping back a bit and seeing the way that my approach to problems has changed also gives me a lot of satisfaction.

Christopher OlotuCurrent Warwick MBA scholar

nexus: summer 08 19

The 2007/2008 academic year proved to be yet another resounding success for the WBSS. Membership numbers soared to over 700 thanks to the fantastic work of the Executive Board under Alexander Groenert as President. Not only were the social events as elaborate and entertaining as ever – primarily the fantastic annual Business Ball, but our careers events became more diverse, offering networking and advice to our members searching for internships and graduate positions. Our football team also won the league remaining the only team to be unbeaten. On the whole this has provided a fantastic plateau upon which to build.

As the new President I feel that such considerable and rapid changes also need to be recognised with a reviewed strategy. This year the WBSS is looking to become even larger and more successful and this will be a challenge. Being the largest student society independent from the Students’ Union means we have full control over the events and partnerships we hold. However, this all has to be maintained without the support of the Union itself. We expect to attain a member base of over 1000 for the upcoming academic year and believe this will be

19

Warwick Business School Society – the year aheadachieved through recognition of the diverse requirements of members.

Our first major endeavour will be the launch of a student magazine titled Plutus, targeted primarily at Undergraduates. The magazine will contain details about the society and upcoming events; articles from prominent figures in WBS and the Financial Times plus messages from our partners. We have very high expectations for Plutus.

Corporate events are set to become slightly less structured. I am hoping to offer a wider choice ranging from a golf afternoon to more open floor topical debates to help further both networking and interview skills for members. The new Social Committee also has exciting plans to make this year’s ball the highlight of the University’s social calendar.

We are looking at a very promising future for WBSS. I firmly believe that as a team, the board, members and partners can all help to make this year one of the most successful to date.

Francis LootesWBSS President

WBSS President Francis Lootes

Development and alumni relations message board

survey alertIn early autumn we will be contacting all of our alumni with

a very important survey. We have reached a pivotal point in

Alumni Relations and now seek your views on what you want

from your Association. This is your opportunity to tell us what

you think and contribute to the future of the Association. So

please look out for the survey, which will be sent to you via

email. Do let us know if you prefer to receive the survey in the

post. E [email protected]

calling entrepreneursThe spring 2009 issue of nexus will focus on Entrepreneurship. If you run your own business and would like to contribute to nexus then do please email. E [email protected] nexus online

Pdfs of the current and previous issues of nexus are available to download. w www.wbs.ac.uk/alumni/nexus/

eNewsTo receive our monthly eNewsletter, check

out previous issues and subscribe online.

w www.wbs.ac.uk/alumni/newsletters.cfm

join up and join inAre you on Facebook? Increase your network by joining the WBS Alumni group. w tinyurl.com/4q9g9c

LinkedInJoin the dedicated WBS group within LinkedIn,

the online professional networking service.

w www.wbs.ac.uk/alumni/linked-in.cfm

class representatives‘Would you like to act as a contact

for your former classmates,

helping to reconnect and perhaps

organising a get-together or two?

If you would like to become a class

rep or wish to nominate someone

from your class, please contact.

e [email protected]

Motivated to mentor?We are looking for alumni to be mentors for fellow alumni or students. If you feel you can dedicate a few hours per month then do volunteer to take an active role in our mentoring scheme. e [email protected]

Business Source Alumni edition

We are pleased to say that we now have

online access to Business Source Alumni via

the alumni website. This replaces Business

Source Premier and is designed specifically

for alumni.

w www.wbs.ac.uk/alumni/business-source

Reviewed by Trevor Charlton (DLMBA 1989–94), Managing Director, Strategy & Solutions Ltd, Cardiff

The superb seminar on ‘Strategy development and improvement’ took place in March. David Taylor kicked off with ‘Our Future – Your Choice, and Loizos Heracleous followed with ‘How to win in hyper-competitive markets’. From my perspective, a reason for attending is to have access to new thoughts, analytical structures and ideas and Loizos provided this.

The after lunch session was in the safe hands of Nigel Slack, presenting on ‘Service and manufacturing – are they really different?’ I understand Roger Mumby-Croft’s presentation on ‘Can Universities address the

20

UK events review

Warwick Business School’s 6th Annual Dinner took place in April at the House of Commons. Both the Churchill Dining Room and the Terrace Pavilion, with its magnificent views across the river, were booked for this memorable event. Guests were invited because of their continued support of the Business School and included key volunteers, board members and donors. Professor John McGee, Associate Dean of WBS, made the opening address and mentioned WBS’ significant achievements and changes.

The event was kindly hosted by Jeremy Wright, MP for Rugby and Kenilworth, who spoke about the many opportunities Warwick University provides for lifelong leaning, available to everyone locally, nationally and internationally. Yvonne Carter, Pro-Vice-Chancellor of the University of Warwick, updated everyone on the progress of the University strategy since its launch last July – first on a University wide scale and then turning to Warwick Business School’s own strategy.

A hundred guests enjoyed the special venue, lovely food and the opportunity to mingle with staff and academic faculty of the School. According to one guest, ‘The whole event was a triumph. The atmosphere was wonderful, as were the food, setting, venue and speakers. There was a real sense of being part of something significant and it had a real buzz.’

6th annual dinner

academic update

WBS-Detica City seriesreviewed by Fiona Williams (FTMBA 2006–07)

A session on ‘How to win in the job market’ was far too good to miss. So on 21 May, I joined a group of WBS alumni and current students to find out more from those in the know – alumnus Chris Mason (FTMBA 1993–94) and Don Barratt, from

Connaught Executive. From the start, Chris engaged the audience and soon dispelled the traditional ways of job hunting. The keys to success: know yourself, go after what you want – don’t shoehorn yourself into other people’s job specs and focus on the informal job market. Having been challenged and stimulated, there was a chance for all to mingle over drinks and a light buffet. Thanks to Simon Finnie (EXMBA 1999–2003), Principal Consultant at Detica, for hosting the successful fifth seminar in the series.

enterprise agenda? If so, how?’ was another excellent presentation.These occasions are a fantastic opportunity to meet like-minded people, catch up with fellow students from the past and many you have not met before. It is also an occasion to again immerse yourself for a short period into more academic business thinking. I pondered how to apply new ideas within my business and to re-invigorate the more structured form of thinking that tends to be pushed into the background whilst dealing with the immediate demands. I met many interesting people and was reluctant to leave.

So, thank you for continuing to provide these opportunities – the next one being on 19 July 2008. w www.wbs.ac.uk/alumni/news/2008/05/05/Academic/update/review

WBS foraDuring the spring term, WBS hosted two lectures inviting students and alumni to hear world class speakers on campus.

The first lecture was a Panel on Risk Management entitled ‘Risk Management, Trick or Treat?’ The speakers were Kiki Maurey (FTMBA 1990–91) , Management Consultant, KMCS; Mike

Robertson (DLMBA 1994–2001) , Managing Partner, Risk Solutions; Chris Enstone (DLMBA 2000–03), Management Consultant, FDS.

The second lecture saw Paul Williams, a senior HR Director, talking on: ‘Strategy and Reward; why does Business plan for the future but reward for the past?’

Details of the 2008/09 Forum series beginning in October will be posted online soon.

Steve Martin (EXMBA 1996) hosted a get-together for Midlands alumni in Leamington on 7 May, one of the hottest days of the year. The networking evening was enhanced by the wide cross-section of attendees – alumni from the class of 1990, very recent graduates, current MBA students and Professor Bob Johnston who dropped by to join

in. In June the group went to the races (see photo) and also enjoyed champagne and Shakespeare at Warwick Castle.

your region – your ideas – your association Why not join the informal support group for your region and you can help to shape the alumni activity in your area?

As a volunteer we know your time is precious and your involvement would be on the ‘creative’ side. Administration will still be coordinated by the WBS alumni relations team. Currently regional activity centres on the social aspect but we need your input if you want to change or supplement this to create a more targeted approach to networking. Events can reflect your specific interests and hobbies, ‘what’s on’ or be more business focused.

With a small team of 3–4 people representing each region, just giving a couple of hours two or three times a year can make a huge difference.To register interest or for further information please contact e [email protected]

UK events review

21

regional round-up At the South West regional dinner in Bath in February, our small but perfectly formed party for the evening was clearly on a fact-finding mission. At the suggestion of Alumni Board member Paul Nicholson (MSc Management & Business Studies 1971–72), the group imparted some fascinating potted life histories. It was interesting that 90 percent of the group were heavily involved within the SME sector. We also had stories ranging from ambassadorial visits to helicopter pilot training to Antarctic expeditions.

At the March gathering of First Friday, our ‘capital’ alumni were joined by some current students in a bid to root out the best Old vs New World wines. Vivat Bacchus’s co-owner and resident wine expert South African Gerrie Knoetze ensured that the evening was a runaway success being both fun and informative. We even

learnt a particularly novel way to re-set your ‘sense of smell’ palette.

Hosted by Ben Couzens, (FTMBA 1992–4), the London Street brasserie overlooking the river proved a stimulating setting for an excellent Thames Valley group social event. The evening’s talk centred on the delights of parachute jumping. Two of our number even chose the same stretch of Australian beach to land

on and despite a previous mid-air collision and a stretch in hospital one of our party is still participating in these hair-raising endeavours.

Lifelong Learning – are you motivated to mentor?

Would you like to volunteer to take an active role in our mentoring scheme?

The re-launch, with a new impetus and focus, led by Prince’s Trust advisor and alumnus Peter Summerfield (MSc Management & Business Studies 1975–76), will take place on Saturday 27 September at WBS as part of the ‘Volunteers Day’.

If you feel you can dedicate a few hours per month and have the necessary life skills to help fellow alumni and students alike please register your interest to Tracy Lynch, Development and Alumni Relations Officer (Student & Regional Affairs)via E [email protected]

Kiki Maurey

22

special interest groups

EntrepreneurshipIn February, E-SIG established a formal structure, consisting of WBS senior management, teaching faculty, students and alumni (including of course – entrepreneurs). During this meeting, a vision was agreed: ‘To be the World Leader in Entrepreneurship.’ To deliver this, E-SIG will have many facets,

including incubating, networking, offering assistance with business plans and research, integration into Business School studies, running events, eg guest speakers, ‘Dragon’s Den’ type, networking and lifelong learning.

With Business School competition ‘hotting up’ in entrepreneurship, E-SIG is looking for funding and support to provide administration, project management, web site development, and business planning.

Do you own your own business? Please email e [email protected] with information to enable us to update your details

Finance We are pleased to report the success of a recent Employers’ Evening which facilitated an information exchange between employers in the Financial Sector and students completing our prestigious one-year MSc in Financial Mathematics at the University of Warwick. Further initiatives are planned for the autumn.

Information Systems ManagementThree more networking events are currently planned, with presentations from Professor Steve Sawyer, Pennsylvania State University; Professor Lucy Suchman, Lancaster University, and Professor Kuldeep Kumar, Erasmus University. The topics will be advertised shortly. Presentations will be followed by drinks to allow for further discussion and networking. W www.wbs.ac.uk/news/events/

Public & Voluntary ServicesThe Public & Voluntary Services group started enthusiastically and in 2007 a number of successful public lectures were held involving students and alumni. Challenging and thought provoking sessions led by Michael Frater, Former Chief Exec of Nottingham City and David Walker, Editor of the Guardian’s Public Magazine took place in June.

The Institute of Governance & Public Management (IGPM) is organising a major Forum on the Future of the Public Sphere from 24–26 September, marking 20 years of work at Warwick on governance and management of the public and voluntary sectors, and beginning to map and shape the new directions for the next 5 to 10 years. They plan to bring together a high level group of policymakers, managers and academics from several countries.

TelecomsIn June WBS Faculty member, Martin Cave, Director, Centre for Management under Regulation presented on: Separation of Telecoms Networks. Regulators in many EU countries and elsewhere are circling incumbent fixed operators with a view to imposing some kind of separation on them. The European Commission has specifically proposed a functional separation remedy from 2010. At least one European operator is contemplating separating itself. The aim of the teleconference was to identify the roots of these separatist movements and to project the likely consequences.

Looking ahead, Sandeep Heer, Senior European Strategy ManagerOrange/ France Telecom Group will be presenting on Developments and Trends in the European Mobile Telecoms Landscape during a teleconference on 19 September.

For further information on being actively involved in running a SIG, becoming a member or setting up a new SIG, please contact Faith Plevin e [email protected]

Women of Warwick Women of Warwick was founded in 2006 by Dustie Houchin; then a full-time MBA student. Having been through the trials and tribulations of the course, and watched others do the same, she decided a support mechanism amongst ladies of WBS would be a welcome addition and so ‘WoW’ was born.

Today, WoW has moved on considerably and is now made up of 70 members, with a nine strong Board; all working to make life as a WBS student/alumna and developing career woman more enjoyable. Through support structures and informal communications they hope to provide the support and friendship required to make your career a success.

w www2.warwick.ac.uk/fac/soc/wbs/wow or w www.facebook.com/group.php?gid=19852326592

Our special interest groups (SIGs) have grown enormously over the last year and we are pleased to report we have SIGs in the following subject areas:

Business AngelsOver 40 people attended the first WBS Business Angels event in February. Introduced by Roger Mumby-Croft, WBS Professor of Enterprise, the programme included presentations by business angels and entrepreneurs, in collaboration with the Minerva Business Angel Network.

‘This was a well organised event that provided real-life, not purely theoretical, information about the investment process in small businesses. Presentations from the major players in the process – the investor, the lawyer and the accountant – provided valuable insight for any business owner looking for equity investment and for investors looking to invest. Two well delivered pitches from entrepreneurs also kept any investors attentive.’John Ryder, (DLMBA 1999–2007), Mirada Partnership Ltd.

Over 30 people were signed up for the second event on 28 June as we went to press. e [email protected] subject ‘Business Angels’ to register your interest in receiving details of future events.

23

overseas events

23

On 30 March, the first workshop of the Marketing, Innovation and Chinese Economy (MICE) Network took place at the School of Economics, Tsinghua University, Beijing. The theme of the workshop was ‘Looking backward and forward on Innovation in China after 30 years of reform (1978–2008)’ and was run in conjunction with the Academy of Innovation and Entrepreneurship (AIE) annual conference. See P8 for more details on the MICE network.

w www2.warwick.ac.uk/fac/soc/wbs/research/mice

IndiaCarol Rue, Director of Personal and Careers Development at WBS, visited India in April and met with WBS alumni. Carol’s visit forms part of our plan to build and develop our alumni networks in India, particularly in Delhi, Mumbai and Bangalore.

We hope to enhance this activity with an inaugural alumni conference in Delhi in Spring 2009. More news to follow on this.

NigeriaWe are pleased to say that, on 22 February, the first Nigerian WBS alumni event was held at the Lagoon Hotel in Lagos. The event was hosted by WBS Associate Professor of Marketing Temi Abimbola. Although the group was relatively small, it was a good start to what we hope will be the beginning of a WBS Alumni Chapter in Nigeria.

A further event will be held later in the year in conjunction with Warwick alumni in Nigeria. Please contact Ann Jackson if you would like to be involved.

E [email protected]

On 26 February, Bob Johnston, Professor of Operations Management at WBS, hosted a dinner for Singapore alumni. Professor Johnston was also joined by Andrew Hardwick, Senior Teaching Fellow on Executive Programmes at WBS and Ben Plummer, Director of Development and Alumni Relations.

On 9 June Ben Plummer and Mavis Ow, the University of Warwick’s Senior Liaison Manager in Singapore, hosted a business event with Nicholas Mak, Director, Consultancy & Research Dept, Knight Frank Pte Ltd speaking on property trends in Singapore. A great evening was had by all.

The next alumni event in Singapore is planned for October.

WBS has many active and committed volunteers overseas and is building its international alumni network.

The Alumni Board is undertaking a large-scale project to ensure that it is connected and engaged with our overseas alumni volunteers, to see what kinds of activities they will be keen to work on in future and to look at ways to support their work. This will be supported by the Volunteer day on 27 September to which overseas volunteers are invited. This will be an opportunity for alumni to get together, share ideas and resources and learn about the work of other volunteers. Those not able to attend will be able to join us via skype, teleconference and webcast.

If there is anyone outside of the UK who would like to start or help to run an alumni group they should contact Alison Bond E [email protected]

The Kuala Lumpur Business Network was launched on 5 June, facilitated by Ben Plummer, Director of Development and Alumni Relations. At this meeting alumni discussed how they would like to drive ahead alumni activity within the region and have decided to have business-focused events once every other month.

The next event will be on 6 August at The Tasting Room, (65–1, 1st Floor [above Wine Cellar], Jalan Bangkung, Bukit Banglobal) with George Tee speaking on property markets – an overview of trends and strategies for investing in the sector. 7pm start.

W www.wbs.ac.uk/alumni/forthcoming.cfm

JapanThe University has recently appointed SI-UK as its new representative in Japan. They have offices in Tokyo, and Osaka. Vicki Smith, Senior Partner, visited the Business School recently and is very keen to hear from WBS alumni based in Japan who would be willing to meet potential students at their offices to talk to them about studying at Warwick. If you can spare a few minutes and would like to get involved please contact Vicki on e [email protected]

Recruitment fairsOur grateful thanks go to our alumni who assisted at the recent MBA World Fairs in London, Lisbon, Paris and Toronto, and the Specialist Masters Fairs in Greece and Turkey.

China

Malaysia

Singapore

alumni news

24

a mountain conqueredMark Procter (FTMBA 1989–90) has just climbed Mount Everest – at over 8,800 metres, the highest mountain in the world. An experienced and dedicated climber, Everest was the fifth of the seven highest summits on each continent for Mark. He travelled out to Nepal in March to join his expedition leader and seven fellow climbers, plus a support team of the legendary Sherpas. Climbing by the South Coll route, he successfully ‘summited’ at 6am local time on Friday 23 May, returning to the UK in early June.

Although not a difficult mountain technically, this was without doubt Mark’s toughest physical challenge to date. He confirms: ‘The combination of extremely thin air at altitude, lack of sleep, extreme cold and need to go up and down the mountain several times to alternately acclimatise and rest were exhausting. I teach personal effectiveness on several WBS programmes and was looking to test my theories with the ultimate team development experience. I now plan to write a paper combining the theory with the incredible experience of the expedition.’

research publishedMehdi Boussebaa (MAOS 2002–3) emailed: ‘I am currently finishing off my PhD thesis at Warwick. For my MA dissertation, I conducted research into an Anglo-French multinational. Specifically, I investigated how differences between British and French conceptions of management influenced the multinational’s attempt to develop a cross-national talent management framework. The research was published in the journal Critical Perspectives on International Business. My MA supervisor Glenn Morgan is co-author.’

update from CyprusStelios Saphiris (FTMBA 2002–03) emailed: ‘After my MBA I worked at the Royal Bank of Scotland in London for a year before deciding to come back to Cyprus. I then started a company called KPSA with two friends that provides audit, tax and consulting services to Cyprus and international companies which use Cyprus entities to take advantage of the low tax rate.’w www.kpsa.com.cy

new role for AnnaOfcom recently announced the appointment of Anna Bradley (DLMBA 1990–94) as Chairman of its independent Consumer Panel. The Panel advises Ofcom on the consumer interest in telecommunications, broadcasting and spectrum markets.

Anna was Consumer Affairs Director of the Financial Services Authority (2002–5) having been Chief Executive of the National Consumer Council

(1999–2002). She is currently Non-Executive Chairman of the Soil Association’s Organic Standards Board, a member of the board of Addaction, Britain’s largest drug and alcohol treatment agency and a consultant to Aegon UK, part of one of the world’s largest life insurance and pension companies.

WBS entrepreneursAndrew Davies (BSc Management 2003–06) and Edward Barrow (BSc Management 2004–07) met at WBS and teamed up to found their own company – idiomag. As Edward explains: ‘We met at a talk organised by the Entrepreneurs Society (AddVenture) in May 2006. Andrew began working full-time for idiomag as Co-Founder, Marketing and Business Development Director when he

graduated. I worked part-time while I completed my final year and now work full-time as Founder, Technical Director.

‘Andrew and I are the two full-time employees for Idio Ltd, however, the WBS triad is completed by my father David Barrow (BSc ManSci 1975–78) who is idiomag’s Chairman and original Angel Investor. David was speaking at the Entrepreneurs Society event when we first met Andrew. It is nice to note that idio Ltd is effectively a two-generation WBS company!’ w www.idiomag.com

new startAihui Ong (DLMBA 2003–06) emailed: ‘After completing my MBA, I took a leap of faith to make a career change and launch my own business. I am now the CEO of EdgiLabs.com – a web consulting company that advocates the use of technology to help businesses engage and better serve their target customers, innovate and simplify their internal operations by adopting a mix of custom built/open source solutions.’ w www.edgilabs.com

25

alumni news

royal presentationIn the spring 2006 edition of nexus, Otto C Frommelt (FTMBA 1993–94) Managing Director of Volvo Austria GmbH and General Manager of Volvo Trucks Austria, stated: ‘One of my challenges is to improve the image in a transport sector renowned for its alpine beauty.’ Otto’s aim to do something for society and the environment generated the idea to present seven

alternatives of renewable energy to be used by Volvo Trucks, to His Majesty Carl XVI Gustaf, King of Sweden, during his recent state visit to Austria.

‘Climate protection is one of the greatest challenges of the present. CO2 neutral trucks are powered by fuels produced from renewable raw materials, such as biomass. Since these materials do not add carbon dioxide to the ecosystem, they have no impact on our climate,’ explained Otto, during the King’s presentation on Heldenplatz.

award for excellenceCongratulations to Manny Coulon (FTMBA 1998–99) whose company came third in the Best Kids Website category of the BT Online Excellence Awards. The BBC’s CBeebies and Disney came first and second respectively.w www.ideasforthekids.co.uk

sweet successJames McMaster (BSc ManSci 2001–04) is Head of Operations at Gü Puds. He tells us, ‘I am lucky enough to work for indulgent dessert brand Gü Puds, winner of ‘The 3i Growth Strategy of the Year Award’ at the 2007 National Business Awards and included in The Times Fast 100 2007. I joined Gü a year ago from LEK Strategy Consultants. Food and drink is a great industry to be in. A wonderful mix of selling, marketing, operations, analysis and generally dealing with economic ups and downs – a great learning curve.’

green design down underLinda Pearce (FTMBA 1998–99) emailed: ‘After completing the full-time MBA, I then completed an architecture degree at the University of Adelaide, Australia (my home town). I recently won a travelling scholarship from the University of Adelaide architecture department. My proposal is to go to Europe and talk to people about matching buildings to educational and workplace needs for the next 20 years. If any alumni would like to commence a dialogue about sustainability/ sustainable architecture/ buildings as brands/workplaces/ educational facilities, I would be interested in hearing from them.’ e [email protected]

greetings from NYOkezie Aruoma (EMBA 1992–95) recently relocated to New York to take up the position of Professor and Chair of one of the academic departments (Pharmaceutical and Biomedical Sciences) at the Touro College of Pharmacy, based in Harlem.

taking the chair Congratulations to Michail Zekkos (MSc Economics & Finance 1998–99) on being elected Chairman of the Hellenic Bankers Association – UK. Michail is Investment Executive at Permira Advisers LLP, based in London. His main area of focus is investment opportunities in the telecommunications, media and technology (TMT) sector.

energetic COOIan Peters (FTMBA 1988–90) was recently appointed Chief Operating Officer of British Gas Energy to oversee the product development, pricing, metering, billing, operations, debt, sales and IS functions.

He joined Centrica, the British Gas parent Company, in March 2002 from Marsh Inc where he had been European Marketing Director. Prior to that he spent many years at NatWest. Since joining Centrica he led the turnaround and sale of Goldfish Bank, drove the acquisition of Dyno-Rod and was Managing Director of British Gas Business in 2005–6.

26

alumni news

26

Sharon’s sacrificeSharon Bolton (FTMBA 1990–91) has published her first work of fiction, Sacrifice, a modern-day thriller inspired by Shetland folklore (see P27).

After graduating from WBS, Sharon worked in marketing for a number of years in the City of London and believes the business skills she gained at Warwick have been instrumental in the book’s success. ‘Writing a novel is like launching any new business,’ she says. ‘You need to tailor your product to the expectations of your future customers, keep aware of changing trends and be the first to see a gap in the market.’ Sharon is now working on her second book.

first ladyA Financial Times article entitled First lady at Queen’s bank, profiled Sarah Deaves (FTMBA 1991–93) the first female chief executive of 300 year old Coutts. Described as a power player who has been quietly reinventing the Queen’s bank, she has been behind efforts to modernise the bank while maintaining its core brand values. Sarah was keynote speaker at the recent Women of the Future summit, where she spoke about costs for companies offering flexibility and family friendliness and noted the greater number of women in leadership roles at start-ups.

appointmentsChris Bowers (FTMBA 1990–1991) joined Applied Materials as Chief of Staff, based in California.

Malcolm Duff (DLMBA 1988–94) appointed General Manager, Southern, of the New Zealand Historic Places Trust, based in Christchurch. Joe Gomez (DLMBA 1997–2000) appointed Director of Efficiency Technologies Australia Pty Ltd (EffTecAU)

WBS advisory board member Russ Houlden (BSc ManSci 1977–80) takes over as CFO of Telecom New Zealand, based in Auckland.

Jonathan Hollands (DLMBA 2001–07) joins the University of Nottingham as Director of Operations and Business Administration in the School of Biomedicine.

John Hynes (EMBA 1994–97) became Chief Operating Officer for Europe at Symmetry Medical Inc

Lee McCabe (DLMBA 2003–07) appointed Director of Market Management for the Oceania region of Expedia Inc, based in Sydney.

Scott McLeod (DLMBA 1989–99) appointed Director of Sales, Caplin Systems

Michelle Paganoti Sartorio (FTMBA 1999–2000) is now Marketing, Communications and Investor Relations Manager for Brascan Brazil, based in Rio de Janeiro.

Matt Selbie (FTMBA 1988–89) joins Tulsa-based online multifactor authentication provider, Vidoop, as Vice President of Marketing.

Remi Thomas (FTMBA 1990–91) joins Alcatel-Lucent as Vice President, Investor Relations.

setting sailGerry Baker (EXMBA 2003–06) is skipper of a crew of WBS alumni taking part in the Business Schools Annual Regatta (BSAR) in September this year. The event attracts crews from business schools in the UK and Europe, and racing takes place on the Solent, using a chartered fleet of 37ft yachts. If you are interested in taking part email Gerry at E [email protected]

a good monthApril 2008 was a good month for Professor Bob McGee (PhD 1982–86) Director of the Center for Accounting, Auditing and Tax Studies at Florida International University, USA. He won two research awards, published three articles and five conference papers and had three articles and one book chapter accepted for publication. He was also appointed to two editorial review boards and collected and sent a ton of books to Rwanda. His 51st book, Taxation and Public Finance in Transition and Developing Economies, was published in May (see P27).

making the newsTeck Koon Lim (DLMBA 1999–2007) was interviewed on Taiwan news channels – GTV and TTV, in December 2007. Teck Koon is a business unit director at Merck Sharp and Dohme, Taiwan – a branch of US pharmaceutical company, Merck & Co. Inc. He is a Singaporean working in Taiwan. The interview was part of the media coverage on a corporate social responsibility project he led, involving donating doses of cervical cancer vaccine and collaborating with medical professionals to vaccinate girls under the care of the Garden of Hope Foundation – a non-government, non-profit organisation established to help disadvantaged girls and young women in Taiwan.

pict

ure

: Joh

n C

outt

s, L

erw

ick

27

hot off the press

Taxation and Public Finance in Transition and Developing Economies is Professor Robert W McGee’s (PhD 1982–86) 51st book, published by Springer. The third in a series, it includes general studies on various aspects of tax compliance,

corruption, budget efficiency and fiscal policy.W tinyurl.com/6blfnk

Sacrifice is Sharon Bolton’s (MBA 1991–92) first novel, published by Bantam Press. Set on the remote Shetland Islands, this modern-day thriller inspired by Shetland folklore has a sinister plot, a race against time and plenty of forensic detail.

W www.sjbolton.com

Three decades of Enterprise Culture: Entrepreneurship, Regeneration and Public Policy by Dr Francis Greene, Dr Kevin Mole & Professor David Storey, CSME. Published by Palgrave Macmillan, this book uses research data from interviews with

more than 900 new entrepreneurs. W tinyurl.com/53eoxz

Marketing Strategy and Competitive Positioning, 4th edition, co-authored by Professor Nigel Piercy, MSM, published by FT Prentice Hall. Chapters on strategic customer management; alignment with key customer groups

and corporate social responsibility as a component of strategy development. W tinyurl.com/3e9ody

The Advanced Dictionary of Marketing: Putting Theory to Use by Dr Scott Dacko, MSM, published by Oxford University Press. Includes all major and emerging marketing approaches, from cause-related and experiential, to mega-marketing and word-of-mouth; with concepts

such as adverse selection and telescoping. W tinyurl.com/5ddtgk

Service Operations Management, 3rd edition, co-authored by Professor Bob Johnston, OM, published by Pearson. Includes international examples from different types of organisations, such as the internet, public and

voluntary sectors, mass transport services, professional services, retailers, internet services, tourism and hospitality. W tinyurl.com/6xad9q

Strategy and Human Resource Management, 2nd edition, co-authored by Professor John Purcell, IRRU, published by Palgrave. This book expands the discussion of goals in HRM, builds a new typology of HR systems and examines HRM in services and the public

sector. W tinyurl.com/47obhy

Knowledge Processes in Globally Distributed Contexts co-authored by Dr Julia Kotlarsky, ISM, published by Palgrave Macmillan. This book seeks to address one particular challenge, namely, the management of knowledge processes of global knowledge

workers. W tinyurl.com/42ssmc

Outsourcing Global Services: Knowledge, Innovation and Social Capital co-authored by Dr Julia Kotlarsky, ISM, published by Palgrave Macmillan. In-depth insights into practices that lead to success in outsourcing global services. Best practices on IT

outsourcing, business process outsourcing and netsourcing. W tinyurl.com/5d6jps

Marketing Planning: A Workbook for Marketing Managers co-authored by Dr Lyndon Simkin, MSM, published by South-Western, London. The marketing planning process: from the core analyses, into the development of strategies, and finally

to the marketing programmes required to implement these strategies. W www.cengage.co.uk/dibb

Align IT: Business impact through IT, by Richard Wyatt-Haines (DLMBA 1995–98) published by John Wiley & Sons. Aims to bring IT’s relationship with business to life, enabling you to implement strategy

rather than develop it. W tinyurl.com/5hd6f8

Operations Strategy, 2nd edition, co-authored by Professor Nigel Slack, OM, published by Pearson. This edition builds on concepts from Strategic Management, Operations Management, Marketing and HRM to

give students a comprehensive understanding of Operations Strategy. W tinyurl.com/62vuut

27

Nexus Summer 2008

Education

Transcript of Nexus Summer 2008