Introduction
The conditions proposed by the financial crisis and international markets have ended up affecting the practice of economies and shared frames of reference on the nature of the problems. A minor phenomenon in Bangladesh can have substantial impacts in New York or London. The scale and size categories have become central to the analysis of what is happening. Institutional sizes are related to risk externalities [Makridakis / Taleb, 2009]. The work produced [Haug, 2007; May, 2008] offer an explanation of the consequences to take extreme risks in economies (extreme risk). Even considering the risk corresponds to the capital (original) external losses can become outrageous.
Background
Studies reveal a context in which larger firms may fail [Bounchaud, 2003; DeMiguel, 2007]. Even estimating the expected losses for the risk and available capital externalities are not fully insured. The issue in these cases beyond the scope of markets and stock exchanges. It is rapidly advancing issues affecting the stability of many countries and the quality of life of their populations. What is experienced is a financial uncertainty that compromises the overall governance. Witnessing phenomena whose nature is causal [Popper, 1935] in extended networks with large faults [Taleb, 2009] that depend on the sizes of companies and types of risk.
These failures in financial markets do not come from small firms and medium-sized industrial estate. The size is important to study the risk (risk) because the relationship in these cases is directly proportional. The size of financial language reflects economies of scale. Something similar to the risks that once came to have the factories (factories) during the time of Adam Smith.
Size and...
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In the world of money, firms including banks and nonbank financial companies face adversaries and often fail. When they do, most failures do not result in extreme externalities. In other words, loss of the firm does not place its counterparties into a troubled position. Ergo, the firm would go through a usual resolution process provided by the government. But, some large firms undergo a “special” treatment because of the government’s fear that its losses may have disproportionately big adverse externalities on the economy thus threaten the financial stability. These are the firms to which “too big to fail”, also known as “TBTF” apply. They are also referred to “too important to fail”, “too big to liquidate”, “too big to unwind and, most recently “too big to jail”. (Kaufman, 2013) Because of their capability to melt down the entire economy in the case of crisis, they are showered with public funding along with continuous bailouts. These unconditional supports have fostered generations and generations of controversy. The controversy dealt with in what extend should the government intervene with the financial firms, has it derived the economy to the desired result and flaws of this ironic concept.
The presence of systemic risk in the current United States financial system is undeniable. Systemic risks exist when the failure of one firm may topple others and destabilize the entire financial system. The firm is then "too big to fail," or perhaps more precisely, "too interconnected to fail.” The Federal Stability Oversight Council is charged with identifying systemic risks and gaps in regulation, making recommendations to regulators to address threats to financial stability, and promoting market discipline by eliminating the expectation that the US federal government will come to the assistance of firms in financial distress. Systemic risks can come through multiple forms, including counterparty risk on other financial ...
Market crashes are not a new phenomenon but the most disturbing fact about the financial crisis of 2008, was that it was self-inflicted. What started as a credit crunch during the early 2006, turned into a fully-blown recession by mid-2008.The world’s financial system received a huge shock in September 2008, with the collapse of The Lehman Brothers, one of the biggest global investment banks [3]. The Global Financial Crisis of 2008, was undoubtedly the worst economic slump since the Great Depression of 1930. While the bankers and financers hold the responsibility for the global economic turmoil, the business schools have also, being partially responsible, faced criticism.
Big businesses “often use money as a motivator for the government to decide policies that would only benefit them. The more affluent they are, the greater are the chances that they will get their way,” (Startupbizhub.com). It is no secret that money plays a large role in politics. The American economy is overrun by a small amount of large corporations, also known as the Fortune 500. In 1988, the Fortune 500 companies had made over $2 trillion in sales alone. When the Chrysler Corporation and Continental Bank Corporation were faced with the possibility of bankruptcy, the federal government had stepped in to save them; this concept is known as the “too big to fail” doctrine. If a small business was faced with bankruptcy, the only thing government officials would be doing is putting up a bankruptcy notice. “Forces outside Congress influence what goes on inside it; in particular, if the Marxist theory is correct, Congress is influenced heavily by the economic structure of our society. those who dominate the American economy dominate Congress as well,” (Berg 214). John C. Berg proclaims that the companies who are undeniably dominating the American economy will have influence on the government, mostly the
Simon Johnson: Break-up institutions that are "too big to fail" to limit systemic risk, which is the risk that one market participant’s failure will have negative effects on other participants due to the interlocking nature of financial markets.
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In previous years the big financial institutions that are “too big to fail” have come to realize that they can “cheat” the system and make big money on it by making poor decisions and knowing that they will be bailed out without having any responsibly for their actions. And when they do it they also escape jail time for such action because of the fear that if a criminal case was filed against any one of the so called “too big to fail” financial institutions it...
If financial markets are instable, it will lead to sharp contraction of economic activity. For example, in this most recent financial crisis, a deterioration in financial institutions’ balance sheets, along with asset price decline and interest rate hikes increased market uncertainty thus, worsening what is called ‘adverse selection and moral hazard’. This is a serious dilemma created before business transactions occur which information is misleading and promotes doing business with the ‘most undesirable’ clients by a financial institution. In turn, these ‘most undesirable’ clients later engage in undesirable behavior. All of this leads to a decline in economic activity, more adverse selection and moral hazards, a banking crisis and further declining in economic activity. Ultimately, the banking crisis came and unanticipated price level increases and even further declines in economic activity.
Lean manufacturing and just-in-time processing are great business strategies that can severely stress a supply chain. The supply chain and supply chain management is a critical operations management element for any major company to succeed and remain competitive in the global market. The supply chain is one of many pieces critical to maximizing value to the end customer and requires close management to minimize external impacts. If a company is relying on another company to supply the raw materials needed for their production line, then impacts to this other company could impact their supply chain. Careful risk management is needed to optimize performance. As a company expands into global markets and global suppliers, this risk and management challenge is multiplied. The global nature of the company could impact important activities such as transportation, funds transfers, suppliers, distributors, accounting and information sharing. Disruption to the supply chain can significantly reduce revenue, cut market share, inflate costs and threaten production. A major disruption would have obvious impacts to profit, but could have additional intangible impacts to the credibility of the company if products are not delivered on time.
Quickly becoming apparent after only a few rounds of play was in the absence of coordinating direction the individual supply chain links immediately focused upon acting in their own best interests much more so than the organization as a whole. Whether the end use customer was satisfied became secondary to avoiding stock outages for the next link in the chain, or their specific “upstream customer”. The real world application of this example is that focus on the end use customer must be consistent and maintained throughout the process up to and including delivery. Undoubtedly internal customers, such as retailers to wholesalers and distributors to production, must be serviced along the way for the transaction to ultimately occur. However, unless an end use customer is involved no profit can be realized by anyone.
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