Although there are already emerging green shoots on the economic landscape, recovery in developed economies is fragile at best and it seems the only viable option left to the world’s business and financial leaders is to collectively “rethink, redesign and rebuild” the global financial architecture.

In other words, since the global economy is not yet out of the woods, leaders must rethink values and ethics and adhere closely to principled leadership as key to stabilization.
This, in essence, was contained in a report on the recently concluded 40th World Economic Forum Annual Meeting, strongly urging the G20 countries to show leadership in seeking new pathways to sustainable growth and job creation.

“As the global financial crisis comes to an end, both public and private sectors are faced with immediate challenges, the resolution of which will define the new financial architecture,” said David Rubenstein, chair of the report’s steering committee.
“This report draws on the combined expertise of over 150 of the foremost experts in the global financial system to provide key guidance to those best positioned to ensure we emerge from the crisis with a healthy financial system,” he added.

The report served as a clarion call to all stakeholders for coordinated action in the financial system, particularly in the area of rethinking values and generating ideas for rebuilding more effective national and global institutions to improve financial governance.

Moreover, the report showed three themes which are outlining the direction of the financial services industry in the near to medium term, to wit:

1. Rethinking business models in a lower profit world – A multitude of factors point to lower run-rate industry profitability in the near and medium term. Financial institutions will need to rethink their business and human capital models in order to adjust and differentiate as a result.

2. Increasing client focus – In light of lower industry profitability and more demanding customers and regulators, substantive value creation for customers and society will be a key driver of success. They will need to promote and enforce positive values such as integrity and responsibility.

3. Polarization of the competitive landscape – Strategic choices of regional footprint, product offering and risk appetite will increasingly polarize as financial institutions seek to justify their strategies to investors and regulators who apply a much greater level of scrutiny.

In addressing the challenge of managing governments newly acquired equity interests in financial institutions, leading experts made the following suggestions: Address equity stakes separately from other types of crisis intervention, aim for a rapid exit strategy while protecting investment value, establish an independent process to manage ownership stakes, restrict government influence on owned institutions to board-level issues, be realistic about securing and incentivizing the best available talent and raise transparency beyond public disclosure of financial performance.

Regarding the issue of winning back trust for financial institutions, the report also emphasized that trust is not only vital to the general health of the overall financial structure but a source of competitive advantage as well.

Rowan Williams, Archbishop of Canterbury, United Kingdom, exhorted participants to take collective responsibility for the future by living responsibly in the present which means we strive to live within ecological limits to ensure the security of work and food.
“Responsibility for the future means being responsible for a vision of humanity which excites and enlarges us,” he said.
The aforesaid report is the result of a year-long collaboration among 150 leaders in public policy, academia and business and the essence of it all boils down to old-fashioned trust, a virtue that will always remain constant in a world that is rapidly changing in so many ways.

Email: businessagenda_report@yahoo.com.ph