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Extracts Module 1 Section 1 Drivers of Change - Debt

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Overview of one of the key macro drivers of change, 'Debt'.

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Extracts Module 1 Section 1 Drivers of Change - Debt

  1. 1. Change management and business performance improvement Extract: Module 1 Section 1 Ged Melia
  2. 2. Module 1 Change management and transformation • The ‘big picture’ - a macroeconomic view • Where is all this change stuff coming from? • Why do we need to change when everything seems to be working OK? • John Kotter’s eight step change management framework. • Challenges at the organisational level: • Generating growth. • Aligning costs with expected revenues. • Should we hire consultants or do just get on it with ourselves? • ‘Resistance to change’ • Selected ‘best practice’ approaches: • Project management, service management, bid management and cost evaluation. Module 2 Business performance improvement • Continuous improvement • Improving processes. • The management control cycle. • Shared service centres. • Sourcing decisions. • IT projects. • Downsizing and restructuring. • Improving growth through combinations and via revenues. Seminar is in two parts
  3. 3. Module 1 - Change management and transformations Section 1: Drivers of change Section 2: A framework for change and transformation Section 3: Implications of Kotter’s studies Section 4: Designing and managing change projects Section 5: Should I hire a consultant? Section 6: Resistance to change
  4. 4. Section 1: Drivers of change
  5. 5. Macro economic and social factors Change drivers Debt Robotics & holographics Globalisation Population growth Resource scarcity Internet & Digital Climate Peak Oil Change has always been with us and always will be. It’s the pace of change that is different. And there are more factors in play, all acting in concert. Everything is getting more complicated and complex. It looks grim but there are solutions We just have to find them…. Bur let’s start by taking a look at what there is, the ‘big picture’ stuff that is already changing our lives, albeit often out of sight. Here are a few.
  6. 6. Debt
  7. 7. What a trillion looks like
  8. 8. The debt trap – developments since 2008 Debt Public Corporate Personal ‘Financial repression’ has encouraged share buy-backs QE and PSBR funded by deficit spending Student loans are going exponential New drivers since 2008 Public debt UK US
  9. 9. Debt Public Corporate Personal ‘Financial repression’ has encouraged equity buy-backs QE and PSBR funded by deficit spending Student loans are going exponential New drivers since 2008 U.S. markets have been supported by up to $1 trillion/yr. in share buy-backs in recent years. ZIRP/low interest rate borrowing used for equity purchases rather than investment. The debt trap – developments since 2008 US UK Statistics not found (BoE comment on share buybacks)
  10. 10. The debt trap – developments since 2008 Debt Public Corporate Personal ‘Financial repression’ has encouraged equity buy-backs QE and PSBR funded by deficit spending Student loans are going exponential New drivers since 2008 US UK Student debt is now so high compared to average salaries that many graduates in respectable public sector professions will be unable to repay their fees even by the end of the 30-year repayment period, the Higher Education Commission warns. According to the Institute for Fiscal Studies, the average student debt will be £44,015 - higher even than the US.
  11. 11. The debt trap – developments since 2008 the Institute of International Finance (IIF), a group that represents the financial services industry. As of June 2014 it estimated that global debt, excluding the financial sector, was equivalent to 245% of total global economic activity or GDP. That's up from 214% in September 2008 when the financial crisis was going into its most intense phase.
  12. 12. The debt trap – how it might play out Consequences • Plan for the long term. The long term interest rate cycle is already over-extended and rates will increase at some point in the future. This should be factored in to any long tern debt based funding. • Don’t over-leverage the balance sheet. • Maintain a lean operating cost base; ensure that bottom line profitability can withstand an interest rate shock. • Build a acquisition reserve – there will be opportunities. • Vocational training, modern apprenticeships, corporate student sponsorships. Actions to consider Debt levels are still manageable in the public and corporate sectors, and at a personal level. Economic recovery is usually a catalyst for interest rates to start reverting to long term trend lines. As interest rates increase government gilts and bonds coupon rates increase and taxes start to rise. Businesses pay increased taxes and interest payments. Individuals have less to spend on discretionary expenditure. There is a moderate to high risk that current debt levels will drive taxes and interest payments that risk another major recession or even a depression. There is a possibility that central banks will suppress rates indefinitely which could further distort both funding markets and economic activity. 2011 UK US Japan

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