People Management and Organization Behavior
Dimensions of Management in the Current
Economic and Financial Crisis.
Synergy Group Presentation
Harmeet Kaur Parhar
The moral dimension of the credit
“A bank is a place that will lend you money if you can prove
that you do not need it”.
Bob Hope, English born American comedian
The word “credit” derives from the Latin word “credere”
meaning “to believe”.
The market system is based on trust. Therefore the credit
crisis can be considered as the crisis of confidence!
Anatomy of crisis.
Government measures Government measures
to support financial to support domestic
sector (September/ demand (November
October 2008) 2008 onwards)
Mortgage Crisis (Summer 2008) Real Economy Crisis
Further waves of measures to support financial sector banking
due to unfavorable developments in real economy sector from
(December 2008 onwards) real economy
Key features of the crisis.
It’s been worse than expected.
A financial event has become an economic problem.
Financial markets were slow to react to bad news.
US housing slowdown started in 2006, sub prime meltdown
didn’t start in earnest until Spring 2007.
Downside risks have emerging simultaneously.
Record oil prices, the lagged effect of past rate hikes, financial
Financial Crisis Consists of:
Bankruptcy- Inability to pay debts or run on the bank ,
Fraudulent home buyers and brokers.
Underestimated “Pay off “ability.
An Economic crisis can take form of a recession or an
depression . Economic crisis most likely experience a
falling GDP a drying up of liquidity and rising/falling crisis
due to inflation/deflation.
Financial Crisis Consists of: (Cont.)
Capital market bubbles/crashes
Market price of stocks are higher than present value of
future cash flows.
Currency crisis occurs when the value of the currency
changes quickly, undermining its ability to serve as medium
of exchange or a Store of Value.
As a result of giving many bad loans, it is clear that
some will end up in default.
Toxic assets have uncertain value , and can create
Kurt Lewin’s Model of management
change In the credit crisis.
Lewin’s change management model, which consists of 3
aspects, has been very effective over the past years.
Unfreeze - present way things are done by telling people
about the change and its benefits.
Change - the way things are done where people begin to
resolve their uncertainty and look for new ways to do
things. People start to believe and act in ways that support
the new direction.
Refreeze - after the changes have been made, things are
done in a new way.
What Will it Take For the Economy
to Return to Strong Growth?
Reduce the inventory of unsold houses.
Open up the market for jumbo home loans.
Housing prices must stabilize.
Large financial institutions need to write down their assets
to realistic values.
Increase the capital at large financial institutions (de-
leveraging of banks).
Add liquidity to the mortgage markets (both residential
What Will it Take For the Economy
to Return to Strong Growth? (cont.)
Liberalization of interest rates.
Reduction of controls on credit.
Encouraging the development of secondary market
for government securities.
Allowing free entry of private banks.
Legal infrastructure must be made.
Bank secrecy laws should be improved.
Financial supervision and bankruptcy.
Deposit insurance scheme is needed.
Actions that business owners take
during the crisis.
Know when your business is in crisis!
A crisis is when sales in your business is not paying your expenses
and you are eating up your savings at a rate that will drive you into
Step back and evaluate!
Once money is spent that cannot be retrieved by selling your
products, services, or business, then the worth of he money invested
is considered to be zero .
Cut the costs!
Look at expenses and find every way to cut them.
Decide weather to close down!
Sometimes it is best to shut down and start something else that has
What To Do In Economic Crisis?
Do no p nic
t a !
Lo k a theb , lo - te p ture
o t ig ng rm ic !
Re e b r thes c m rke isa m h a o hum n
mm e to k a t s uc b ut a
e o nsa it isa o fina ia d ta
m tio s b ut nc l a !
No isag o tim tos c up
w o d e to k !
Sta fo us d o thething tha re lly m tte in life
y c e n s t a a r !
Financial crisis arises from disruptions on financial
markets. So that the financial system can no longer
efficiently allocate funds.
Ma e o m tsha o re the rie a o ho
ny c no is ve ffe d o s b ut w
fina ia c e d ve p a ho the c uldb
nc l ris s e lo nd w y o e
p ve d Ho e r, fina ia c e a s are ula
re nte . w ve nc l ris s re till g r
o c nc a undthew rld
c urre e ro o .
Fina ia p b m a o n fo w db e o na
nc l ro le s re fte llo e y m tio l
s s a c n le dto m rec m lic te p yc lo ic l
tre s nd a a o o p a d s ho g a
e c . It a c b ha r o ind ua a w ll a
ffe ts ffe ts e vio f ivid ls s e s
o a tio b ha r.
rg niza n e vio