Beyond managing change: a move toward a new civilization? 2/3

Read ‘Beyond managing change: a move toward a new civilization?’ 1/3

As our increased life span creates new needs and new markets, as urbanization gains momentum and creates megalopolis that are hard to manage, as the digital revolution spreads new patterns of communication, and robotics and nano-technologies transform employment and professional requirements, as scarcity requires frugality and the flaws in traditional models of governance become more visible, we can indeed say that we are entering a new era. In this new civilization people may no longer learn to write, models of sociability for living together will be different and the role of traditional institutions (the family, religion) will be redefined. For this type of world, one that we will bequeath to our grandchildren, what is our own, individual responsibility?

Management – particularly in banks – will not escape societal pressure to change. Financial services are under the spotlight, particularly since Wall Street’s recklessness and criminal fraud seven years ago caused trillions of dollars in economic damage and almost shattered the global economy. In an age of hyper-transparency, reputational risk will have to be managed very professionally, especially in the financial sector where risk management is the very essence of the profession and where transparency pressures will grow ever stronger.

In the financial sectors for example whistle blowers will use instant messaging since, as the Economist wrote: “Anti-corporate campaigners have taken to the digital world like ducks to water. It is (the Internet) beast that feeds on scandal and particularly delights in the flesh of the powerful and privileged…Walls have ears, smart phones have eyes…”[1] NGOs are good at uncovering bad news about companies and telling the world about it on social media”.[2] Tweets can instantly destroy a bank’s reputation. The tyranny of the click and instant messaging are not only a potential threat to reputations, they also have a huge impact on the private sphere (e.g. family life). Big data – so effective for profiling potential and current customers – generates an erosion of privacy when the state or corporations have access to the citizen’s or the consumer’s behavior patterns. The online marketplace has changed consumers’ attitudes and increased the volume and speed of consumption (e.g. China’s internet retailing sector, for instance, posted RMB 1,85 trillion ($296.6bn) [3] in 2013 – a growth rate of 41.2%% from 2012). It also tends to create an artificial reality disconnected from the real world where cyber-crooks thrive (as bankers know only too well). Who will then be trusted to regulate the web: Google or the government?

The 2008 financial crisis opened the eyes of millions of Americans to the widespread corruption and mismanagement in their financial industry, and built public support for stronger bank oversight. But today, the big bank lobby is expanding its political influence and wants to kill the Dodd-Frank Bill so that the big investment banks can operate like hedge funds or private equity, almost unregulated, and too-big-to-fail banks can continue to gamble on derivatives with funds insured by the taxpayer. In the face of this, civil society’s wish to restrain the financial industry’s toxic blend of recklessness and political influence seems likely to remain merely wishful thinking.

Perhaps in Asia a different attitude toward risk has prevented some of the worst transgressions so apparent in the West from occurring. But as the sophistication of financial algorithms is progressively shared around the world, moral safeguards may not be strong enough.

Read ‘Beyond managing change: a move toward a new civilization?’ 1/3

[1] Beware the angry birds, The Economist, October 11, 2014

[2] The Economist, October 11, 2014, p. 72.

[3] While US e-retail sales were valued at $262.5 billion in 2013. (Forbes, 12/2/2014)

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Henri Claude de Bettignies

Professor Emeritus, INSEAD ; Distinguished Professor (Emeritus) of Globally Responsible Leadership, CEIBS (Shanghai) ; Visiting Professor, Stanford Graduate School of Business.