Managing the Financial Firm

Course Number 1509

Senior Lecturer Clayton Rose
Fall, 20 Sessions
Paper

Career Focus

This course explores the challenges faced by general managers in financial firms at a time of unprecedented disruption to industry and business models, of historic regulatory and political intervention in markets and firms, and of a fundamental reconsideration of the role and responsibilities of these firms and their leaders. The course will be of interest to students who may seek management roles in financial service firms, to those who wish to examine the role of a general manager operating in a large, influential industry undergoing dramatic change, as well as to those who wish to explore the disruption to the industry and opportunities that may emerge.

Course Objectives

Financial firms play a central role in the proper functioning and health of the global economy, providing capital for growth, the "plumbing" to facilitate liquidity and transactions, and the tools to shift risk. This course provides students with an opportunity to develop a general management model of financial firms through an examination of how managers contend with critical interrelated challenges, often simultaneously, while accounting for the changing political, economic and regulatory environment. The financial and economic crisis that surfaced in 2007 has ushered in an historic reshaping of the industry: business practices and models of many firms and whole sectors have been called into question, re-regulation has begun, and the role of government in the industry is under fundamental reexamination. There will be marked changes to existing business models, as well as the likely emergence of new organizational forms. The crisis has also raised the level of scrutiny and criticism from many quarters of society with which firms and their leaders must contend. The risks and opportunities for firms and their leaders have never been greater.

Course Content

The general manager in the industry will contend with historic disruption to business models and a debate surrounding the responsibilities of leaders and firms. Within this context, at the firm or division level he/she faces four interrelated challenges and they define the course modules. The first issue is confidence, and the need for firms to maintain the trust of their constituents. A financial firm's viability is particularly dependent upon maintaining not only the reality but the perception of integrity, financial strength and competence. The second issue is need for operational effectiveness, in areas including risk, infrastructure and processes, human capital, and managing organic growth. The third issue is the strategic challenge of finding and defending a unique position in a crowded marketplace, which includes analyzing the merits of diversification versus focus. The final issue is the challenge of evaluating and managing transformational transactions in an industry where business combinations often impair value rather than enhance it. We will also explore how business models may change and opportunities that may arise as a result of the economic and financial market crisis.

We will examine firms in a number of countries and in many sectors of the industry. While the course utilizes concepts from various management and finance disciplines, it does not provide a "deep dive" into these disciplines, or into specific sectors of the financial industry, which are available in the EC and for which this course can be viewed as a complement. Rather, it integrates aspects of these disciplines in a manner relevant to the organizational challenge of managing financial firms.

We will complement traditional cases with some "live cases," examining issues and events in "real time." The cases will be supplemented by readings to provide both theory supporting the modules and as a platform for exploring the relevance of recent issues in each class. We will also have guest speakers.