Credit crunch explained

This was a post I made in my MBA discussions relating to stakeholders for Accounting and Financial Management...

I was working for one of the biggest banks in Australia at the time of the credit crunch. Although Australian banks were not severely affected by the credit crisis (as a matter of fact, they were heralded as being amongst the safest banks in the world), it was still a big deal and my team in Group Risk spent a lot of time doing case studies and discussions to understand the cause of the crisis and the lessons that can be learnt.

The credit crisis was well documented and, in my view, can be broadly summed up as follows. Credit was cheap and abundant all over the world. With so much money, banks started offering it to poor quality (risky) borrowers. At the same time, advancements in technology and quantitative techniques led to an explosion of exotic and complex financial products being issued by investment banks (eg, collateralised debt obligations). The complexity of these instruments and the lack of understanding of the quantitative models used to value these instruments allowed the investment banks to package the high risk loans into a range of products with a variety of risk ratings. Because of the poor understanding of the underlying risks by all those involved (including the regulators and rating agencies), the risk ratings given to these complex financial instruments were incorrect. As the risky borrowers started to default, holders of these financial instruments (which includes banks, governments, etc) started to lose money. The significance of the poor risk ratings is that people who thought they invested in instruments with next to no risk all of a sudden started losing money. Given the interconnectedness of the modern day global financial system, the losses started to flow through all over the world. As losses started to accumulate, having enough money for the day to day running of businesses became all the more important (this lack of funds available for day to day use is known as the liquidity crisis) and so banks, who themselves also need to conserve what little money they had, became more selective in who they lent to (this lack of funds available to be borrowed is known as the credit crisis or credit crunch). With a lack of funds available to be borrowed, companies started to run out of money for the day to day operations of their business (including servicing loan repayments). As a result, many ended up going into bankruptcy.

In this context, there are many culprits – banks for being too reckless, regulators for not doing a good enough job regulating the banks, rating agencies for assigning incorrect risk ratings, and investors for placing too much reliance on the regulators and rating agencies to do a good job (as they say, you should always understand the risks that you are taking before you invest).

Although Australia was not that severely hit by all this, it did bring about some interesting changes. Banks saw the risk with relying too much on wholesale funding (borrowing from other banks around the world to fund the loans that they make in Australia) and so placed more emphasis on funding their balance sheets with deposits (this lead to a price war among banks in the form of more competitive interest rates and reduced fees). It also lead to the demise of several poor performing organisations, whose problems surfaced as credit ran dry.

MBA - Role theory applied

It’s only the second week into my MBA program and already it’s given me a lot of food for thought. Learning about organisational behaviour has been quite enlightening. Not only has it put my role stress into perspective, it’s also helped me understand the different personality types and their suitability for different role types and hence what my own role preference is and what I should be doing (the wonders of role theory)!

Among the many struggles that people face in their various roles in life – that of a husband, that of a manager at work, that of a family member, etc – the one that, to me, is most prevalent is role ambiguity and the ability to distinguish one’s own role in different situations. Put more simply, people need work life balance, without which, they will end up feeling role strain (the negative type of role stress) from the various roles that they have in life.

My own enlightenment through all this is to not be drawn too much into the dilemma of balancing my work and personal life as to me, personal life is definitely much more important than work life. As such, to avoid role stress, I need to distribute my time according to what matters to me most!

Simple, but sometimes it’s the simple things that trips you up most in life!

MBA Induction 1

Had my first MBA induction today and boy am I impressed by all the technology! I feel like I’ve witnessed the future of education where lectures are conducted online and students work in virtual study groups in virtual meeting rooms from all over the world!

Having got access to the study notes yesterday for the first couple of lessons in each of the subjects, I am also impressed by the quality of the notes and the amount of thought and organisation that have gone into this!

I’m now looking forward to the second induction next week, the coming online classes study group meetings, and digging into the notes and readings!

Thumbs up totally to WBS!

The MBA experience is about to begin...

Just before going to Cologne last week, I got access to my.wbs, WBS' online learning portal, and my WBS email address. Furthermore, I also got the textbooks for my first three subjects delivered to me at work.

So far, I am quite impressed with my experience with WBS. The online resources that they have for their MBA students are quite extensive. Going through the Student Handbook on my.wbs, I was quite impressed by the wealth of information that they have available. They cover pretty much everything from what an MBA degree covers, to how to study and resources available. And to my surprise, WBS and Warwick University together offers many of the most popular software for its students to download and use at home, including SAS and Mathematica, which I have already downloaded.

I am also impressed by the range of students enrolled in my cohort. WBS encourages students to post Introductions on my.wbs, and from people's postings, I found that my cohort is made up of people with a really diverse range of background and from a diverse range of places. There are scientists, HR managers, investment consultants, entrepreneurs, etc etc, from UK, Nigeria, Europe, US, Canada, Australia, etc etc. Furthermore, the people seemed quite accomplished, with most being managers of teams of people and in positions with some level of decision making authority.

Apart from the uni provided resources, I am also impressed by WBS' embracing of the most popular online resources to assist its students, staff and alumni to network. People say networking is one of the most valuable part of doing an MBA and WBS sure maximises the opportunities for its students and alumni to do that. Being a LinkedIn user, I was able to join the WBS Group, which is only open to students, staff and alumni of the business school. Through this, I was then given the opportunity to help review a book on strategy (The Strategy Book) written by an alumnus and which will be published early next year. Of course, I put my hand up to this and am currently in the process of learning about strategy, an area that I am particularly interested in learning about through my MBA studies.

Although the course has not officially began, I feel I have already benefited a lot from being enrolled as an MBA student with WBS. The wide range of resources offered by WBS will definitely be something that I will be making the most of. One particular resource that I'm already thinking about is their contact list of alumni in different industries who have agreed to let associates of WBS contact them about their industry. One such contact is a head of a retail banking area at NAB in Australia. When I have time, I plan to make the most of this contact to see how I can best use my MBA to land myself a job in banking when I eventually return to Australia.

With my textbooks in hand, laptop at the ready, and my.wbs at my disposal, I am all set to make the most of my MBA experience, and am looking forward to broadening my knowledge of the business world.

MBA Enrolment and Registration

I have just registered and enrolled for my MBA studies. It was interesting seeing how different working in the UK is compared to Australia and now I get to see the difference on the study front as well.

The enrolment and registration process was relatively straightforward. Most of the fields were pre-populated and so it was more a process of reviewing the details than actually having to fill things out. As part of the enrolment process, we have to upload a photo for our student card. Not having a decent photo on hand, I went into a meeting room and took a mug shot with my mobile. That appears to have worked so hopefully I won't get a message later saying that my photo is too crappy to be acceptable.

One part of the enrolment and registration process required us to provide details on how we'll be paying our fees. This is where my head was pulled out of the clouds and I was brought back to the harsh reality of our quid pro quo society! Studying my undergrad and my first postgrad in Aust, I never really had to worry about the fees as they were deferred and automatically taken out of our pay when we started working. As such, the vast sums of money that we have to fork out for our self embetterment never really bit me - the only times that I was even aware/reminded of their existence were when I received the annual statements around tax time with the current outstandings of my educational debt.

This time, however, things are slightly different. Although nothing's confirmed yet as discussions are still taking place regarding my study support (my boss is speaking to his boss, and his boss is speaking to his boss), I am prepared for the worse and am ready to pay the fees out of my own pocket. As such, I opted to pay by quarterly instalments, hoping that will ease the burden a bit.

Now that all is done on my end, I guess I can only sit back and twiddle my thumb while I wait for the Uni to process my details and send me my bill and study pack!

The elusive MBA is finally within reach

Yes. I have committed myself to further study yet again. Some might question my sanity while others might feel sympathy for me but to me, it is the realisation of a long held desire to add three special letters to the end of my name and I am looking forward to it!

The journey thus far has been far from smooth. I have long had the desire to do an MBA but for one reason or another, I never got around to it. Then when arguably the best time for me to do it came, I decided to move to London and hence had to defer it yet again. But trying to be optimistic, I consoled myself by thinking that given the large number of top business schools in the UK, perhaps I can do my MBA there. But when I started looking into it, I was disappointed that both the timing and the cost of most programs doesn't suit me! The time they require to complete the program, taking into account the start date, does not work well with the timing of my two year visa, and the cost is usually exorbitantly high!

Gutted by this, I was more or less resolved to forgetting about doing an MBA in the UK and just enjoying my two years there. However, my desire to obtain a UK qualification to spice up my CV never went away and I found myself researching UK qualifications one day. That was when I stumbled across an article by the Economist/Economic Intelligence Unit that discussed distance learning MBAs. The article opened my eyes to the possibilities of doing an MBA through distance learning and I was sufficiently impressed to further research this possibility.

From my further research, I obtained a new found understanding and appreciation of distance learning MBAs and eventually even applied for one. The key findings that influenced my decision to apply are as follows:

1. Accreditation: There are several associations out there that accredit MBA programs and for the programs to be accredited, certain criterias has to be met. Once these criterias are met and the program has been accredited, the programs can then be seen to be equal. In other words, if a business school is accredited, then it is safe to say that their standard of MBA programs, whether they are delivered full time face to face, or through distance learning, are of the same quality and standard.

2. Top business schools: Many of the world's top business schools are providing distance learning delivery options and if they believe enough in this delivery method to offer it while knowing the risk that poor delivery will tarnish their reputation, then that's enough of an assurance for me to believe in it too.

3. Cost: While the distance learning option is cheaper than the full time option, it is still quite significant. In fact, it can be more than many well known full time programs! So if people are willing to fork out such large sums of money to do these programs, then that again adds credibility to these programs.

4. Reception: It seems from my research that many employers view these program positively, especially since they know it takes a lot of admirable qualities from people, like time management, self motivation and dedication to complete these programs.

5. Difficulty: Almost everyone who has gone through these programs talk about the difficulty of completing it. And the statistics from the Economic Intelligence Unit report shows this given the relatively low completion rates. In other words, the business schools do take these programs seriously, enough to actually make students work to earn their degrees.

Deciding on such a route to complete an MBA, the next step was to choose the business schools to apply for. After extensive research, I narrowed it down to two top business schools - the first was Warwick Business School and the second was Manchester Business School, and so I submitted an application to WBS and if that failed, I was going to apply to MBS. Fortunately, WBS made me an offer.

In choosing a business school, several considerations influenced my decision greatly. These were timinig, cost and quality of the program. Warwick Business School came out on top on all of these.

1. Timing - The Warwick MBA can be completed in two and half years. As with all accredited programs, there is a significant element of face to face teaching involved. These take the form of Warwick Weeks in the WBS program. In total there are a minimum of three Warwick Weeks in the WBS program and they all take place while I'm still in London under my Tier 5 visa so timing wise, this works out perfectly for me. Given I will only have about 17 months left on my visa by the time I start the Warwick MBA, the last couple of months of my program can be completed while I'm back in Australia, which again works out well for me.

2. Cost - Although the cost is quite hefty at about AUD$30K+, it is still cheaper than many other porgrams while at the same time, not too cheap to make it look cheap!

3. Quality - This is arguably one of the most important aspects influencing my decision. From my research, Warwick's program, especially their distance learning delivery mode, is class! The Warwick Week provides a crucial face to face element that bridges a bit of the gap between the distance learning mode and the face to face mode. The flexibility of opting into the modular classes that is taught entirely face to face is also appealing and I intend to take several of these if time and cost permits. And the fact that we graduate with simply the Warwick MBA with no mention of mode of delivery means that WBS considers all their modes of delivery are of equal quality. Furthermore, some argue that the DL mode provides an extra level of interaction that is not available in the full time option - asynchronous discussions where participants discusses issues not in real time and hence can apply more thought to their responses.

Having said all this, I must admit that I'm still stressing over whether I'm making the right decision in choosing this over a full time program. In the blogs to follow, I would outline more of my thoughts on this - stay tuned!

The last 4 months...

Four months. That's how long it has been since I left my home of 27 years to come and live in London. I still cannot believe how quickly everything happened. After a half an hour Skype interview, two week wait for our Tier 5 Visa, one month notice period with my then employer, and voila, I'm in London.

People say settling in a new country can be quite stressful. I agree. But fortunately for me, I came with my wife, Irene, and so had someone to share the burden with. In these last four months, we've been through both heaven and hell. Here's a really quick summary of all the joys and tribulations.

Settling down...

Settling down wasn't easy. Having to deal with dodgy real estates who inflates the number of properties that have doesn't help with the difficult and stressful process of finding an immediate permanent accommodation. Having searched extensively in the area that we originally wanted to no avail, we were happy to have finally found something in a different area. In hindsight, I think the location of our home now is actually better than where we originally wanted to settle.

Our new home was literally brand new when we moved in. So new that the construction fence outside the place wasn't taken away until about a month after we moved in. The water was also not connected until a week after we moved in despite having been assured by the real estate that all will be ready by the time we moved in. Again, we were let down by dodgy real estate agents!

Work - Economic Capital at Aviva

Having secured my job after a short half an hour Skype interview, I didn't have much of a clue as to what I was going to be doing, apart from the fact that it's in the Economic Capital team, an area that I'm keen to get in to. As it turns out, even my team didn't know where I was going to work and I ended being put in the Technical Development team with a focus on the economic scenario generator (ESG), a decision that was made just before I was due to begin work there.

Life is ironic. My undergrad was in Actuarial Studies and Information Systems and I vowed never to work in info sys but in my first job as a risk analyst for a major bank, I was seconded to a systems development project on my second day. Now, wanting to move away from heavy quantitative modelling work, I ended up being put in an area that couldn't be further from what I want. Fortunately though, my boss is nice and after I discussed with him my career goals, he is making an obvious effort to satisfy my needs and so now I'm doing less of the hands on modelling work and more managing and leading the team who will be doing the hands on work.

As things are, my job is not my dream job but there are elements there that makes it very good - like learning about market risk modelling and analytics, and getting exposure to all aspects of economic capital modelling and decision through serving as the secretary to an economic capital committee. Also, working hours are not too demanding and my boss is nice, which helps, so I'll see how things go in a few months time.

Exploring South West England (May)


About 2-3 weeks after arriving in London, we decided to go on a road trip over the bank holiday. Being our first trip, we were naturally very excited. We had booked a relatively cheap car for the three days, got a great deal on our accommodation, had everything planned out, and were all ready to go until we arrived at the car rental place to be turned down with our car rental!

Apparently, the rental place required all sorts of proof of ID and address for the person taking out the rental which we weren't aware of (a consequence of the high level of identity fraud in London). And even if we were, we did not have enough proof given we have just settled down and just moved into our new place. Having tried all our options to secure another rental car to no avail, we ended up booking a streetcar, which we had just signed up to a week ago (and so fortunately that we did), for the three days. Given we booked in the very last minute, only one car within our reach (by taxi) was available and it was a BMW 3 series so the cost turned out to be many more times expensive than our cheap rental car (luckily the company we booked the cheap car through was willing to refund us the payment we made for the booking).


In the end, we had a fantastic time and despite the slightly more expensive car, we at least managed to travel in style and comfort, as well as having at last tried out those fancy London taxis (to get to the streetcar). And that being our first taste of England beyond London, we weren't disappointed one bit! England is truly an amazing place, full of history and beauty; things that you don't normally see in Sydney. We visited Windsor Castle, Stonehenge, Bath, Coventry (where we stayed), Warwick Castle, Stratford-upon-Avon where Shakespeare lived, Cotswold Villiages, Uffington White Horse, and Oxford.

Amsterdam (June)


Our first overseas trip after arriving in London was to Amsterdam. We did that over a two day weekend, flying out on Friday night and returning on Sunday night. Although we only had two days, it was more than enough. We visited all the major attractions on the Saturday (we got an I Amsterdam card that gave us access to many museums and tram rides), and spent Sunday relaxing, including having a nice Alfresco pub lunch. Although the Saturday was packed, it was very rewarding. We also managed to find some time to include a bit at a "coffee shop", where I got a brownie. The brownie wasn't too bad but shortly afterwards, we had dinner at a pub where I had a beer and I think the beer + brownie was a fatal combination as I ended up kind of stoned, which sort of ruined my visit to Anne Frank's House as I wasn't able to appreciate it as much as if I was sober! On the whole, the trip was a great introduction to Europe!

My IWC Portugese watch

I've always wanted to buy a nice watch but my intention was to get one when I reached certain milestones, like being Senior Manager. But for some reason, my urge to buy one grew after coming to London and I spent countless hours researching about watches. In the end, at the urging of Irene, I ended up getting a nice IWC Portugese. Irene actually chipped in a large part and it was her who found the AD where we bought it and her who made the initial enquiries with the AD. The AD was a store called David Robinson at Canary Wharf and they were pretty nice. Apart from offering a discount, which most ADs I spoke to weren't willing to do, they also ordered a brand new watch straight from IWC in Switzerland and didn't open the package until we were there.

My 30th birthday in Paris (July)


My 30th birthday present from Irene was a trip to Paris. She conceived this idea when we were still in Sydney planning our move over and, not surprisingly, she managed to pull it off. We spent a total of 4 days in Paris, taking two days of leave and two days over the weekend. We went by Eurostar on the Wednesday night after work and stayed in a nice hotel with a close view of the Eiffel Tower.

The trip was nothing short of spectacular! Amongst the many memorable moments were being one of the first to see the Mona Lisa at the Louvre on the day (we bought tickets in advance so we skipped the long queue and went straight for the Mona Lisa after getting in) and getting unobstructed photos with the famous painting, a nice birthday lunch at La Tour d'Argent (famous for their ducks cooked in their own blood and liver), dinner and show at the Moulin Rouge, and lunch at the World's 16th best restaurant Pierre Gagnier where even a main course each and a desert to share looked like a full blown degustation.

By the end of the trip, I was sort of sick of eating and felt like I had lost my appetite. Irene probably felt the same way too as by the end of the trip, she lost a bit of that desire of hers to eat foie gras (we had foie gras every day on the trip). But the very next week in London, we again had fine dining at the three Michelin star restaurant Alain Ducasse at the Dorchester for Irene's birthday. Within the one week, we had a total of 10 Michelin stars worth of fine dining (Paris: 3 at Pierre Gagnier, 2 at L'Espadon and 1 at La Tour d'Argent; London: 3 at Alain Ducasse, 1 at Arbutus - dinner with Irene's friend Nika and Jun); a truly gastronomical week!

Brussels (August)


Our next trip was to Brussels. This was another long weekend trip thanks to the Summer bank holiday. We flew out on the Saturday morning and returned on Monday night. Brussels is relatively small and so didn't take long to cover all the main attractions. We were also by then sick of museums and so spent more of our time exploring the city and its old European architecture (especially in the Grand Place and the lanes connecting it). We also had plenty of mussels and chips, two food items that are famous in Brussels and which certainly lived up to our expectations! Even the worse mussels we had were probably better than the ones in Sydney. We also tried a few beers and bought some beer glasses back as souvenirs. And of course, how can we get away without buying some chocolates, though, most of the chocolates we bought were for souvenir as opposed to being for ourselves. Instead, we bought and ate plenty of nougats! On the whole, Brussels was really relaxing and enjoyable, thanks to the mussels and chips, if nothing else.

One other thing worth mentioning about in Brussels is the €1 breakfast - the greatest find of all!!! It includes a coffee and biscuit, a bacon and scrambled egg roll, and a nice croissant.

The Warwick MBA

I have long wanted to do an MBA and if it wasn't for my plans to come and live and work in London, I would have started the EMBA course at AGSM. However, now that I'm in the UK, home to many of the world's best universities, I might as well make the most of my time here and add a UK qualification to my name.

Prior to coming, I have considered many options, the most attractive of which is an MBA with the London Business School. Unfortunately, most programs require at least two years to finish and fees are exorbitant, making them a bit out of my league, especially given my two year visa here. Nevertheless, doing some further study here has always been on my mind and one day, while exploring my options, I stumbled across a report from the Economist discussing distance learning MBAs. After reading that report and doing extensive research, I concluded that an MBA with the Warwick Business School, which provides the flexibility of having a range of delivery options to choose from, including distance learning and face to face options, would work well for me so I ended up applying.

The application process for the Warwick MBA was quite lengthy. Given I was only applying to the part time program, I didn't have to take the GMAT, which was one thing less to worry about. But I still had to do all the other stuff, like submit three essays, getting two references, and satisfy the 4 year management experience and the prior academic requirements. Writing essays was no issue, I did that in half a day on the weekend, but it was the references that worried me most. Fortunately, three out of four of my previous managers submitted references for me almost immediately and they must have said some good stuff about me as just over two weeks after submitting my application, I received an email from WBS saying I was made an offer, pending submission of my original transcripts (I had got my wonderful sibblings to scan my transcripts for me back in Sydney so that I can submit my application and now needed to send in the originals, which I brought back with me during my short trip back to Sydney for a friend's wedding in September).

After I brought back my transcripts and sent them off to WBS for verification, I got a confirmation from WBS that my offer is now unconditional and so I am now due to begin my MBA studies in January next year!

Short trip back to Sydney for Jiong's wedding (September)

Friends are important to me, not least the one who went out of his way to introduce my now lovely wife to me. As such, I made every effort to attend his wedding, even if it meant flying out of London after work on Wednesday to arrive in Sydney on Friday morning, attend the wedding on Saturday (as best man), do a speech at the reception, and fly out of Sydney on Monday morning to arrive back in London on Tuesday morning to go straight to work.

Although the trip was rushed, it was definitely well worth it. I managed to catch up with my family and bring back many of the souvenirs that I had bought for them, attend Joing's wedding, and catch up with some good friends, including Chewy, who will be getting married next year and who I will be making another gallant effort for to attend.

One year wedding anniversary in Prague (September)


Everyone agrees that Prague is beautiful but some also say that it's scary and dangerous. My experience is that Prague is one of the most beautiful cities that I've seen, with a picturesque scene from the east side of the river where you can see the west side of the city that is slightly inclined on a hill and is connected from the east by the magnificent Charles bridge that leads the eye to the splendid Prague Castle. In terms of safety, I also feel that it's much safer than other European cities, such as Paris, though one thing I didn't like about Prague were the hordes of tourist groups taking over the most beautiful parts of the city!

Prague is definitely one of the most "European" cities that I've seen, where the main city is mainly laid with stone roads and old European architecture. We also enjoyed sampling the variety of Bohemian cuisines, including a beef stew in a bread pot - both novel and practical!

This being our one year anniversary trip, we booked a fine dining dinner on our anniversary night and had a Bohemian degustation. The restaurant was lovely and we got a nice table. Perhaps it was the occasion but I found the food to be splendid, something I did not expect in a place like Prague! And to decorate the table, we put a Bohemian crystal that we bought for our one year anniversary that day; that added a lovely touch to the evening.

This wonderful trip was a bit tainted by the weather though! Of the three days that we were there (we took a day off work and had three days including the weekend), only the first day was not raining. In anticipation of the poor weather, we took photos of all the beautiful sites in Prague on the first day and so in terms of photos, we did not miss out on much.

Another experience from this trip was flying easyJet, which did not allocate seats and so it was left to the Darwinism instincts of everyone to scramble and fight for their seats. Luckily for us, we managed to clamber to some pretty good seats on both the to and from flights.

Conclusion

So, there you have it. Our last 4 months in London is as laid out above. But it goes without saying, our experiences over these last 4 months is nowhere near fully captured by what is written above, as to do so will require many more months and pages of writing. And as much as I would like to write it all down as a safeguard from the totally unreliable memory that I've got, I guess for now, this will have to do...