Archive for June, 2010

Quinn & Goldman Sachs – the case for management competence

Tuesday, June 1st, 2010

The extent of the failed insurance company Quinn’s loss leader pricing in the UK is revealed with the branch contributing £44m of the 2009 loss, £28m of that from commercial insurance.  

Quinn’s largest creditor, Anglo Irish Bank (AIB) is amongst those expressing an interest in buying the remaining assets and is looking for a JV partner that would be both regulator credible, and could manage the business to recoup some of AIB’s losses. 

This smacks of desperation.  The business is stopped.  In addition to a new investor approval is needed from both Irish and UK regulators for any commencement.  Meanwhile staff are queuing up to take redundancy, and competitors are sweeping up the renewals and new business.  It is difficult to understand what could be left to salvage – particularly in a market where competition is more than competent and reputation matters.      

For AIB this surely underlines its difficulties in understanding the risks it was taking in lending to Quinn.  Like RBS and its Goldman Sachs Abacus 2007-AC1 losses, the consequences are significant.  The risk assessment was clearly not adequate to protect the interests of the investors.  Demonstrating again, that without competent interpretation, data is just numbers.  

From the outside it is not possible to differentiate between commission or omission.  And what, after all, is the end result difference between the caveat emptor/competent entity justification of Goldman Sachs, and Quinn’s determination to grow its business using other people’s money?  Were these investors merely ‘unlucky’ in their timing of their ‘me too’ participation in the Bubble?  Did they confuse investment with the CDO/churning and slicing/repackaging of risk activities that others were conducting? Were bonuses paid for the decisions that have broken these banks?

As businesses go forward into the post crunch world, risk can no longer be palmed off onto others or its management delegated to a piece of software.  The bottom line is that Management Competence matters, particularly those ‘soft’ skills that enable a business to navigate through uncharted strategic territory. 

What are you doing to ensure your teams are competent and confident to deal with the ‘not business as usual’, high uncertainty post credit crunch world? 

 Next Steps

Talk to us about effective and engaging ways of developing those illusive ‘soft’ skills in high IQ managers and staff.

 http://www.tribune.ie/business/news/article/2010/may/30/quinn-facing-3000-hike-of-uk-commercial-premiums/

 

 

 

 

 

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