Knowledge intensive processes characteristics and improvement: a banking best practice example

This paper identifies characteristics of knowledge intensive processes and a method to improve their performance based on analysis of investment banking front office processes. The inability to improve these processes using standard process improvement techniques confirmed that much of the process was not codified and depended on tacit knowledge and skills. This led to the use of a semi-structured analysis of the characteristics of the processes via a questionnaire to identify knowledge intensive processes characteristics that adds to existing theory. Further work identified innovative process analysis and change techniques that could generate improvements based on an analysis of their properties and the issue drivers. An improvement methodology was developed to harness a number of techniques that were found to effective in resolving the issue drivers and improving these knowledge intensive processes.

The role of rules-based compliance systems in the new EU regulatory landscape: perspectives of institutional change

Purpose The research objective of this study is to understand how institutional changes to the EU regulatory landscape may affect corresponding institutionalized operational practices within financial organizations. Design/methodology/approach The study adopts an Investment Management System as its case and investigates different implementations of this system within eight financial organizations, predominantly focused on investment banking and asset management activities within capital markets. At the systems vendor site, senior systems consultants and client relationship managers were interviewed. Within the financial organizations, compliance, risk and systems experts were interviewed. Findings The study empirically tests modes of institutional change. Displacement and Layering were found to be the most prevalent modes. However, the study highlights how the outcomes of Displacement and Drift may be similar in effect as both modes may cause compliance gaps. The research highlights how changes in regulations may create gaps in systems and processes which, in the short term, need to be plugged by manual processes. Practical implications Vendors abilities to manage institutional change caused by Drift, Displacement, Layering and Conversion and their ability to efficiently and quickly translate institutional variables into structured systems has the power to ease the pain and cost of compliance as well as reducing the risk of breeches by reducing the need for interim manual systems. Originality/value The study makes a contribution by applying recent theoretical concepts of institutional change to the topic of regulatory change uses this analysis to provide insight into the effects of this new environment

Foreign direct investment in high-risk environments: an historical perspective

Since the banking crisis of 2008 the global economy is perceived as riskier than before. Firms that cannot manage risks have withdrawn from countries in which they previously invested. These problems are not new. For centuries firms have invested in risky foreign environments, and many of them have succeeded. This paper reviews the risk management strategies of foreign investors. Using archival evidence and secondary sources it distinguishes the different types of risks that investors face and the different strategies by which risks can be managed. It investigates which strategies are used to manage which types of risk.

A review of Islamic mutual funds’ financial performance and investment style in Muslim and non-Muslim countries

Islamic finance has grown beyond its reputation of providing small-scale banking options and now provides investment and financing options for complex large-scale commercial transactions. Islamic investments are one area that has attracted the attention of investors due to its performance, especially during the economic downturn. The Shari’ah compliance nature of Islamic funds provides an opportunity for those Muslim investors to be part of the global investment sector who have previously been reluctant to invest in conventional mutual funds. The fact that the funds’ managers are prohibited from investing in activities such as weapons production, alcohol production and interest-bearing finance operations, makes Islamic mutual funds also attractive for those Non-Muslim investors who wish to invest ethically. Today there are hundreds of Islamic equity indices offered by Dow Jones, FTSE, MSCI and S&P. Despite the growing importance of Islamic funds, there have been limited studies exploring the performance of Islamic funds worldwide. Due to very limited data sets and not too rigorous analytical methods, these existent studies have neither investigated Islamic funds’ financial performance in noticeable detail nor analysed the investment style of more than six funds. For instance, relevant questions such as the financial performance of Islamic mutual funds’ beyond their investment styles or a difference in performance between funds from Muslim and non-Muslim countries have nearly not been investigated at all. Very recently, a study by Hoepner, Rammal and Rezec (2011) analysed the financial performance and investment style of 262 Islamic equity funds from 20 countries in five regions (Africa, Asia-Pacific, Europe, Gulf Cooperative Council-GCC, and North America). As comparison, previous studies did not even analyse 60 funds. Hoepner et al.’s study sampled a period of two decades and was therefore able to test the performance of the funds during economic booms as well as economic downturns. The findings of the study provide new insights into the performance of Islamic mutual funds in Muslim and Western markets and during financial crisis.

State ownership, bank loans, and corporate investment

We study the effect of bank loans on Chinese publicly listed firms' investment decisions based on the underinvestment and overinvestment theories of leverage. Evidence from China is of particular importance because China is the world's largest emerging and transitional economy. At first we show that there is a negative relationship between bank loan ratios and investment for Chinese publicly listed firms. And this negative relationship is much stronger for firms with low growth than firms with high growth. Secondly, we find that both short-term and long-term loan ratios are negatively correlated with investment. However, the higher the long-term loan ratios are, the weaker the negative relationship between long-term loan ratios and investment is. Thirdly, firm ownership only matters to the effect of short-term bank loans on investment in our sample. That is, the negative relationship between short-term loan ratios and investment is weaker for SOEs than for non-SOEs. Lastly, we show that the reform of China's banking system in 2003 has not strengthened the negative relationship between bank loans and investment. Our findings suggest that although Chinese state-owned banks are severely intervened by government policies, they still have a disciplining role on firms' investment, especially in firms with low growth.

Investment in preventing and preparing for biological emergencies and disasters: social and economic costs of disasters versus costs of surveillance and response preparedness

Biological emergencies such as the appearance of an exotic transboundary or emerging disease can become disasters. The question that faces Veterinary Services in developing countries is how to balance resources dedicated to active insurance measures, such as border control, surveillance, working with the governments of developing countries, and investing in improving veterinary knowledge and tools, with passive measures, such as contingency funds and vaccine banks. There is strong evidence that the animal health situation in developed countries has improved and is relatively stable. In addition, through trade with other countries, developing countries are becoming part of the international animal health system, the status of which is improving, though with occasional setbacks. However, despite these improvements, the risk of a possible biological disaster still remains, and has increased in recent times because of the threat of bioterrorism. This paper suggests that a model that combines decision tree analysis with epidemiology is required to identify critical points in food chains that should be strengthened to reduce the risk of emergencies and prevent emergencies from becoming disasters.

When are ant-attractant devices a worthwhile investment? Vicia faba extrafloral nectaries and Lasius niger ants

Most studies aiming to determine the beneficial effect of ants on plants simply consider the effects of the presence or exclusion of ants on plant yield. This approach is often inadequate, however, as ants interact with both non-tended herbivores and tended Homoptera. Moreover, the interaction with these groups of organisms is dependent on ant density, and these functional relationships are likely to be non-linear. A model is presented here that segregates plant herbivores into two categories depending on the sign of their numerical response to ants (myrmecophiles increase with ants, non-tended herbivores decline). The changes in these two components of herbivores with increasing ant density and the resulting implications for ant-plant mutualisms are considered. It emerges that a wide range of ant densities needs to be considered as the interaction sign (mutualism or parasitism) and strength is likely to change with ant density. The model is used to interpret the results of an experimental study that varied levels of Aphis fabae infestation and Lasius niger ant attendance on Vicia faba bean plants. Increasing ant density consistently reduced plant fitness and thus, in this location, the interaction between the ants and the plant can be considered parasitic. In the Vicia faba system, these costs of ants are unlikely to be offset by other beneficial agents (e.g., parasitoids), which also visit extrafloral nectaries.

Direct investment in real estate

Momentum strategies have the potential to generate extra profits in private real estate markets. Tests of a variety of frequencies of portfolio reweighting identify periods of winner and loser performance. There are strong potential gains from momentum strategies that are based on prior returns over a 6- to 12-month period. Whether these gains are attainable for real-world investors depends on transaction costs, but some momentum strategies do produce net excess returns. The findings hold even if returns are unsmoothed to reflect underlying market prices.