Are we heading towards a Financial Crisis in 2016? Reply

business man in a crisis

New YouGov research reveals that most British people expect a global financial crisis this year. 51% say this is very or fairly likely compared to 28% who say it is very or fairly unlikely. You Gov

There are several key reasons behind this thinking:

  1. Stock Market have created inflated values for businesses in that last couple of years and could fall dramatically this year
  2. China is in crisis, last week it suffered a 7% slump in its main share index
  3. The World Bank and OECD have both expressed doubts over economic growth
  4. Interest Rates are expected to rise
  5. Falling Oil Prices – great for consumers but bad for many economies

What should you do to prepare for the worst (hoping it doesn’t happen)?

  • Pay off debt and reduce your interest rate exposure
  • Improve your Cash Cycle and tighten credit controls
  • Re-examine your investment strategy

Let’s hope there isn’t a crisis!

steve@bicknells.net

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Is Greed Good – 12 years on from Enron and Sarbox? 1

Millionaire

It was December 2001when Enron filed for Chapter 11 bankruptcy.

In just 15 years, Enron grew from nowhere to be America’s seventh largest company, employing 21,000 staff in more than 40 countries.

But the firm’s success turned out to have involved an elaborate scam.

Enron lied about its profits and was accused of a range of shady dealings, including concealing debts so they didn’t show up in the company’s accounts.

Enron was followed by scandals at Global Crossing and WorldCom, John ‘Bernie’ Ebbers co-founded WorldCom and made this statement in his defence

“I know what I don’t know. To this day, I don’t know technology, and I don’t know finance or accounting”

These companies all had the same auditors, Arthur Anderson which was once one of the top 5 accounting firms in the world.

The scandals lead to the creation of The Public Accounting Reform and Investor Protection Act as a result of work done by Senators Sarbanes and Oxley and is general referred to as Sarbox or SOX and applies to US publicly listed companies and their subsidiaries.

Some of the key items in the Act include:

  • Auditor Independence (s201,202)
  • Audit Partner Rotation (s203)
  • Forfeiture of Bonuses (s304)
  • Disclosures (s401,409)
  • Internal Controls (s404)
  • Personal Loans to Executives (s402)
  • Whistleblower Protection (s806)

But despite this it failed to prevent the Global Financial Crisis of 2008 .

So is Greed Good?

Common themes in all these scandals were:

  • Greed/Personal Ambition
  • Attitude of Senior Management
  • Failure to report ‘wrong doing’

Tax Avoidance is now in the spot light will that lead to new scandals coming to light?

steve@bicknells.net