All Financial and Governance Crises arise from failure to manage the Business
The current financial crisis is caused by failure to manage capital worth as part of the business
Governments encouraged creation of mortgage securities to enable banks to loan more money and poorly-secured mortgages to enable low-income earners to own homes. Investment banks bundled mortgages to sell as capital investment security solutions, with unsubstantiated “asset value” or, in business terms, capital worth. A dangerous situation grew as housing prices spiraled up, while the actual worth of capital investment solutions decreased, but could not be managed by 20th century management or detected by 20th century accounting. The unaccounted for and unmanaged decline came to light as borrowers defaulted and suddenly we have a world financial crisis.
The financial crisis shows the very serious unsolvable problems and significant financial losses incurred because actual businesses are not managed today. The problems with 20th century management and accounting that cause financial and business crises are explained in every article in the Business Change Forum.
Now is the time to replace 20th century management with R-pM to manage businesses and prevent future crises
All financial and other business crises are caused by poor business management. The good business management needed is prevented by 20th century management used by all government, financial, and other enterprises today. The only solution available is to enable good business management with Result-performance Management (R-pM) by clearing away 20th century management structures laid over the business and managing actual business data and utilizing actual business management information.
Specific capital solutions invested in the business and capital solution investments by the business must be managed for value-creation, costs of utilization, return on investments, and changing capital worth that is not managed today. Now is the time for governments, financial institutions, corporations, and other enterprises to wake up to fundamental management problems and institute the only solution to organize and manage the actual business. The details are explained in the article “All Financial and Governance Crises arise from failure to manage the Business” posted in 21st Century Management Magazine.
