As the Dow Jones Industrial Average reached a record, not many are cheering because investors questioned what will happen when the US Federal Reserve stops its stimulus. In Europe, policy makers are still battling instability. The sentiment in Asia, however, is in sharp contrast to the rest of the world.
“I would not assume that a crisis would not happen. That was the assumption in Europe and that was the assumption in the US,” says Antonio Fatas, Professor of Economics at INSEAD Business School. “There’s a lot of optimism here, there’s great dynamics and great growth but it has to be managed in a way which is sustainable.”
Asia’s optimism now has been compared with European and American buoyancy in the early 1900s. With the influx of businesses, investments and financial professionals, inflation risks and asset bubbles are key concerns.
“In all crises, whether it is Asia in ‘96, the US in the ‘80s, the 2008 global financial crisis, in all of them you have a set of imbalances,” says Fatas. “As these imbalances get worst, the financial system suffers, balance sheets deteriorate and you get a financial crisis.”
Amid the heightened need for financial risk management, the market for specialised Master’s degree programmes in accounting, management, finance, and a number of other business disciplines has never been stronger. Ever since the financial crisis in 2008, there has been a strong increase in demand for education specifically in finance and this is in part caused by the fact that financial products have reached a level of complexity that institutions were unable to accurately price them or assess the risks, according to Kristen Lynas, Director of Executive Degrees at INSEAD.
“In the financial industry, knowledge is king,” says Lynas. “The person who has the strongest and best quantitative skills, the knowledge of the products and is able to properly price them and assess risks is in the best position.”
However, knowledge is “meaningless” if financial professionals aren’t “able to connect it to the strategy of the business or aren’t able to communicate on it properly with stakeholders,” she adds.
As markets in Asian economies develop and mature, financial risk management in the region is regarded as comparable to anywhere in the world. “It is numbers based; it is very quantitative; the type of products might be different but the ability to price those products and work with them doesn’t change,” says Lynas.
As more western institutions shift their attention and senior management to Asia, Fatas says the focus for financial executives is different in the two jurisdictions.
“In Europe and in the US, there are much faster and more significant changes in regulations and certainly my first priority would be to understand that and also the regulatory environment, that is, if it is changing and how will it change in the future,” he adds. “This might be less of an issue in Asia.”
“In Asia, one should worry more about the possibility of a crisis, imbalances in some of the big countries like China.”