Monthly Archives: December 2016

Book Review The Curse of Cash by Kenneth S Rogoff. Princeton University Press Published August 2016.

Faculty, Uncategorized

 

The Curse of Cash        

Kenneth S Rogoff                                                             

Princeton University Press

August 2016.

  • ISBN-10:0691172137
  • ISBN-13:978-0691172132

 

Book Review by Gurpreet Singh Bhatia

Associate Professor, Economics, IILM Institute for Higher Education, New Delhi

Email: gurpreet.bhatia@iilm.edu

 

The author begins with the hypothesis that the time has come for advanced countries to rethink the role of cash in their economies. The author had suggested to the authorities in the US that phasing out high denomination note of $100 would help cull underground economy. The similar idea of phasing out high denomination notes of €500 has been put forward by policy makers to the European Central Bank.

The research provides evidence that in developed countries, the underground economy accounts for majority of cash holding and the economy is characterized by a high demand for small bills for use in retail transactions, but this demand appears to be diminishing over time, due to increased debit card usage.

Using the scanner data of US retail transaction, researchers have found that low-income households use small bills for cash purchases in stores. The author enlightens the audience of the fact that in European counties, majority of the people use cash for buying items less than €20, and a very small proportion of population uses cash to buy items that cost more than €1000.

Chapter four begins with the conjecture that even in developed countries in some countries like the US, many poor and low-income individuals rely heavily on cash.

The countries with very low currency to GDP ratio include a mix of countries that have taken action to phase out cash (Norway, Sweden, and Denmark) and high-inflation countries, where holding cash is expensive, because it quickly depreciates in real value. The currency ratios for Canada and the UK are both roughly half that of the US.

Chapter 3 titled “Size and Composition of Global Currency Supplies, and the Share Held Abroad” gives mind boggling facts about currency in circulation around the world, and about the proportion of high denomination currency held by citizens.

The author discusses the size and composition of global currency supplies, and the share held abroad. The author conjectures that if Marco Polo were able to return to China today, one of the few familiar items he would discover would be the paper currency.

The author begins with the historical perspective of currencies, and informs that China was the first country to introduce paper currency. The author says that after WWII, international community gave up the idea of reestablishing gold standard in favor of Bretton Woods system of fixed exchange rates with the US dollar as the pivotal currency, and the US dollar became the de facto world currency.

The author raises an important point of society´s need to balance an individual’s right to privacy with society’s need to enforce its laws and regulations? For example, shifting from cash economy to digital payment economy exposes citizens to the possibility of being included in the database at the cost of personal privacy.

It is a misperception that the advanced economies are doing away with cash. In fact, the use of cash in advanced economies is increasing. And it is not just the United States that has a gigantic currency supply dominated by big bills. The problem is nearly universal in advanced economies.

In chapter six, the author explains the concept of seigniorage. It occurs when the government prints money and spends it at face value. It makes profits because the cost of printing is only a very small proportion of the face value of currency.

All countries except Sweden have earned from seigniorage. Sweden´s profits from printing of currency is negative because in that country, public’s use of notes and coins has declined since 2007, both as proportion of GDP and also in absolute terms.

The central banks have the privilege to print money and recover their operating costs, but the central banks must exercise considerable amount of discretion on where to draw the fine line between necessary expenditures and non-trivial ones. It is important that central banks maintain independence.

In chapter 7, Rogoff provides the reader with a comprehensive plan on how to phase out paper currency in the US context. The author suggests that the currency be phased out in four steps.

The fourth stage focuses on real time clearing, where the government helps facilitate development of the quick payments.

Chapter eight is on the concept of zero bound constraint where the economies experience lower interest rate coupled with low growth.

In the recent years, the OECD countries have witnessed a near zero interest rate (the interest rates have been even negative in countries like Germany and Japan).

Chapter 9 focuses on inflation targets, GDP and fiscal policy. The author suggests that the central banks raise target inflation rates from an average of 2% to 4%. The reason is that money in neutral in long run. When the central banks lower interest rate, consumers and procurers adjust to prices in the long run and the only way the economy could be kick started is by increasing the target inflation rates.

Rogoff suggest that instead of targeting inflation, a better idea would be to target GDP and enhance it through reducing income tax and increasing value added tax, thereby increasing inflation effective demand, therefore providing stimulus.

The last part of this book deals with digital currency. Rogoff questions the feasibility of replacing paper currency with digital currency in emerging market like India where majority of population is engaged in agriculture in rural areas where the infrastructure fir digital currency is not yet developed. On the positive side, phasing out cash in favor of digital currency in emerging markets would have positive effect by reducing corruption and underground economy.

The author stipulates that cryptocurrency like Bitcoin could be a currency of the future. After all, Bitcoin could function as unit of account and medium of exchange, withe same functions of paper currency.

In conclusion, this is an important and coincidentally, a timely book in context of current demonetization being implemented in Indian economy. It would behoove the policymakers and researchers in India to pay heed to the recommendations provided by Kenneth Rogoff, specifically related to emerging economies.

 

 

VITTIYA SAKSHARTA ABHIYAN (VISAKA) – A Campaign for Digital Economy

Guest Blog

#deshbadalrahahai

Taking cue from Modi Governments initiative on cashless economy  , IILM also encouraged its students and faculty members to not only adopt digital payments methods in their day to day life but also try educating at least 10-12 people around their neighborhood to start using these methods.

I have taken a session with our under graduate and post graduate students on this subject and train them on various methods of digital payments.

  1. USSD(Unstructured Supplementary Service Data)
  2. AEPS (Aadhaar Enabled Payment System)
  3. UPI(Unified payment interface)
  4. POS(Point Of Sale)
  5. Credit/Debit cards
  6. E Wallets
  7. Micro ATMs
  8. Internet banking
  9. Mobile banking
  10. Ru Pay cards

Two team of students are specifically assigned the task to educate people in nearby villages about these methods and also encourage them to adopt to new technology without fear and apprehentions. One of the teams is only comprising of girls under GIRL UP club to approach women in areas with high concentration of BPL families and educate them,because if a women is educated whole family becomes educated.img-20161222-wa0014

HR Conference, 2016 “Rise of Virtual Team: Sustainability & Effectiveness in a VUCA world “

Conferences

HR CONFERENCE 2016

“Rise of Virtual Team: Sustainability & Effectiveness in a VUCA world “

 

IILM Graduate School of Management

16, Knowledge Park II, Greater Noida-201 306

17th December, (Saturday) 2016

IILM Graduate School of Management, Greater Noida is in continuous pursuit of all-round excellence in Management Education by narrowing the gap between academia and industry. To that end, IGSM, Greater Noida organized a day-long HR Conference on the theme “Rise of Virtual Teams: Sustainability and Effectiveness in the VUCA World” on Saturday, 17th December, 2016 at its Greater Noida Campus. The Conference aimed to provide insights on dynamism of virtual team in a volatile economic environment. It focused on socio-emotional communication strategies and the changing role of leadership for virtual team effectiveness.

Inaugural Session:

 

The Conference began with a Welcome Address by Dr. Taruna Gautam,Director, IGSM, followed by an introduction to the Conference theme by Dr. Shyamali Satpathy, Conference Chair. Dr. Gautam addressed the students about the dramatically changing business environment where team members have to overcome space, time and cultural barriers to deliver and sustain in the competition. She also highlighted on new information age, internet of things and artificial intelligence are disrupting existing business models and affecting their long term feasibility. Dr Satpathy threw light on sustainability and effectiveness of virtual team in the era of globalization. She emphasized on the role of Socio-Emotional communication strategies and leadership for the effectiveness of a virtual team.

anurag

The Chief Guest of the Conference Mr. Anurag Gour, Marketing Head, Microsoft

Mr Gour during his Inaugural session discussed about his experience at Microsoft where he has been associated for over a decade. He also discussed on Digital Transformation due to the change in the VUCA World and about the challenges faced by the companies due to paradigm shift in the global business landscape.

With supporting facts and figures he spoke about the changes in the VUCA World and the constant transformations in the Fortune 500 companies. He said that technical infusion has lead to uncertainty and consequently to opportunity. He laid emphasis on employee engagement and role clarity for effective people management. .

sunny

The Keynote Speaker of the Conference  Mr. Sunny Sharma, Founder, Foetron In.

Mr. Sharma elaborated on the broad idea about the changes in the VUCA World.  He stressed on the fact that most important asset is the data which people do not want to share and it is very important to gain trust which comes from working in a team continually. He stated that the young people today do not want to be judged but want solution to their problems. He concluded the session by stating that the world is volatile and it for us to decide how to cope up with changing environment.

 

Both the speakers concluded that in order to get succeed, HR personnel must understand their responsibility towards the business, objectives and mission of the organization. The session was very interactive and students took deep interest in exchanging ideas with the speakers.

 

Session 1: Socio-Emotional Communication Strategies for Virtual Team Effectiveness

 

s2

After the inaugural session, the conference proceeded to its first technical session where Professor Arun Gupta, moderator of the session, introduced the panel members and gave a brief idea about the objectives of the session.

The first panel member of this session was Ms. Runa Maitra, Founder & Director of People Talent Management. She started the discussion by sharing her own experience in working in different environment. She also said embracing technology like social media would increase networking and employee engagement.  A leader needs to keep people motivated, happy and actually connected with the organization which leads to increase in productivity. She laid emphasis on ability to understand and manage emotions in a virtual team for conflict management.

Manuel Pardhe, HR Head, Thompson Digital was the next panel member to talk. He shared his experience of working in different sectors seeing a lot of volatility. He also focused on the power of technology which makes it possible for the organizations to increase their connectivity which in turn leads to effective communication among the team members of different time zone. He also shared his experience of working in gulf country and in America. Lastly he concluded by saying if the organizations do not adapt to the technology they won’t survive.

Ms. Anjali Singh, Zonal Manager, Mahindra and Mahindra was the last panel member of the first session.  She continued the session mentioning the VUCA World gives a lot of challenges but gives opportunities as well. By giving example of UBER, she tried to explain how a disruptive innovation also has a social aspect that is of giving a lot of employment or empowerment. She also discussed on team dynamism and role of emotional intelligence to resolve conflict in a virtual team.

Session 2 – Virtual Team Dynamics and Role of Leadership for Virtual Team Effectiveness

s1

The second session moderated by Professor Rajkishan Nair introducing the panel members to the audience.

The first speaker of the session was Mr. Murlee Dhar Shyamm, Vice President HR, RJ Corp Healthcare. Mr. Murlee initiated the session by quoting “An organization must focus on seeking for best employees, should be customer centric and should respect individual effort”. He also spoke about sustainable business practices by exploring new ideas that necessarily entailed risk. Further he reflected upon challenges that have been happening across the last decade with some influence areas key areas like globalization, digitalization and innovation.

He further contributed to the session by stating that the strongest point of virtual team is its ability to collaborate across the world. He gave the example of a company named “Thread less” that uses crowd intelligence. He concluded the session by stating that a leader has a huge responsibility to make organizations future ready.

Mr. Anup Mittal, AGM, Retail Sales, Vodafone Ltd. was the second speaker of the session. He continued the session by sharing his own experience of working in a startup that delivered services like bouquet to the customers from there he explained the concept of “Virtual” He elucidated that virtual is something that is connected intangibly. He further continued the session by saying that leadership is a born quality. And some leadership qualities are to be developed as per the situation’s demands.  It is just the vision, mission, cohesiveness, and what the leader brings on the table.

Mr. Govind Kohli, AGM, HR, Jiva Ayurveda was the last speaker on this panel. He spoke about the role of leadership and mentioned that great leaders by themselves were not good enough for building world class companies; it required the concerted effort of talented employees who were aligned to a company’s mission and vision to transform a dream into a reality. As a leader, one has to ensure that he has to create social aspect of everything.

Valedictory Address & Vote of Thanks

Mr. Murlee Dhar Shyamm gave the Valedictory Address focusing on urge to be wiser, thoughtful, and doing a lot more research, to have clear vision for team effectiveness. He stated that the change in the VUCA World will make every organization to change the way it operates.

The students showed interest and responded with great enthusiasm while putting up questions to the panelists and guests speakers. The conference concluded with Vote of Thanks proposed by the conference chair Dr.Satpathy. She acknowledged all those who had contributed in making the conference a success.

 

 

Workforce Diversity and Organizational Culture

Faculty, , ,

Organizational Culture, as conceptualized by Schein, can be understood as a layered phenomenon with the surface level artefacts visible in an organization as the topmost layer, the espoused values that fuel those just underneath and most importantly the assumptions and beliefs that underlie the above two layers. Culture is the invisible yet powerful force that drives morale, engagement and performance. Needless to say that the culture of an organization comes from its people and is both top-down as well as bottom-up, resulting from the numerous interactions (or the lack thereof) among its people. The diversity in the workforce is therefore, a strong influence sculpting the culture of organizations of today.

schein

Experts are of the opinion that in the glocal world that we live in today, diversity is the key to maximize organizational effectiveness. But what does this diversity really refer to? Is it the variety or multiplicity of demographic features that characterize a company’s workforce, in terms of race, gender, culture, religion, national origin, handicap, sexual orientation and age? Or are we referring to the more intrinsic differences that exist between individuals that surpass the group level differences? Whatever the definition may be, it is true that in any workplace today, we are surrounded by people who often think and work differently. It begins with how people perceive themselves and others and the variations therein, which directly influence people’s interactions and communication within the organization.

The challenge for organizations really is to manage this workforce diversity to benefit from it, to make it advantageous. It is ‘Easier said than done!’

What exactly are these advantages that researches keep talking about?

There are several benefits for an organization that embraces diversity in its culture:

  • Increased adaptability – Organizations employing a diverse workforce can supply a greater variety of solutions to problems that arise on a day-to-day basis. Employees from diverse backgrounds bring individual talents and experiences in suggesting ideas that are flexible in adapting to fluctuating markets and customer demands.
  • Broader service range – A diverse collection of skills and experiences (e.g. languages, cultural understanding) allows a company to provide service to customers on a global basis. IBM is one organization that created several minority task forces focusing on groups such as women and Native Americans. In the ensuing years these task forces expanded IBM’s multicultural markets growing from $10 million to $300 million in revenue in just 3 years.
  • Greater Creativity – A diverse workforce that feels comfortable communicating varying points of view provides a larger pool of ideas and experiences. The organization can draw from that pool to meet business strategy needs and the needs of customers more effectively.

All of these benefits have a clear impact on the bottom-line of a company.

Challenges of Diversity in the workplace

While the benefits of diversity are evident, this path is not devoid of challenges for the organization.

  • Unconscious bias is one of the most significant barriers for an organization on the path to embracing diversity. Simply because it is unconscious makes it all the more challenging to overcome. While each individual comes with their own set of unconscious biases, there are some that are common such as those stemming from stereotypes related to women and people from certain cultural and ethnic backgrounds.
  • Communication is another important challenge in organizations often resulting from basic differences in the style of communication as well as different meanings associated with non-verbal signals. For example, high-context cultures such as India, Japan and China, rely on implicit communication whereas low context cultures such as USA rely largely on explicit verbal communication. Such differences, when not understood, often lead to miscommunication among teams/employees.
  • Resistance to change – Any change is often met with resistance, it is a human tendency. There are employees who refuse to accept the fact that the social and cultural makeup of their workplace is changing. The “we’ve always done it this way” mentality sometimes silences new ideas and inhibits progress.
  • Implementation of diversity in the workplace policies –This can be an overriding challenge to all diversity advocates. Policy level change marks the beginning which then needs to be implemented across the organization. It is important to recognize and accommodate at the policy level cultural and religious holidays, differing modes of dressing, dietary restrictions and needs of individuals with disabilities.

All the above challenges, while real, can be overcome by building awareness and skills through sensitization training programmes and coaching sessions across all levels. Most importantly the top management, the leaders need to be good role models, displaying their support for diversity, respecting people from all backgrounds equally.

Mentoring at IILM

Career Development (Placement), , ,

The word ‘mentor’ may be described in simple terms as a person who gives a younger or less experienced person help and advice over a period of time, especially at work or school. In this context, ‘mentor’ is understood as a person who provides assistance and guidance to his or her ‘mentee’- the person who is being guided, and the objective of ‘mentoring’ is to bring out and nurture the best possible abilities in the ‘mentee’.

It may sound clichéd, but the fact is that in current times we do not want our leaders to be a knowledge bank. Instead, we want them to manifest themselves as dynamic individuals who are capable of handling various situations and people at work. IILM has the tradition of implementing a robust mentoring program for each and every student in order to ensure that its graduate and post-graduate students are prepared to handle the world outside.

The various aspects of the mentoring program at IILM are:

  • Academic and Career Counselling: When a student is selected to pursue studies at IILM, s/he is also allocated a dedicated mentor, considering the fact that young and fresh undergraduates and graduates have numerous expectations related to their academics, career and future plans. The mentor remains in regular contact with the student providing guidance and insights to the mentee. The focus is on academic and professional planning, in addition to personal development.
  • Direction and Guidance: At IILM, the objective is to not only to focus on the core job of guaranteeing academic learning to the students, but also ensuring that within the framework of the mentoring program, mentees share their aspirations and areas of interest with their mentor. The mentor then extends to them all the necessary direction and guidance, which may shape them as effective and successful leaders of tomorrow.
  • Identification of Strengths and Opportunities: The mentor helps the mentee identify his or her strengths and areas of opportunities and development in order to create a nurturing environment. This allows the mentee to achieve his or her academic and career goals through regular interactions between the two.

To quote a few examples:

  • There are students who need help in expanding their family business. In such a situation, the mentor usually connects them to the faculty who has specialized in family business studies or the Entrepreneurship Development Cell (EDC) that caters to nurturing young entrepreneurs.
  • Similarly, there are students who wish to work with leading organizations. With the rich pool of faculty at IILM, who come from industry as well academic backgrounds, the mentor helps provide an understanding of the industry operations to the mentee. The Career Development Cell (CDC) works closely with the mentor to make the students employable.

Thus, the process functions on the basis of regular interactions, expressing and meeting expectations and sharing experiences and follow ups with the mentees. The outcome of mentoring program is, hence, transformation of undergraduates into responsible business professionals.

Mentoring Plan for Staff and Faculty Members

It is noteworthy to mention that the mentoring program is structured not only for the students but also for the all the faculty and staff members. When a new joinee becomes a part of the IILM family, the senior faculty and staff members, including the Deans and the Directors mentor them to understand the modus operandi of the system. During this process, which may be defined as the learning curve, the new joinees understand the dynamics of the system, the process flow of their job profile and are provided continuous inputs and feedback to handle their roles independently.

In a nutshell, the mentoring program is an integral part of the IILM system, which enables each and every individual to define their goals and expectations, draft a plan and then work on the accomplishment of those goals.

Comprehensive Report of HR Conference 2016, IILM Gurgaon Campus:

Conferences

Empowering HR through Technology: A way forward

IILM Gurgaon organized a National Conference on ‘Empowering HR  through Technology: The Way Forward’ on September 30, 2016.Through this conference it aimed to  create a platform where HR professionals could share their  insights on the sweep of technology in the area of Human Resource. The world of human resources has experienced something of a revolution over the last decade. Much of that change is due to advances in technology and the opportunities found when hiring managers began embracing the Internet as a new tool in their toolbox rather than just an interesting way to pass the time. The World Wide Web has forever changed the way we do almost everything — and change is good. Change is the only constant force in this dynamic and competitive world. The conference was a confluence of corporate speakers and academia experts to merge the practical and the theoretical spectrum together. This will aid in better understanding of the changing HR arena and how converging HR and technology can create value. The sessions were  power packed with the theme to bring forth the clarity of concepts and actionable steps for the audience.

The  Objective of the conference were 1.To advance the field of HR by incorporating latest technology leading to increase in productivity. 2. Removing human biases through technology in HR practices, increasing value for the organization. 3.Recruiting employees, engaging employees, acquiring talent, retaining employees, optimizing employee performance through technology  4.To understand the ethical value of social media in HR practices.

There were 3 sessions. The conference began with lighting of the lamp  by our Chief  Guest Mr. Kamal Singh Director General National HRD Network and Mr. Kaustav Mitra Director Xecute  HR solution and Dr. Sujata Shahi Senior Director IILM Gurgaon campus. Dr. Sujata welcomed the guests and all the participants of the conference. The theme of the conference was introduced by Dr.Pinky Goswami.  In her speech, she stressed on the importance of transition in HR keeping up to the requirements of the Millennial, “A generation born to the digital world”.

Dr. Kaustav Mitra  gave the keynote address and talked in detail about the changing nature of HR in all its functions. The plenary session members were, Ms. Vishwapriya Associate Director HR PWC,Mr. Manish Anand– (Vice President IT  Max Life Insurance) and  Mr. Raj Nehru (Director HR Schneider Electricals). All the plenary speakers gave very interesting presentations about the new age HR and the way it has got about the multi faceted changes impacting an entire organization. It was  well appreciated by the participants. The moderator of the plenary session Dr. P.Goswami summed up the session along with a Q&A round.

Session 1: Driving Employee engagement with modern HR Technology

The global forces are reshaping the workplace, the workforce, and work itself. After years of struggling to drive employee engagement and retention, improve leadership, and build a meaningful culture, executives see a need to reinvent  a new design of the organization. Four powerful forces—from demographic upheavals and the rise of digital technology to rapid business-model innovation, and socially driven evolution in the employer-employee relationship—are driving change for both HR functions and the organizations they serve, creating talent challenges and potential solutions radically different from those faced by previous generations of leaders. The speakers for the session was Mr. Debabrata Bannerjee (VP Enterprise Business Application Apollo International) Mr. Kishore Das (HR Advisor and Consultant DCM ) Ms. Pooja Goswami  (  Head- People Function HR EKO India Financial Services ) Ms. Prerna  Kapoor(Sr. Manager Compensation & Benefit – Pepsico) Ms. Sukanya Devi (Student PGDM Term 4). The moderator for the session

Session 2:  Managing People Performance through HR Analytics

The working environment is increasingly becoming very complex and ambiguous. This has put human resources into a challenging situation in terms of making definite   decisions in the workplace. HR has to look constantly at new tools for making risk free decisions, and this is where the help of HR analytics comes in. HR analytics is the use of statistical methods like factor analysis, correlation and regression and making use of different sources and variables to arrive at meaningful insights. It helps HR understand the dynamics in the workforce.  The speakers for the session were Ms. Neeti Kumar (Manager HR  Xceedance) Ms. Manu Gupta (Founder of Innokreat which provides customised Employee Wellness and Analytics Software Solutions to HR) Ms. Shyana Mehta(Student of PGDM Term 4) and Mr. Asif Mir Shabbir (Student of PGDM Term 1). The session moderator Prof. Richa Bhargava finally opened the session for the participants to put up questions to the speakers.

 

Session 3: Recruiting Talent through social media and ethics of social media: A look into the challenges and downside

Every month million people use Twitter, Instagram and Facebook.  Such social platforms, with the largest audiences available. Recruiters are increasingly turning to the social web to market their companies to job seekers and to screen prospective employees. Is the use of social media an ethical form of screening for recruiters to use, or are they taking candidate research too far and invading their privacy? Recruiters may argue that social media is a public platform, unless the candidate makes it otherwise, and that it’s their own choice to share the content that is available to anyone who searches for it. This session  discussed the challenges  and  downside. The speakers for the session was Mr. Mayank Arora(Cargill Hr Head),Mrs. Malbika Bose(Black Barry- HR head) Mrs. Arti Kohli  Ashwani(Bausch&Lombs HR head)Ms. Sonam Yadav (Student of PGDM  Term 4). Prof.Ruchi Shah the moderator of the session summed up the session discussion on the positive and negative influences of social media in the HR sector.

The conference concluded with a vote of thanks by Prof. Shivani Ahuja.

Love the Land, Live the Life.. Normandie, France

Global Study, , ,

A global exchange program was organized for the PG-1 students of IILM, all the campuses. Students were given choices to choose one of their dream global universities on the basis of modules offered by the university. The choices were France, Spain, Canada, Germany and Finland. The entire program was sponsored by IILM and tied up university except the students extra expenditures like food, travelling etc. On 4th of September 2016, 45 students collectively from LR, Gurgaon and Greater Noida campus boarded Emirates for Ecole de Management de Normandie, France with Dr. Gurpreet Singh Bhatia (Associate Professor, Economics, LR) as the team lead for the students for the entire exchange program.  The students were provided with the resident at Apart’ City, Caen.

The exchange program started on 6th with the welcome speech of Alain Ouvrieu, director of EM, Normandie. During the orientation the students were introduced to the different modules they have to take for next 26 days. The modules were: Supply Chain Management by Roger Soulieux, Doing business in France by Marie-Pierre Seznec, Business startup by Max Mikale Bjorling, and Business Project by Alain De Lamaziere. The students were divided in the group of 5-6 and were asked to present a business plan on lingerie’s and swimsuit market in different country like Benelux, Great Britain, Germany etc. The whole program was coordinated by Severine Groult(International Development Manager, Short program) and Brigitte Laine(International Development Assistant). In addition with this the students were also explained about the rules and regulations to be followed in college and hotel. Each and every student was provided on the same day with a unique identity card and a tram/bus card to travel nearby location for free of cost. The cost for the meal for Indian students was reduced so that they have to don’t pay much in terms of euros in university canteen.

img_1320

The program was planned in such a way that there were class room lectures and related excursion. For example after attending SCM classes there was an excursion planned for student to Le Havre Port for the better understanding and practical knowledge. A surprise team building activity was also organized for all in an amusement park called Festyland, where students were told to capture pictures and videos and finally produce a digital file which was discussed in terms of business in front of Mr. lair, Director of Festyland. In addition to this students were taken to Caramel D’isigny where they tasted the caramel products and were showed the entire process how caramel chocolates are made. Students were allowed to buy the chocolates and candies from factories own shop at cheaper rates.  Here the idea was to explain the businesses related to caramel i.e. how the raw materials like milk, sugar etc. are arranged from different parts of the country. Another excursion was also made to cider factory i.e. Billy’s farm where the students there shown the process of making cider and how apples can help in making business. Students were allowed to taste the different kinds of cider and buy them from the firm.

Not only the business excursion but also the fun trip was planned in between the studies. Trip to Etretat was planned to show and experience the beauty of nature’s creation in form of elephant trunk cliff. Since, Normandie was one of major victim during World War 2, so to explain the history and the past, another trip was planned to Omaha beach, US Crematory and to the Memorial at Normandie. The students were explained about the hard situation and grievances faced by the people during the Hitler rein and how the World War 2 changed the face of the world specially France. To make memories, students were taken to Le Mount Saint Michel which is one of Europe’s most unforgettable sights. Set in the mesmerizing bay where Normandie and Brittany merge, the island grabs the eye from great distance. The entire story of how a mout turned into a great place of Christian pilgrimage was explained by the help of audio guide to everyone.

A unforgettable trip was also planned for the students dream city i.e. to Paris. Each studentwas given a blue t-shirt with the brand tag of EM Normandie on it for the trip. Students were shown the 360° view of Paris from Montparnasse tower. In addition to this student were also shown some of the major brand and historical monuments like Arc De Triomphe and finally dropped to Eiffel tower where photoshoot was done and students were allowed to enjoy on their own. Finally a relaxing trip on cruise down the river Seine was organized which proved out a great way to see many of Paris’ famous landmarks and sights.

Over the weekends everyone was allowed to go for the places they wish. Majorly students targeted Belgium, Amsterdam and Switzerland. The expense for this trip was on their own. But before leaving from the hotel they were asked to give a written information of the places they are leaving to, the number of students going and there contact numbers, there hotel and travelling tickets details. This information was circulated to IILM as well as EM Normandie so as to keep a tract to the student’s safety and security.

Each module has given a timeline of 4-5 classes to complete the course. At the end the students were asked to present a power point presentation in three modules and a mock multiple choice question insupply chain management module. The students were rated on scale of 20 in business project and top 3 business plan i.e. groups were appreciated for their work. In business startup module the students were asked to present their idea individually on how tourism in Normandie can attract Indian tourist. Manvendra and Pravin, a student form LR and Gurgaon campus respectively got 20 on 20 for their idea. Similarly in module doing business in France a presentation in group was done on how the business in Normandie is going on in different sectors.

The 26 days for the student ended with lot of fun and learning at EM Normandie. Student who excel in their work were appreciated from university side and a dinner at was organized for all in an Indian restaurant by Severine. Finally on 30th morning the students were dropped to the Paris airport to back to India.

  • Article by Er. Manvendra Singh, (PG20161419)

Are Dividend Announcements Informative Corporate Events ?

General Blog,

The value of a firm keeps changing due to changes in economic activities. In academic literature, these economic activities are precisely termed as ‘corporate event’. Corporate actions/events and changes in corporate payout policies are important considerations for the finance managers while taking financial decisions. In particular, corporate actions such as cash dividend announcements have information content and are used by managers to signal the future prospects of the firm. They reduce information asymmetry between the mangers and shareholders through the private information reflected in the stock prices. The significance of dividend payment/announcement is expressed by Ezra Solomon in these words: In an uncertain world in which verbal statements can be ignored or misinterpreted, dividend action does provide a clear-cut means of ‘making a statement’ that speaks louder than a thousand words. The same has been expressed by Gordon (1963) as payment of dividends (in the hand) is worth more than retained earnings (in the bush), due to the risk of sub-optimal investment decisions by managers.

Shareholders’ wealth is represented in the market price of the company’s common stock, which, in turn, is the function of the company’s investment, financing and the dividend decisions. Dividend decisions involve the periodic determination of the proportion of a firm’s total distributable earnings that is payable to its ordinary shareholders. They are considered as the fundamental building blocks of the corporate payout policy. Historically, cash dividends have been considered as the most important form of the payout policy. They are one of the principal mechanisms by which firms distribute cash to their shareholders. These decisions typically carry informational content concerning the value of the firm and, by and large, impact the return, risk and liquidity of the shares.
The market reaction of dividends (by and large) in India supports the Lintner’s (1956) model to be the best fit explanation for dividend behavior. Announcements of corporate actions and their impact on share prices are likely to affect the value of the firm and returns to the investors. It implies that dividends serve as a ‘signaling’ mechanism implying the firm’s future promise to disburse free cash flow and positive future earnings prospects. However, apart from the instant market reaction (represented through returns), it is desirable to understand the fundamental and the psychological factors behind these decisions/announcements. The Indian stock market has huge information asymmetry existing between the managers and the shareholders. Dividend decision is amongst the major financial decisions taken by the firm, the top level finance personnel (Directors/ Vice President/Company Secretary/ Managers) are directly involved in taking these decisions. Hence, it also becomes desirable to gauge/understand the viewpoint of the Indian finance managers behind the announcement of cash dividends. In other words, what are the driving forces and the motivations/perceptions of the management announcing these decisions?.
The Indian managers companies rely both on the past dividend and current earnings in deciding the current period’s payment of dividend. These companies also place more emphasis on dividend stability, as evinced by the fact that the dividend practices of Indian companies have been found to be unaffected by the financial crisis. At the same time, dividend announcing companies are considered to have a strong outlook regarding their future earnings prospects as perceived by the investors.In India, cash dividends also serve the purpose to attract more investors. Investors have strong preference for cash dividends, thereby increasing the market value of the firm. Cash dividend provides a positive impact on the firm’s future prospects and facilitates in maintaining a stable stock price. Dividends are a definitive statement about the ability of management to achieve profitable growth on a sustainable basis among Indian investors as supported with Black’s (1986) suggestion; “I think we must assume that investors care about dividends directly”.

The reaction of the investors subsequent to these corporate announcements helps the corporates, practitioners, market analysts, institutional investors and financial system in evaluating financial decisions like payout policy, investment strategies, construction of optimum portfolios and the availability of information to the investors. They would also provide an insight to the academicians and researchers into how Indian finance managers use the assumptions, models and decision rules generated in teaching/making financial decisions. Further, these decisions are also meant to be considered by various regulatory authorities to improve the informational efficiency of the Indian stock market. Since, these corporate actions have signaling power to indicate the future prospects of the firm, it becomes vital for the managers to identify the growth and investment opportunities prior to taking such decisions. At last, the instant reaction emanating, might help understand investors and the firms to examine the wealth and enhance the value of the firm.

References
•Black, F. (1986). Noise. The Journal of Finance, 41(3), 528-543.
•Gordon, M. J. (1963). Optimal investment and financing policy. The Journal of Finance, 18(2), 264-272.
•Lintner, J. (1956). Distribution of incomes of corporations among dividends, retained earnings, and taxes. The American Economic Review, 46(2), 97-113.

BREXIT

Faculty

On June 23, 2016, in one of the most epochal referendums in European history if not modern history, Britain the 5th largest economy in the world voted to quit the European Union (EU) by a margin of around 1.3 million votes, defying predictions from all economic, political & academic quarters. The impact of Britain’s Exit from the EU is already being felt by financial markets across the EU and the globe.

Brexit- A snapshot:
‘Brexit’ is a combination of the words “ British” and “Exit” and referred ( when it was coined- by the Economist magazine in June 2012- “ A Brixit Looms”- http://www.economist.com/blogs/bagehot/2012/06/britain-and-eu-0 ) to the departure of Britain from the EU. The origins of the EU dates back to 1957 as a six nation economic and political alliance. Britain joined the alliance only in 1973 but has faced a lot of opposition and skepticism against its continuation within the EU ever since. In 1975, in the first referendum on the same issue (whether Britain should continue with EU), 67% of those who voted preferred to ‘Remain’. Meanwhile, EU has today grown into a “gigantic transnational entity of 28 countries, with most countries moving into a common currency ‘Euro’. However, Britain still uses pound as its currency and does not participate in the Schengen border-free zone, which allows passport- free travel within the EU.
Why Brexit?
As part of his 2015 re-election campaign, British Prime Minister David Cameron had promised to hold a referendum on Brexit. Many from the ruling Conservative Party and the U.K. Independence Party believe that the EU infringes on British sovereignty and its national interests on issues such as trade, immigration, financial and labor regulation, social spending and a host of related issues .
•According to Brexit supporters, increased migration from other European countries into UK using the ‘freedom of movement clause’ has put a heavy burden on natural resources and increased welfare expenditure. The ‘Remain’ supporters argue to the contrary saying that the addition to the national economy from the migrants is more than they take out.

•45% of UK trade is with the EU, therefore, the ‘Remain’ side says, access to the single European market, free of tariffs and border controls, is critical for the U.K. However, the Brexit supporters are confident that since the the EU needs British markets, individual trade deals with European countries can be easily negotiated.

•While Brexit supporters claim that there will be a jobs boom without the restrictions that EU regulations impose, the opposers argue that as three million jobs in the UK are tied to the EU there could be a jobs crisis if the U.K. leaves the EU.

•One side is of the opinion that cooperating with the EU will make the UK safer, while the other side believes that the security risk will in fact increase if the U.K. does not have control over its borders.

•Another argument in support of the Remain campaign was that leaving the EU will jeopardize the dominance of London, the Europe’s financial centre, as banks will move out. Whereas, the Brexiteers argue that London’s status is unassailable as it is already a global power base!

Possible Impact of Brexit on UK and EU:

A major impact could be on UK laws ( a 2010 study attributes 17% of UK laws to its EU membership), especially relating to fishing, agriculture, trade and environmental policies, criminal justice, data protection, immigration and broadcasting, and human rights . For example, in agriculture British farmers would be deprived of EU subsidies. “British farmers have to meet the EU standards of quality control to export to member countries. EU’s agriculture policy lays down the law on GM crops, animal husbandry and even how much of his field a farmer must leave fallow to get subsidies” . With Brexit, it remains to be seen how Britain negotiates with EU on these issues on a case- by- case basis. On the economy front, it has been pointed out that since prices in the EU are 20% higher than global market prices, exiting the EU will enable Britain to reduce prices by 8% . The political fallouts of Brexit are yet to take shape, the only major indication so far being the declaration of David Cameron that he will step down as the Prime Minister with effect from October this year.
UK is one of the largest contributors to the EU’s monetary resources spent on administration of the EU in member countries, aid activities outside the EU, grants for asylum, education and culture, on preserving and managing natural resources (this includes, agriculture, fishing, mining and so on), helping poorer countries in Europe and in grants to research in science and technology and in helping small businesses. The Brexit, it’s strongly believed, would rock the EU — already shaken by differences over migration and the future of the eurozone — by ripping away its second-largest economy, one of its top two military powers and by far its richest financial centre. Moreover, as Dr. Jonathan Portes of the National Institute of Economic and Social Research points out, “ If Brexit wins we can account on a lot more referendums” !!
Possible Impact on India
India’s concerns over Brexit are multi-dimensional. Listed below are some of them.
•The welfare of a nearly 3 million strong diaspora of Indian-origin UK citizens.

•The interests of a large moving population of Indians who come to Britain ever year as tourists, business people, professionals, students, spouses, parents and relatives.

•Many Indian companies (around 800 companies- more than the combined number in Europe) are listed on the London Stock Exchange and many have European headquarters in London- Brexit could reduce the advantage.
•“Brexit can affect India’s flagship IT sector given that the UK accounts for 17% or one-sixth of the sector’s global exports that topped $100 billion (approximately Rs.6.70 lakh crore). For one, Brexit will increase overhead costs, setting up new headquarters, perhaps in both Europe and Britain” .

It may be noted that there is a tone of optimism in Indian circles as evidenced by statements by industry heads, policy practitioners including the RBI Governor and the Union Finance Minister.
The rise in uncertainty brings both risks and opportunities for India. “Brexit is neither good nor bad for India. It’s mostly how the country responds to the new situation”

Bonds and Masala Bonds

Faculty

Bonds are instruments of debt – typically used by corporates to raise money from investors. Masala bonds, on the other hand, have to be explained in the context of Indian corporates raising money from overseas investors. Before masala bonds, corporates have had to rely on avenues such as external commercial borrowings or ECBs. The challenge with the likes of ECBs is the entity raising money is faced with a currency risk – they have to be raised and repaid in dollar terms. A year is a long time in forex markets – currencies fluctuate sharply. So, imagine the risk a bond issuing entity, especially one with largely rupee earnings, if issue and repayment are years apart.

They are rupee-denominated bonds issued to overseas buyers. This is how it is different from other instruments. With a masala bond, a corporate could issue Rs. 10 billion worth of bonds with the promise of paying back Rs. 11 billion in one year. But as the Indian rupee has limited convertibility, the investors will lend the dollar equivalent of the Rs. 10 billion. After one year, the Indian corporate needs to pay back the dollar equivalent of Rs. 11 billion. The currency risk is with the investor.
The International Finance Corporation (IFC), the investment arm of the World Bank, issued a Rs. 1,000 crore bond in November last year. The purpose of the issue was to fund infrastructure projects in India.

IFC named them ‘masala’ bonds to reflect the Indian angle to it. This kind of naming has been done before. There was even much speculation about what the rupee-denominated bonds would be called before ‘masala’ was confirmed. Samosa, Ganga, and Peacock were apparently some of the names doing the rounds.
Why should investors look at masala bonds?
The Finance Ministry has cut the withholding tax (a tax deducted at source on residents outside the country) on interest income of such bonds to 5 per cent from 20 per cent, making it attractive for investors. Also, capital gains from rupee appreciation are exempted from tax.
Globally, there is ample liquidity thanks to lower interest rates in developed markets, but there are very few investment options due to weak economic conditions globally. India is that rare fast-growing large economy, and masala bonds is one way for investors to take advantage of this.
What do masala bonds mean to the issuer?
An important consideration for issuers is the access to cheaper funding than what’s available in the domestic markets, according to ratings firm S&P. For corporates, who would be the main issuers, masala bonds will be one other key source of funding apart from banks and local debt markets. Another ratings firm India Ratings and Research says such bonds would lower the cost of capital over a period of time – the cost remains one of the highest in Asia. This also makes sense given that Indian banks are reluctant to lend to sectors facing weak demand and heavy debt.

Benefits of Masala Bonds

It helps the Indian companies to diversify their bond portfolio. For example,earlier companies used to issue only corporate bonds. Masala bonds is an addition to their bond portfolio.
It helps the Indian companies to cut down cost. If the company issues any bond in India, it carries an interest rate of 7.5%-9.00% whereas; Masala Bonds outside India is issued below 7.00% interest rate.
It helps the Indian companies to tap a large number of investors as this bond is issued in the offshore market.
Masala bonds will help in building up foreign investors’ confidence in Indian economy and currency which will strengthen the foreign investments in the country.
An offshore investor earns better returns by investing in Masala bonds rather than byinvesting in his own country.For example, if he had invested in the bond offered in his own country the US, the bond yield is hardly 2% whereas if he invests in rupee denominated Masala Bond the yield ranges from 5.00% to 7.00%.
An investor will benefit from his investment in masala bondsif the rupee appreciates at the time of maturity. For example,Price of a bond in Rupee terms is Rs. 1050, INR/USD rate on investment date is Rs. 70, Amount Invested in USDis $17.5, Redemption Amount in Rupee terms is Rs. 1800, INR/USD rate on Redemption date is Rs. 60, so Redemption amount in USD would be $30. The investor pays $17.5 and receives $30, i.e., the investor is earning a profit of $12.5 on his investment.

Risk
As it is rupee denominated bond the risk will be borne by the investor. The issuer does not carry any currency risk by issuing this bond in the foreign market.
For example:
Price of a bond in Rupee terms: 1050
INR/USD rate on investment date: 60
Amount Invested in USD ($): 17.5
Redemption Amount in Rupee terms: 1110
INR/USD rate on Redemption date: 70
Redemption amount in USD ($): 15.85
The investor pays $17.5 and receives $15.85. The loss of $1.65 on his investment due to fluctuation in exchange rate has to be borne by the investor.

Conclusion
Masala bond will help the Indian corporates to reduce its interest cost burden on the debt amount on its balance sheet. The more of foreign funds can be used for infrastructural development in the country. Overall, the development of a Masala bond market would be positive for Indian firms, opening up potentially significant new sources of funding over External Commercial Borro wings (ECB).