Daily Archives: December 21, 2010

Why Haven’t You Put a Knowledge Retention Policy in Place Yet?

While reading a recent article in Corporate Executive on “solving the problem of the aging workforce”, I was shocked at a statistic they quoted from a 2008 study conducted by the Institute for Corporate Productivity (i4CP) that noted that 30% of companies admitted they retained knowledge either poorly or not at all and 78% of companies admitted that they did not have anyone responsible for organizational knowledge retention. In other words, 4 out of 5 companies do not have an individual responsible for insuring knowledge in their company does not get lost!

Without anyone responsible for insuring knowledge retention, a knowledge retention policy will not be created and knowledge will not be captured. As a result, as your aging workforce retires, key knowledge will retire with them. With between 29% and 36% of your workforce eligible for retirement within the next 9 years, that’s 1/3rd of your corporate knowledge at risk of disappearing. Given the amount of knowledge that’s already been lost in the outsourcing craze, where many companies just handed functions over to outsource providers in their entirety — without any thought as to how key knowledge would be retained in case the tasks needed to be reassigned, brought-back in house, or managed internally — can you really afford to lose 1/3rd of your corporate knowledge? I doubt it.

It’s time to put a knowledge retention policy in place … before it’s too late!

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If Basel II Crippled Trade Finance, Will Basel III Stifle It?

Last year we discussed how Basel II is crippling trade finance, but it looks like the worst might be yet to come. According to some reviewers, Basel III, the forthcoming update to the Basel Accords, might stifle it.

As per this recent article in the Financial Times, the top 35 banks will face a $100 Billion Basel III shortfall in equity capital after the new regulations are imposed, with 90% of the shortfall concentrated in the biggest six banks. Barclays Capital estimates that the banks will need to hold top-quality capital equal to 8% of their total assets.

Not only will the Basel III reforms force banks to increase the risk adjustment for big swathes of their business, but it will gradually tighten the definition of what counts as tier one capital, putting many of the US banks who are already on shaky ground on top of a fault line. This could force banks to curb lending to the real economy or raise borrowing costs.

Plus, as described in this post over on the Reuters blogs, when credit in an economy is growing faster than the economy itself, a countercyclical capital buffer kicks in, which essentially says that banks need to have more capital in good times. So, instead of the 7% common equity, 8.5% Tier 1 capital, and 10.5% Tier 2 capital, the banks will need 9.5% common equity, 11% Tier 1 capital, and 13% Tier 2 capital.

And that’s just the beginning. In 2015, the liquidity coverage ratio gets introduced and then the net stable funding ratio arrives in 2018. And the committee is reviewing the need for additional capital, liquidity, or other supervisory measures to reduce the externalities created by systemically important institutions.

While stronger measures are obviously needed, as the economy cannot afford another Bear Stearns, if it’s too much, too fast, will the banks be able to handle it?

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