No Election Day Rally for IPOs This Time Around

The New York Times, 3 November 2008

Election year trends show that the stock market generally makes gains in the days leading up to the U.S. presidential election; its direction after the election depends on the outcome. Wall Street tends to favor situations where the president and congress are controlled by opposing parties, according to the Journal. This year is different; there hasn't been a single IPO since early August, only added uncertainty.

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AIG's Computer Risk Models Not Linked to Real-World Realities—How We've Seen Leading Companies Manage Risk

The Wall Street Journal, 3 November 2008

This article provides background on how AIG’s reliance on computer-based risk models was linked to the downfall of the finance titan. A key learning from AIG’s collapse is that they knew these complex models did not adequately identify and measure all risks associated with the credit-default swaps they were selling.

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Our view: Several months ago, our research team asked three questions:

1. Which companies are the best at managing risk?
2. Which companies performed the best in the last downturn?
3. Which companies have been able to best take advantage of changing economic conditions to get ahead?

To review our findings of what makes an elite risk manager, click here.

Suppliers Putting the Pressure on Retailers

Reuters, 3 November 2008

Circuit City Stores Inc plans to close 155 stores, citing restrictive payment terms from suppliers who have tightened agreements and in some cases now require up-front payment for inventory before they will ship goods.

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Our view: The balance of power between retailers and manufacturers shifts with changes in market conditions as buyers and suppliers alike look to protect themselves against risk. Indeed, buyers’ desire for suppliers to “own” inventory until use or resale is on the rise, but credit insurers who bridge the gap between shipping and payment for suppliers are withdrawing coverage. We suggest you work with your procurement organization to assess your supply base for criticality and solvency. If your organization is a member of the Procurement Strategy Council, see how leading companies take a segmented approach to supplier management in a tight credit market, click here.

Whole Foods Threatened by Slump in Upscale Spending

The Wall Street Journal, 3 November 2008

The upscale grocery chain is expected to trim earnings forecasts for the current fiscal year as consumers switch to buying store brands and discounted groceries.

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Related News: Other luxury retailers such as Chanel are also acknowledging uncertainty in the current climate.

“Heard in the Suite”—Joint Ventures Are Looking More Attractive

This feature highlights member quotes that represent emerging trends, challenges to conventional wisdom, or underreported news.

Joint ventures (JVs) and alliances are beginning to appeal to companies that have traditionally opted to “just buy it” or “make it themselves.” As a result, JVs still prove difficult for many companies to manage because organizational silos complicate working across the matrix. One executive admitted, “Alliances are going to be critical for our new business development, but we’ve never done them before. We are just not very good with partnerships unless we are 100% in control.”

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Our view: Many joint ventures do not achieve their potential and failure rates are high. Use a toolkit to prepare for the joint venture process and due diligence requirements.

Listen to the new Heard in the Suite podcast. In this episode, we discuss CFO concern over insurance coverage and pricing, and identify key questions executives should ask themselves to ensure they keep risk management on the radar.

Daily Capital Markets Review: Despite Manufacturing Reports, Markets Quiet on Eve of Election

Corporate Executive Board, 3 November 2008

This summary includes news items regarding global liquidity, the TED spread, commercial paper and T-bill rates, currencies and commodities, and corporate debt spreads and new issuances. If you would like to receive the Review after markets close (instead of the next morning), please click here.

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