Greg Hallman

How are MBA programs preparing finance-focused students for working in a crisis and its aftermath? We asked Greg F. Hallman, finance lecturer at the McCombs School of Business at the University of Texas at Austin.

What are some ways the current financial downturn has affected the content and teaching methodology in finance at McCombs?

In my view, the financial downturn has actually made teaching finance a little easier.  At its core, finance is the study of risk and return. The past couple of years in the market have given todays students a perfect illustration of risk and the downside to investing.  Now when we teach them that expected return is a payment for risk, I believe they can better understand the risk/return relationship.

The market’s performance has also made very clear the fact that no matter how good our models are we cannot see the future. This has, of course, always been true, but the troubles suffered by the big and generally smart banks have shown that even with a decent model of the market’s behavior unlikely events can and do occur to wreck the best laid plans.

How are the students you have contact with responding to the rapid changes in the industry?  For these students, how do you think the MBA has made them more prepared and adaptable to a new industry?

The graduating students I have talked to are less picky about jobs, and in my view seem to be more open to working at smaller shops than in the past. They realize that the market will one day turn around and the best thing they can do now is try and get something good on their resume so that if they want to move when the market gets better they have some good experience to sell along with their MBA. Given that this is a financial crisis, I believe that the training the students have received in our program will make them well suited to cleaning up the current mess and understanding where value might be found in the wreckage.

What – if any – new kinds of skills will be demanded of finance MBAs coming into the job market now and in the next few years?

As I said, I think that a lot of the finance work in the near term will be the work of cleaning up the excesses of the past few years. To that end, I think finance skills that help to identify truly valuable assets from assets that were valuable only when debt money was essentially free will be very useful.

For those employed cleaning up the mess, a knowledge of real estate and structured debt should be useful in untangling the billion in mortgage securities, that need to be valued and moved from the over-stressed banks to new owners.  A class in bankruptcy law might also prove useful, especially in the near term.

Photo Courtesy: McCombs School of Business

Markus Rudolf

The financial crisis has taken center stage in business school classrooms around the world. Rightfully so, says the finance chair at one of Germany’s leading business schools.

How is the financial crisis affecting the way you teach finance?

One positive thing about the things that are going on right now is that we can learn a lot from them. You can empirically analyze how markets react in extreme scenarios. This is something you find in our lectures. Our lectures are focused on recent developments anyway, but this year we are teaching a lot about the financial crisis.

Of course, we also have conferences where we invite academics, as well as professionals. One example was the Campus for Finance New Year Conference recently where we had a lot of CFOs and CEOs here, one Nobel laureate, and a lot of professors. We were talking for three entire days about the financial crisis – what the reasons for it are and what can be improved in the future in order to avoid these developments that we have right now.

Is anything changing in the students?

What we do see is that the behavior of employment changes. The most popular employers have been investment banks and consulting companies. The popularity of banks as possible employers was low in late 2008. This year, things seem to turn back again. It is also partly because many of our students are interested in jobs that are related to social responsibility. Some of them are even doing a kind of social year. That is something that we did not have to such an extent in the last nine years that I’ve been here. My feeling is that values are changing among the students.

Even among the students that work in the banking and finance sector?

Exactly. There are definitely less that go into the financial sector, and that has to do with the fact that there are not as many jobs as in years past. But I also have the feeling that the minds of the students have changed.

Everyone I know in the sector is thinking about the business model, and it’s quite obvious that the business model of the past will not be applicable to the business model of the future. It is quite obvious that there have been mistakes made, and my impression is that the finance sector has not exactly found it’s place in the future, but many people are thinking about it.

You are also the academic director of the Master of Law and Business (MLB) program with Bucerius Law School in Hamburg. Why would someone do this program instead of an MBA?

Well, the basic concept is that there are a lot of issues in the economy and the business world where you need expertise in both fields – business and law. Think about the regulation and the problems we are having because of the financial crisis. This has to do a lot with regulation of the banking sector, of mergers and acquisitions, and in those kinds of transactions, there are always business people involved as well as lawyers.

Our feeling is that legal people don’t understand very much about business, and business people don’t understand very much about law. This program allows them both the business people and lawyers to understand the other side better, to have added value. We also offer lectures on the same topic from two perspectives. We encourage our law and business professors to interact with each other, and basically to have connections between the courses so that the students become aware of the different views – the business and the law.

Is this something that employers were demanding?

Well, we’ve already had two classes that have graduated, and all of those students have been quite successfully placed in law firms, industrial firms, and banks. One integral part of the program is an internship. It was not too complicated, even though the program was brand new and nobody knew about it to place them for those six weeks in those companies as well as the law firms. There is obviously demand for our graduates, and that shows that our concept seems to be interesting to the business world.

Photo Courtesy: Markus Rudolf

Clarissa Tan

Clarissa Tan left her native Singapore to pursue an MBA at the China Europe International Business School (CEIBS) in Shanghai. We asked her about her aspirations, and how it’s been observing the financial crisis through a Chinese lens.

Why did you decide to do an MBA in China?

I wanted to switch careers from business unit control (primarily accounting and control) to private equity.  There is substantial and increasing private equity activity in China compared to Singapore, which is why I am committed to building a career in China.

By doing an MBA in China, I can re-tool my skill sets, gain some China-specific knowledge of its economy and industries, and network with China-focused individuals.  Doing an MBA in China also gives me adequate time and opportunity to form friendships and bonds in China.

Has studying in China given you a unique perspective on global finance?

Yes, studying in China has given me a unique perspective on global finance. One example is to learn about and to see first-hand the Chinese perspective on the current financial crisis.

How have your professors been addressing the changes in the global 
finance sector?

Some professors have expressed their view that the US has to change its spending on credit behavior and increase its savings rate and, at the same time, the Chinese have to save and invest less but spend more in order for the current vicious cycle to be broken.  This stems from their view that the BOP deficit that the US keeps with the Chinese was funded by the money that the US obtained from China by the sale of US T-bills.  This way, excess credit was accessed by the US, over what they can really “afford” and thus planted the seed for the subprime loans disaster.

Studying in China has also given me the chance to hear what Chinese academics have to say about topical issues raised by those outside the country – for example the thorny topic of RMB appreciation. It is interesting and refreshing to hear the views of Chinese academics here as we discuss both sides of the issue.

How has the MBA has made you and your fellow 
students more prepared and adaptable to working in a changing financial 
sector?

The MBA program is different from a traditional masters program or an undergraduate program in which the students are not encouraged to or do not have past working experience to share with the other students.  During the MBA program, we discuss and debate on the current issues amongst 180 of us and the professors every day.  With the sharing of minds of so many individuals, we get different perspectives and hear different thoughts that we would otherwise not be able to when we were at work.

What are the new kinds of skills that will be demanded of
 finance MBAs coming into the job market now and in the next few years?

The next few years are an interesting time for China as she moves from export orientation to an open economy and implementing reform policies on its exchange rates and capital controls. The gradual opening up of the banking sector in mainland China and China’s foreign exchange reforms  present many opportunities for finance professionals in the near future.

With the negative impact of the financial crisis on several investment banks on Wall Street, and with the demand for securities work comparatively still flourishing in China, finance MBAs may need to be flexible pertaining to where their work will bring them.  Finance MBAs may find more opportunities in China and thus may need language skills and the strong ability to assimilate and adapt to living and working in a country that has been described by its leaders as a “socialistic market economy.”

Photo courtesy: Clarissa Tan / CEIBS