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Financial Darwinism
Create Value or Self-Destruct in a World of Risk
Leo M. Tilman (Author), Edmund S. Phelps (Foreword by)
9780470385463, Wiley
Hardback, published 25 November 2008
192 pages, Drawings: 40 B&W, 0 Color; Tables: 22 B&W, 0 Color
23.6 x 16.1 x 2.2 cm, 0.361 kg
"As the world places increasing emphasis on fair valuation, risk-based financial disclosure and risk-focused regulation, Tilman's guide becomes more important for CEOs, directors and fiduciaries who must build risk evaluation into all fundamental decisions." (Corporate Governance) “While Tilman's thesis is directed to financial firms, the concept applies to all businesses. Failure to adopt a risk management strategic planning model will lead to extinction, hence the "Darwinism" in the title. Summing Up: Recommended.” (Choice, April 2009) "...Tilman couldn't have chosen a better time...clearly written and with plenty of rational advice for financial institutions" (City A.M., December 11th 2008) "One of the book's merits is that he offers tables that provide taxonomies of business model transformation." (Financial World, February 2009) "This book is highly recommended for finance professional sat all levels of an organization as well as investors desiring insights into how firms can weather the "tectonic shift" in the financial landscape. The terminology and models used should be within the grasp of anyone who has taken an undergraduate course in finance." (Journal of Corporate Finance and Accounting) “[Tilman] sees much to be learned from the collective blindness that led to the economic meltdown. … says the first steps to recovery are humility and innovation” (Alpha magazine) "This book offers a deeply thoughtful and well-reasoned analysis of what has gone wrong and the outlines of an eventual road to recovery." (Financial Executive International)
In Financial Darwinism, author Leo Tilman lays the groundwork for understanding the new financial order by introducing his evolutionary thesis and then outlines an actionable decision-making framework that enables financial institutions and investors to fully leverage the power of business strategy, corporate finance, investment analysis, and risk management. Financial Darwinism is an invaluable road map to today's financial world and an essential guide to surviving and thriving during these challenging times.
Foreword ix Preface xv Acknowledgments xix CHAPTER 1 Understanding and Navigating the Financial Revolution 1 Introduction: The Need for Transformational Thinking 1 From George Bailey to the Golden Age 5 Accounting for Profits the Old-Fashioned Way 7 The “Great Moderation” As an Evolutionary Catalyst 11 Economic Performance in the Dynamic New World 14 Pressures on Static Business Models 18 Dynamic Finance Perspective on Financial Crises 21 Pillars of Strategic Decision Making 25 Value Creation Through Dynamism and Business Model Transformations 26 Beyond the Facade: The Importance of Risk-Based Transparency 35 CHAPTER 2 The Old Regime and Its Demise 39 Economic Performance and Viability of Financial Institutions 39 Static Business Models 41 Dominant Forces: The Future that Has Already Happened 46 Pressures on Static Business Models 55 CHAPTER 3 The Dynamic New World 65 Risk-Based Economic Performance 65 Balance Sheet Arbitrage 68 Principal Investments 69 Systematic Risk Exposures 71 Fees and Expenses 74 Capital Structure Optimization 75 Economic Performance Attribution 75 CHAPTER 4 Business Model Transformations 79 Pillars of Strategic Decisions in a Dynamic World 79 Responsive Recalibrations of Business Models 81 Full-Scale Business Model Transformations 86 Making the Strategic Vision a Reality 93 CHAPTER 5 The Road to Financial Darwinism 99 Real-World Business Model Transformations 99 Stakeholder Communication & Equity Valuation in a Dynamic World 109 Economic Value Creation (and Destruction) by Non-Financial Corporations 112 The Infamous “Carry Trade” and the Old Ways of Thinking 115 A Dynamic Finance Perspective on Modern Financial Crises 118 Beyond the Facade: The Need for Risk-Based Transparency 127 Conclusion 129 Epilogue: Financial Darwinism and the Crisis of 2007–2008 133 Appendix A: The Risk-Based Economic Performance Equation 137 Appenidx B: A Case Study in Dynamic Finance 141 Notes 157 References 163 About the Author 167 Index 169
Subject Areas: Finance & accounting [KF]
