“AA+ Passing perception or failing grade”
Confluence 2011, Day 1, Session 1
Confluence – the idea series, is back with a bang and this time, organized a two day Finance and HR convention. The Day 1 had two Finance sessions, with the first session Chaired by Prof. Surendra S Yadav, and the eminent panellists for the discussion were as follows:
Mr. Pawan Agrawal[/b], Director – Corporate Finance, Yes Bank
Mr. Tarun Rustagi[/b], Head – Business Planning, Max New York life Insurance
Mr. Lalit Gupta[/b], Head of Capital Markets, Futures First Pvt. Ltd
Mr. DVSSV Prasad[/b], Managing Director, PNB Gilts
The topic of discussion given was “AA+ Passing Perception or Failing Grade”, in relation to the recent AA+ rating given by Standard & Poor, the credit rating agency, to the USA, downgrading from its existing rating of AAA. Prof. Yadav delivered the opening address talking about credit rating agencies and the relevance of their ratings to countries and industries.
Mr. Agrawal voiced his key note address, saying that from the investors perspective, these ratings donot matter much as all that the investors look at is the liquidity of the currency, a case in point, for USA the US $. He expressed that, the willingness & ability to pay the debt by USA cannot be doubted and this is what the investors take into consideration whereas the credit rating agencies take into consideration the political facets too such as in this case the discord between various political parties in USA on the issue of repaying debt. He cited an example to illustrate this, that in the case of a small company and a well-established large company, the large company might default a few payments and the smaller one might be regular but the investors invest in the larger company where as the credit rating agency rates the smaller one higher.
The credit rating agencies have a procedure for reducing the rating as S & P did for US i.e they first put the country or industry on a negative watch if they think there is a possibility it might default its debts or there is a political discord, and finally announces it’s rating after the stipulated time. Credit rating agencies have a larger role to play in the society according to him as they increase the credibility of the company.
Mr Gupta started his address with the statement that the rating given by S&P not being a surprise to the markets. He said that the main reason for the downgrade is that US has not been following austerity measures to keep its debt in check and also doesn’t have a credible plan for the future. The investors hadn’t moved out of US immediately because there are no investment opportunities elsewhere. He ended his speech saying that as far as the markets are concerned this rating is just a passing perception.
Mr. Rustogi defined the two vectors on which a credit rating agency bases its rating, that is political environment or policy making uncertainty in a country and the debt to GDP ratio. The huge debts in US according to him started off with the increase in the debt ceiling and overspending on defence which started from the Bush government.
Mr. Prasad pointed out that the degradation of the rating has more to do with the feeling of, loss of something that has existed since the beginning than any actual loss for US. He also mentioned the differences in rating such as, a country’s credit rating might go down but the rating of an industry in the same country might go up. He described an incidence where Lehman brothers were rated higher than India but after two months the fate of Lehman brothers was, it crumbled like a pack of cards.
Later the questions posed by the students were answered by the panel such as what if there is another downgrade in US rating, for which the panellists answered that it would be a great opportunity for the east to project their currency as the better one and attract investments. Another one was that what would be the measures taken by India if it is filling in for US after a few years for which the panel said that Indian policies are more conservative in nature than the US and this is to be continued and in addition to this the FDI should be put to proper use.
With this the session came to an end and the panellists were invited to join the students for lunch where the students interacted with them personally and went home with an immense learning experience.
Confluence 2011, Day 2, Session 1
The Day 2 of Confluence had the HR convention chaired by Prof. Kanika Bhal, and the elite panel which participated in the discussion are as follows:
Mr. Abinash Upadhyay[/b], Divisional Head – Corpo
rate HR, Apollo TyresMr. Supreet Singh[/b], VP HR, Kotak Mahindra Bank
Mr. Indra Yadav[/b], VP HR, Orkash Services Pvt. Ltd
The topic for discussion was ‘The demise of lifetime employment’. Beginning the session with a key note address, Prof. Bhal stated that lifetime employment is something which neither the company nor the employee are expecting of each other. She opined that the time period of a relationship has little to do with loyalty, agreeing at the same time that loyalty in a short time is a tough task. She also spoke about recession time when the power equation changes between the employer and employee and the numerous challenges faced by it. Mr. Upadhyay elaborated on the history of employment sources in India such as, the public sector initially, then the huge private sector companies and now the prevailing smaller corporates, and stated that loyalty comes only when the employee needs are satisfied. He then spoke about the employee and employer’s perspective of looking at the problem i.e the employee always looks for better opportunities wherever he finds them and in terms of employers, the biggest enemy of the worker is the structure of the organization. He stated that companies are not worried about the lower rung of the organisation but about the higher rung, where it is difficult to find people.
Mr Singh spoke about what loyalty is and defined it as the goals of an individual aligned with that of the organization and also pointed out that loyalty of an employee is simply not enough, he must also be able to add value to the organization. He pointed out that both the employer and the employee must think of a reason to wish for lifetime employment. While the employer should think of the employability and reason for retaining the employee, the employee should think of how well his goals are aligned with that of the organization.
Mr. Yadav brought a different perspective to the whole issue, that proper leadership is what should be the primary goal of the employer and that would take care of the other aspects. While asked about the trust factor between the employer and employee, in the question-answer session, the panellists were of the opinion that the organisation should stretch forward the hand of trust and attach a level of integrity with the employee until and unless he proves otherwise and this would in turn make the employee loyal to the organisation.
The session ended with a loud cheer from the appreciative audience and mementos being awarded to the panellists by Prof. Bhal as a token of appreciation from DMS, IIT Delhi.