Management opportunities report: Institute of Technology Tallaght
Pasqueline Tierney explains why it's incumbent on educators, the Government and companies to now provide the correct skillset for the financial-services sector.
If anything has been learned from our current financial crisis, it's the fact that there was a critical lack of understanding of the operations of the financial-services sector. Many buyers and sellers did not understand the products that they were engaged in, such as special purpose vehicles, credit derivatives, contracts for difference, short selling and UCITS. There was also an incredible lack of corporate governance and risk assessment.
It seems apparent that two key reasons for the financial debacle were that the skill set of those making important decisions in this sector was inadequate and there was a serious lack of effective corporate governance. Back in 2007, this deficiency of knowledge and qualification was highlighted by a Forfás report where it stated that, "an increase in the supply of graduates emerging from formal education with the appropriate skill sets to meet the needs of the financial-services industry is required."
This report also stated that new and innovative education, training modules and courses at graduate, post-graduate and professional levels were also needed. Specifically courses covering areas such as derivatives structuring, risk management, financial modelling and mathematical and technological skills were required.
Around the same time (December 2007), Finuas, a financial-services training body, jointly funded by the Government and companies in this sector, produced a report outlining that many of the necessary skills for this sector were in short supply due to our "extraordinary economic growth over the last decade which has produced a tight labour market with low unemployment."
Obviously today, this is not a problem with unemployment running at 13%. Now the time seems to be ripe for training graduates and retraining staff with the right skillset for this sector.
But it appears that rectifying the corporate governance deficit will be a much greater challenge. Matthew Elderfield, the new head of Financial Regulation at the Central Bank of Ireland, believes that the problem at the heart of the crisis was the focus on principles-based regulation which "has become codeword for light-touch regulation". Elderfield has also highlighted the deficiencies in the regulator's powers and the fact that many of the fitness and probity checks were on a non-statutory footing and thus unenforceable.
Given the significant social and economic impact of this global financial crisis, new financial regulation is inevitable. Some of the new regulation will in all likelihood address the problem of financial mis-selling, where the buyer was not fully informed or, indeed, misled about the product or its suitability for them. There has also been a growing number of decisions by the Financial Ombudsman made against financial institutions in these situations.
Pasqueline Tierney FCCA MBS is a lecturer at the Institute of Technology Tallaght's Department of Accountancy & Prof Studies
