Being a renowned academician in the field of management, he delivered a guest lecture on ‘Financial meltdown - need for a paradigm change in managing risk’ for MBA students.

The guest speaker was welcomed by Dr (Col) HS Singha, Director of GNIMT. While delivering guest lecture, Dr Zahir said, “The meltdown on the Wall Street started with the bankruptcy of Lehman Brothers, the fourth largest investment bank in USA with around $ 650 billion assets, has hit markets around the world. It is the biggest financial crisis the world has witnessed since 1929-30 great depression.”

He added, “The reasons for this crisis may be sought in two groups of factors: Economic and Behavioural.The economic factors which are responsible for the financial meltdown, starting from the largest economy of the world, USA, are three-fold. First, it all started with sub-prime lending (basically housing loans) ignoring the risk and paying capacity of the borrowers on the promise that real estate price will go on increasing.

It didn’t happen, because we must remember that anything that goes up must come down. Secondly, everybody in USA - households, economy and the government - was living far beyond its means. The US household’s indebtedness is estimated to be 120% of their disposable income. The US itself is the most indebted and leveraged country in the world with Balance of Payment deficit of over $ 700 billion, thanks to uncontrolled spending and fancy wars President Bush has inflicted on the world. Lastly, in the name of globalisation and market economy, the regulatory system was highly diluted giving rise to what is known as Chicago School of Economics.”

The behavioral reasons, which Dr Zahir said, are more important, are the bane of today’s highly liberalized global capitalism. He stated, “ There are three behavioral factors responsible for the present crisis: Arrogance, Greed and Trading (speculation)”. As a matter of fact, these behavioral variables have also contributed to the economic variable explained earlier.

The crisis will result in negative growth in most of the developed economies: US, Europe and Japan. India is also severely affected but despite slowing down of its economy, it is in better position than western economies. The impact of the slow-down on jobs and unemployment all over the world is most disturbing.”