Global Industry Outlook: Finance, Services and Media

Friday 29 January, 2010 - No industry is immune to the global, cyclical and structural changes reshaping the world economy.

Chairs of the World Economic Forum Governors Meetings each share their industry's evaluation of the most important challenges and opportunities in 2010.

Key Points
• The gloom and doom of last year has given way to a more optimistic outlook across the five sectors – financial services, professional services, real estate, investments and media
• A strong financial sector is needed to support the prosperity essential to tackling the bigger problems of unemployment and poverty; it is time to stop the blame game and move on
• Funding for real estate development is being held back by problems in the financial sector
• The media industry is still searching for new economic models that will allow old media to survive and new media to thrive

Synopsis
The five Chairs of the Forum’s Governors Meetings expressed general optimism for this year’s business outlook and shared the key issues discussed during their Meetings.

Topics covered by the financial services group included the economic outlook, regulatory framework, sustainability and risk management. It was pointed out that the whole industry has been tarnished even though only a few banks failed the test during the crisis. Most banks have done well and are enjoying higher profitability. The lesson from the crisis: single out those who made mistakes. The sector’s failure was attributed to a combination of bankers’ mistakes, political failures and market inefficiencies. It is time to stop the blame game and focus on real issues like unemployment and poverty, which can only be tackled by a robust financial sector.

The bulk of the discussion within the professional services group centred on the need to address issues created by the backlash against capitalism and globalization. Members feel the need to speak up to reinforce the idea that capitalism and globalization have served us well. They will also advise clients to look at value management as synonymous with values management. In Members’ engagement with public entities, they will caution against moving from one extreme to another in terms of regulation, bearing in mind that new regulations should enhance protection but not stymie growth and entrepreneurial drive. Members should also help clients see risks holistically, not focusing on specific areas and overlooking others.

As an asset class, real estate suffered vertiginous declines in price and activity levels during the crisis. Asset prices fell 40-50% while the volume of activities plunged 70%. The prevailing sentiment is that the situation is stabilizing, with demand driven by Chinese liquidity. The industry, however, relies heavily on financial institutions to structure deals, and until the regulators sort out how the industry is to be regulated, lending will be kept down as banks continue to grapple with NPLs in their portfolios. Sustainability has gained importance, as the industry is responsible for 40% of the world’s carbon footprint – twice that of airplanes and automobiles combined. Increasingly, governments are regulating the energy performance standards of buildings, as well as construction standards.

In the investments group, Members representing private equity and hedge funds industries felt they have not communicated well to stakeholders their contributions to the larger economy: in the case of private equity, their role in promoting efficient use of capital by corporations; and in the case of hedge funds, their track record on delivering returns to investors while not being caught up in the mess associated with the financial crisis.

The media group saw more representation from new media than old media in a reflection of the digital world in which we live. The group dealt with the challenge of defining new economic models that will allow old media to survive and new media to thrive; the issues of personal and corporate reputation in the era of social media; privacy or lack thereof; and the protection of intellectual property.

Session Panelists
Josef Ackermann, Chairman of the Management Board and the Group Executive Committee, Deutsche Bank, Germany; Member of the Foundation Board of the World Economic Forum; Chair of the Governors Meeting for Financial Services 2010; Co-Chair of the World Economic Forum Annual Meeting 2010
Hans-Paul Bürkner, Global Chief Executive Officer and President, The Boston Consulting Group, Germany; Co-Chair of the Governors Meeting for Professional Services
Colin Dyer, President and Chief Executive Officer, Jones Lang LaSalle, USA; Chair of the Governors Meeting for Real Estate 2010
Eric Mindich, Founder and Chief Executive Officer, Eton Park Capital Management, USA; Co-Chair of the Governors Meeting for Investors 2010
Jeff Zucker, President and Chief Executive Officer, NBC Universal, USA; Chair of the Governors Meeting for Media, Entertainment & Information 2010

Moderated by
Kevin Steinberg, Chief Operating Officer, Head of Centre for Global Industries, World Economic Forum USA

Disclosures
This summary was prepared by Catherine Ong. The views expressed are those of certain participants in the discussion and do not necessarily reflect the views of all participants or of the World Economic Forum.