How are MBA programs preparing finance-focused students for working in a crisis and its aftermath? We asked Greg F. Hallman, finance lecturer at the McCombs School of Business at the University of Texas at Austin.
What are some ways the current financial downturn has affected the content and teaching methodology in finance at McCombs?
In my view, the financial downturn has actually made teaching finance a little easier. At its core, finance is the study of risk and return. The past couple of years in the market have given todays students a perfect illustration of risk and the downside to investing. Now when we teach them that expected return is a payment for risk, I believe they can better understand the risk/return relationship.
The market’s performance has also made very clear the fact that no matter how good our models are we cannot see the future. This has, of course, always been true, but the troubles suffered by the big and generally smart banks have shown that even with a decent model of the market’s behavior unlikely events can and do occur to wreck the best laid plans.
How are the students you have contact with responding to the rapid changes in the industry? For these students, how do you think the MBA has made them more prepared and adaptable to a new industry?
The graduating students I have talked to are less picky about jobs, and in my view seem to be more open to working at smaller shops than in the past. They realize that the market will one day turn around and the best thing they can do now is try and get something good on their resume so that if they want to move when the market gets better they have some good experience to sell along with their MBA. Given that this is a financial crisis, I believe that the training the students have received in our program will make them well suited to cleaning up the current mess and understanding where value might be found in the wreckage.
What – if any – new kinds of skills will be demanded of finance MBAs coming into the job market now and in the next few years?
As I said, I think that a lot of the finance work in the near term will be the work of cleaning up the excesses of the past few years. To that end, I think finance skills that help to identify truly valuable assets from assets that were valuable only when debt money was essentially free will be very useful.
For those employed cleaning up the mess, a knowledge of real estate and structured debt should be useful in untangling the billion in mortgage securities, that need to be valued and moved from the over-stressed banks to new owners. A class in bankruptcy law might also prove useful, especially in the near term.
Photo Courtesy: McCombs School of Business