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Global Finance’s Supply-Chain Revolution - Andrew Sheng - Project Syndicate
In today’s financial architecture, as with other supply chains, interdependent networks tend to concentrate in powerful hubs. For example, just two financial centers, London and New York, dominate international finance, and only 22 players conduct 90% of all global foreign-exchange trading. Such concentration is very efficient, but it also contributes to greater systemic risks, because, if the leading hubs fail, the whole system can collapse.

Open feedback mechanisms ensure a supply chain’s ability to respond to a changing environment, but, in the case of financial supply chains, feedback mechanisms can amplify shocks until the whole system blows up. The Lehman Brothers collapse triggered just such an explosion, with the financial system saved only by government bailouts.

Today, the financial sector needs innovation of a higher order, involving business models, strategy, and management approaches that restore trust in finance.
confidence  trust  reform  regulation  volatility  history  change  leverage  lehmanbrothers  GFC  supply-chain  London  wallstreet  finance 
january 2012 by asterisk2a

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