5 commandments of cloud preparation — John Mooney and Jeanne Ross

Jeanne Ross, Dir. & Principal Research Scientist at MIT Sloan's CISR

Jeanne Ross, Dir. & Princ. Res. Scientist at CISR

John Mooney, Researcher at the MIT Sloan's CISR

John Mooney, Researcher at CISR

From Computerworld

Talk of the cloud has stirred up a lot of excitement. A 2011 mandate from the government CIO to move toward a cloud-first strategy has managers hoping that public cloud solutions will provide a quick fix to sticky technology challenges and messy business processes.

To some extent the hype is real. The cloud is transforming how organizations use and manage technology. As cloud adoption becomes more prevalent, government organizations that resist its charms risk missing opportunities to enhance the services they deliver.

Read More »

What Facebook got right with its IPO — Howard Anderson

Image credit: MarketWatch

From WSJ MarketWatch

CAMBRIDGE, Mass. (MarketWatch) — A year after the Facebook IPO the media bellyaching about all the things the social media company did wrong is relentless.

“Facebook, One Year Later: What Really Happened in the Biggest IPO Flop Ever,” reads a headline in The Atlantic. “Missed out on the Facebook IPO and couldn’t be happier,” reads another on CNNMoney. And from Forbes: “Facebook Year One: Fighting Back from an IPO Flop.” Read More »

Saving the Dodd-Frank Act derivatives reforms—John Parsons

MIT Sloan Sr. Lecturer John Parsons

The Dodd-Frank Act included important reforms of the derivative market. Nearly three years after passage of the Act, Congress is now considering amendments. I’m testifying this week on the derivatives reform amendments before the U.S. House of Representatives in opposition of several of the amendments as a reversal of the needed reform.

Title VII of the Dodd-Frank Act mandates important changes in U.S. derivative markets, but many of these changes are not yet fully implemented. As Americans remain threatened by the same dangers that exploded on the country in 2008, Congress should consider ways to encourage and enable the full implementation of the Dodd-Frank derivative reforms. Read More »

Dropping the Ball on Financial Regulation — Simon Johnson

 

MIT Sloan Prof. Simon Johnson

From the New York Times

With regard to financial reform, the outcome of the November election seems straightforward. At the presidential level, the too-big-to-fail banks bet heavily on Mitt Romney and lost; President Obama received relatively few contributions from the financial sector, in contrast to 2008. In Senate races, Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio demonstrated that it was possible to win not just without Wall Street money but against Wall Street money. Read More »

Why a rating agency should be concerned about the survival of the company it’s assessing

MIT Sloan Assoc. Prof. Gustavo Manso

My latest paper* focuses on the difficulties that rating agencies face in setting a credit score that accurately reflects the credit quality of a borrower, but also takes into account the effect that score will have on the borrower’s credit quality in the future. When a rating agency cuts a given company’s credit rating, investor confidence in that company’s ability to meet its debt obligations is undermined, making it very difficult for the company to raise cash. The downgrade often becomes a self-fulfilling prophecy.

In my paper I talk about the ideal accurate credit rating environment. It’s important to note that there may be several possible ratings that are accurate for a particular firm or country at any point in time, but some of these ratings lead to more distress than others. I believe rating agencies ought to be careful to select the best rating: one that provides an accurate portrayal of the company’s credit worthiness, but also takes into account the continued existence of the company in question. These ratings – where the agencies have a small bias towards the ultimate survival of the companies they evaluate – allow the companies to borrow money at a lower interest rate and therefore improve their chances of withstanding any financial shocks that may arise.

Read More »