Written by Schon Condon in October, 2007

Interesting combination you say, well yes, but both are, whilst very separate, extremely important.

Dealing firstly with the Birthday, it is hard to believe that it’s been twelve months since we separated from our previous Firm on the 1 October 2006. It has been a very busy but rewarding year to see how quickly we have been adapting to our new image and direction. It is true that we did not re-badge until January 2007, but the ground work started this time last year. To give adequate recognition I must applaud the efforts of all of the team at Condon Associates for the effort that they have put in and we are all excited about our future. Would you expect anything else from FIT practitioners?

It would also be remiss of me not to mention all those that have sought our advice, guidance and assistance over the year for without you we would have no purpose. We, as a Team, thank you all. Further we certainly look forward to again assisting you into the future.

Over the next few months there will be a few more exiting events, but I’ll let you know more about these in future issues of “On the Beam” as they unfold.

So now let’s consider Pricing Strategies. Has anyone ever considered insolvency as a pricing strategy?

I was recently listening to a programme on ABC Radio where they had a group of senior International Bankers and other relevant professionals discussing a number of issues surrounding modern International Banking. I was driving at the time and consequently was not in a position to take detailed notes, but am seeking to get a copy of the programme.

After discussing items such as the growth of banking, its role and responsibilities, its key role to the growth of the global economy the topic moved to that of the many new financial products that were being created essentially on a weekly basis. At this point two distinct sides evolved. Put simply, one surrounded the creativity and ingenuity aspects of the new products leading up to the opportunities they created, whilst the other was that much of this development represented recklessness and irresponsibility. As I believe I am insufficiently informed to pass a qualified judgement I do not intend to seek to do so here.

It was however during the short debate that ensured that a statement was made that left me somewhat bewildered. In essence, one of the biggest issues being faced in dealing with these new products was how to accurately determine an appropriate pricing structure for them because of the uniqueness of the products and an inability to determine their true value to the customer or end beneficiary.

The solution offered by one party was that we (the market) needed more Bankruptcies (a term that appeared to be used in the more international sense i.e. meaning insolvencies, rather than the Australian personal financial manner) so that the institutions were more able to accurately determine the “real” value of the products in the market place.

In taking such a stance I wonder what provision the proponent is making to cover all of the ensuing losses by creditors, employees, customers, governments and owners when the “Bankruptcy that we had to have” is experienced. The construct that insolvency be used as a pricing tool is certainly new to me, and there are many people I have dealt with that I do not believe would accept “incorrect pricing of the financial products” as an acceptable reason for failure.

Certainly such an approach will bolster the Turnaround industry significantly as I think the actual fallout sought or accepted will be more preferably described as a “difficult period of trading” rather than an “outright collapse.”

Certainly it represents interesting food for thought. Please, enjoy the read.