Finance & Governance was born from the observation that governance as practiced traditionnally do not meet the requirements of an unstable world and in transition.
As stock indexes climb without turbulence, it is tempting to phantasize a world of unlimited growth where conventional strategic advantages, whether strategies of scale, segmentation be it low cost or luxury, are to be acquired through acquisitions, or mergers, or cost reductions. Two hundred years of phenomenal growth in the West has plunged us into this illusion. However it has been clarified that something was missing in theories of endogenous growth,.tIt seems Ricardo’s theory of comparative advantage was not verified in practice. We cannot take sustainability and growth ifor granted.
New growth theories include human capital, but the quality of this knowledge is not taken into account. Asset quality is not properly understood (securitization of bad loans were made to believe they were getting good quality), nor the value of the work can not be understood either by the amount of hours worked, nor productivity (the number of hours required to produce a task or good). Finally, only the capital can be measured quantitatively and qualitatively not provided to ignore the currency in which it is denominated. What is missing, so this is an assessment of the appropriateness of the investment.
The choice of capital allocation and development efforts is crucial to growth.
In other words, it is the quality of governance and institutions that determines whether the returns will be increasing or decreasing and prints the system dynamics. Growth is not endogenous or exogenous: it is the result of matching internal capabilities with the environment, external definition of an economic system.
These qualitative factors are not captured by the statistical or econometric models. these models in finance are falsely reassuring, and have led many companies to bankruptcy. The quality of governance is tested on the ability to cope with a "black swan".
To respond, Finance & Gouvernance has developed tools and methods to support the organizations towards a resilient governance, acute phase turbulence as winning phase of relative stability.