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Today's sky-high personal debt levels portend a freeze in consumer spending and a rise in defaults. They could threaten your company - even if you don't sell to consumers. Two experts explain how to calculate your firm's risk.

The "Strategic Conversations at Suncorp Commercial Insurance" case series examines the actions taken by the senior executives of the Australian-based Suncorp Commercial Insurance, working with strategy consultant 2nd Road, to build an aligned and committed workforce following a difficult merger with a rival insurer, Promina Group. The A case outlines both the process used, which features the widely participative "strategic conversation" developed by 2nd Road, as well as the outcomes achieved. The A case introduces the context of the merger, the integration challenges by CI's senior leader, Mark Milliner, and the emergence of the "thriving city" metaphor that becomes the basis of the approach. The B case, UV3914, examines the cascade process designed to roll the metaphor out to all employees. The C case, UV3915, shares the results of pre- and post-tests done to ascertain the extent to which participation in the process increased the understanding and commitment to the new strategy for those involved.

The "Strategic Conversations at Suncorp Commercial Insurance" case series examines the actions taken by the senior executives of the Australian-based Suncorp Commercial Insurance, working with strategy consultant 2nd Road, to build an aligned and committed workforce following a difficult merger with a rival insurer, Promina Group. The A case outlines both the process used, which features the widely participative "strategic conversation" developed by 2nd Road, as well as the outcomes achieved. The A case introduces the context of the merger, the integration challenges by CI's senior leader, Mark Milliner, and the emergence of the "thriving city" metaphor that becomes the basis of the approach. The B case examines the cascade process designed to roll the metaphor out to all employees. The C case shares the results of pre- and post-tests done to ascertain the extent to which participation in the process increased the understanding and commitment to the new strategy for those involved.

You are leading a negotiating team for your company. When you sit down with the other party, someone on your side of the table blurts out: "Just tell us - what do we need to do to get more of your business?" And in that moment, you know you've lost the upper hand. Gaffes like this are more common than most businesspeople would care to admit, management professors Brett, Friedman, and Behfar have found in their research. Even though team members are all technically on the same side, they often have different priorities and imagine different ideal outcomes: Business development just wants to close the deal. Finance is most concerned about costs. Legal is focused on patents and intellectual property. The authors recommend taking four steps, either singly or in tandem, to align those goals: Map out each person's priorities, work out conflicts directly with departments, employ a mediator if that doesn't work, and use data to resolve differences. Once you are all on the same page, you can take steps to make sure everyone is coordinated during the negotiations themselves. Try simulating the negotiation beforehand, assigning roles to team members that take advantage of their strengths, and establishing the signals you will use to communicate with one another during the session. The payoff from working as a cohesive group is clear. With access to greater expertise and the ability to assign members to specialized roles, teams can implement more complex strategies than a sole negotiator could ever pull off.

This is a negotiation exercise. The case involves the negotiated licensing agreement between an American manufacturer in Arizona, and a Mexican licensor in the State of Sonora. Sam Paint owns and operates the largest wholesale paint business in southern Arizona. Although he sells a variety of house-paint products, he is best known for his quick-drying paint, a process he developed and patented in the United States twelve years ago. Sam also holds a Mexican patent for quick-drying paint. Both patents are scheduled to expire in five years. This negotiation takes place in the aftermath of the North American Free Trade Agreement (NAFTA) and the passage in Mexico of a strengthened intellectual property system

The Obama administration and the U.S. Federal Reserve - along with counterparts around the world - are doing their utmost to thaw the credit freeze that took hold in the fall of 2008. But these measures, says the author, serve to show how badly the housing and derivatives bubbles deformed the economy and the global financial system. The first effect of the bailouts will be a dramatic rise in the size and cost of government borrowing, which will have serious inflationary consequences. Just as important is the transformation of the U.S. central bank into a version of the "bad bank" touted as a solution to the crisis. How disastrous the consequences will be depends on whether our appetite for risk has been increased by the bailouts or reduced by the meltdown.

Although the recession has meant a rise in some threats to corporate security and a fall in others, security directors are seeing their budgets cut without regard to these shifts. Businesses must ensure that their spending addresses the most urgent priorities.

Green Bank of the Philippines was known for its product innovation and its ability to bring new products to market. In 2002, Green Bank designed an untested commitment savings product that both gave individuals access to formal savings and helped them commit to reaching their savings goals. Omar Andaya, the Green Bank president, must decide how to evaluate the success of this product. The management team at Green Bank discusses various evaluation methods, including a formal quantitative impact evaluation using a randomized control trial (RCT), and the value an impact assessment brings to the Bank. In particular, they grapple with the question of how success is measured for a product both for the bank and for its clients. The case highlights the issues an organization must consider before deciding to do an impact assessment as well as common design challenges.

Having studied the dynamics of cascades in complex systems, this Columbia sociologist and network scientist argues that the most damaging ones are impossible to anticipate. The solution, therefore, may be to make systems less complex to start with, in order to reduce the chance that any one part can trigger a catastrophic chain of events. In the financial system, this means preventing companies from growing too big to fail in the first place.

Contracts exist to foster trust, but they can actually do the opposite. Overly detailed contracts leave no room for spontaneous acts of kindness to create goodwill between parties; too-rigid contracts leave parties unable to respond to the unanticipated; and, strangely enough, incentives can end up being just plain insulting.

Jim Golden wants to radically change how catastrophic trucking accident lawsuit claims are handled by his trucking company. He wants to "do the right thing" for both the claimant and his company. Golden is a former litigator with 16 years of experience defending corporations in wrongful death lawsuits. After becoming disenchanted with the traditional "deny, delay, defend" method of litigation, which is aggressive, adversarial, costly, and drags the process out for as long as possible, Golden decides to re-think how he practices law. Golden wants to introduce a "negotiation counsel" approach to claims where his company is at fault. Initially, he is unsure of specific tactics, but envisions non-adversarial, communicative, and problem-solving interaction. He believes that if all parties involved in a claim engaged in a joint problem solving manner (rather than as a win/lose contest), practical, just, and emotionally satisfying agreements can be reached much more quickly.

In the negotiated year 2005/2006, Brazilian iron ore giant Vale, negotiated a 71% price increase with its Chinese customers. For the same period, Australian BHP asked for a premium reflecting the freight cost differentials between shipping iron ore to China from Australia versus Brazil. This demand was later dropped due to strong opposition from Chinese steelmakers. In the negotiated year 2007/2008, following price increases of 65-71% negotiated by Vale, the other Australian Iron ore giant, Rio Tinto, demanded and obtained a premium that saw the total increase in prices reach 200% from the previous year. This case analyses the motivations behind these price negotiations in the light of BHP's intended hostile takeover of Rio Tinto, which would result not only in a combined market share of almost 40% in the production of traded iron ore but a monopoly in the supply of Australian iron ores. This case can be used in business classes, negotiation and strategy as will provide students with different aspects of the negotiation process. Issues such as hostile takeovers, pricing, market share and business relations are discussed in this case.

We believe that the practice of threat as a negotiation tactic is essentially without merit. While its risks are outsized, its benefits are few, if any. This renders threat utterly bankrupt as a strategy. Herein, we explore the drawbacks of threat as a negotiation tactic, and offer a series of practice pointers relevant to threat and its potential defenses.

Financial risk management is hard to get right even in the best of times. It can take one of six paths to failure, nearly all of them exemplified in the current crisis. Relying on historical data. A risk manager who assessed real estate risk on the basis of statistics from the past three decades would have been sorely unprepared for the volatility of house prices in 2007. Focusing on narrow measures. A daily Value-at-Risk (VaR) measure is commonly used for securities trading. But a daily measure assumes that assets can be sold quickly or hedged, so it doesn't apply to portfolios with which the firm may be temporarily stuck. Overlooking knowable risks. Risk managers often distinguish among market, credit, and operational risks, which they measure differently and in isolation rather than cross-organizationally. They may also fail to assess new risks embedded in the instruments they use for risk mitigation. Overlooking concealed risks. Risk takers may deliberately hide their risks, as happened at the French bank Societe Generale in 2007. Or they may underreport them when their trading positions are complex and short-lived. Failing to communicate. Sometimes even the most scrupulous risk manager cannot clearly explain a state-of-the-art system to the CEO and the board. In such a case, their confidence in the system's capabilities may be unwarranted. Not managing in real time. It is difficult to hedge trading positions when their risk characteristics can change completely within a single day - as can happen, say, with barrier calls. The author advises practicing sustainable risk management: Never mind that catastrophic risks have extremely small probabilities; build scenarios for them and design strategies for surviving them anyway.

Spreadsheet supplement for case UV1056.

In August 2005, The Carlyle Group and its partners (Clayton, Dubilier & Rice, and Merrill Lynch Global Private Equity) must finalize the terms of a bid to purchase the Hertz Corporation. The Ford Motor Company had put Hertz, a wholly owned subsidiary, up for sale in April 2005, and in June 2005 Hertz entered a dual-track process, that would result in its sale or an initial public offering (IPO). The case provides detailed pro forma projections for the transaction that allow students to examine the synergies of the deal and estimate a value and bid for Hertz. Students must consider whether their bid provides an adequate return to the sponsors, can produce a higher value for Hertz than can an IPO, and can best the bid of a rival bidding group. The case is appropriate for use in courses on corporate finance, private equity, or deal valuation. Because of the rich range of issues that can be considered, the case also works well as a capstone case or in a case competition. For instructors wishing to provide students an overview of the role and practices of private equity, we recommend combining the Hertz LBO case with its companion case, "Investing in Sponsor-Backed IPOs: The Case of Hertz" (UV1409). The Hertz IPO was announced in July 2006, just seven months after the LBO was completed. The two cases cover a wide range of issues that arise over the course of entry and exit of private equity investments.

American Airlines sought to reduce the fees it pays to global distribution services (GDSs) (such as SABRE) to reach travel agents. But GDSs held significant tactical advantages. For example, GDSs had signed long-term exclusive contracts with the corporate customers who were American's best customers. Furthermore, travel agents tended to favor whichever GDS offered the highest commissions - impeding price competition among GDSs. Against this backdrop, American considered how best to cut its GDS costs.

Supplements the (A) case.

As global inflation increases, maintaining food and fuel subsidies will be difficult for developing nations. However, because discontinuing subsidies can ignite popular protests, nations must proceed cautiously as they remove those subsidies to protect both their own interests and those of the foreign companies that invest in them.

To deliver 5-6 major new Chinese joint ventures annually, Hong Kong China Gas executives began extracting cross-border negotiating lessons from their 80 existing Chinese JVs. Chairman Alfred Chan and CEO Peter Wong knew that HKGC's growth strategy required significant mainland expansion through negotiating joint-ventures to run gas and water distribution systems in diverse urban and rural locations throughout mainland China--often in the face of entrenched local interests who could have blocking power. Discussions with HKGC's negotiation teams revealed an increasingly sophisticated negotiating approach from target identification and party mapping, to "social mapping" and building guanxi, to creative deal design and tactics, in order to most effectively work out issues of equity, management control, territory, and exclusivity.