A diversified financial conglomerate has six units (subsidiaries), with each unit focusing on its own specialization:
thrift operations,
consumer finance operations,
mutual fund operations,
securities firm operations,
insurance operations, and
consulting for pension funds (managing long-term bond portfolios for some pension funds).
1. Your assignment is to identify the units that will be less adversely affected by the recession. You believe that the units’ different characteristics will cause some of them to be affected more than others.
2. Currently, each unit employs economists who develop forecasts for interest rates and other economic conditions. When assessing potential economic effects on each unit, what are the disadvantages of this approach versus having just one economist at the holding company provide forecasts?