The violence caused by drug trafficking is a source of much destabilization in many realms, from the rule of law and human rights to institutional trust and the country’s reputation. However, what effect does it have on economic variables, such as productivity?

To know more about the effects of drug violence on the labor productivity of Mexicans, we decided to analyse the decade between 2003 and 2013, conscious of the fact that the so-called war on drugs meant that there was a watershed for the level and reach of criminality in the country.

Our results confirm that the resulting violence of drug trafficking has harmed work place productivity, however its impact differs depending on if the crimes were prosecuted by the local, state or federal authorities. The decline in productivity is explained by the effects that crime has on the opening of new businesses and on the creation of capital, due to the high levels of uncertainty it provokes.

The high rate of theft and robberies also reduces the probability of companies expanding their operations, with a larger repercussion than the sanctions or bribes. At the same time, local trade is negatively affected by the crime related murders of the cartels.

In our article “Violence in Mexico and its effects on labor productivity”, co-written with Dr. André Varella Mollick, of the University of Texas Rio Grande Valley, we examine the evolution of labor productivity in the 32 Federal Mexican Institutions. On a theoretical basis, an econometric model was designed in which the labor productivity of different states depends on the real wages of workers as well as other factors. When forecasting the model, we use the so-called “Generalized Methods of Moments”, tackling the bi-directional nature of labor productivity and wages, with statistics from the IMSS [Mexican Institute of Social Security].

Moreover, the criminality variables were obtained from the Executive Department of the Public National Security System, at local, state and federal levels. Under the federal jurisdiction drug crimes, firearm crimes and cartel crimes were taken into consideration (64.5% of the total), while at local and state levels vandalism, house robberies, murders, assaults, kidnappings and blackmail (62% of the total) were all accounted for.

The war on drugs: a before and after

Since the start of the war on drugs, declared by Felipe Calderón’s government in December 2005, cartel feuds have incited a wave of violence that has specifically focused on the northern border states (Baja California, Sonora, Chihuahua, Coahuila, Nuevo León and Tamaulipas), where 25% of drug trafficking crime is concentrated. The state of Tamaulipas has the highest rate of drug trafficking crimes, where, between 2007 and 2014 there was a ground zero of an extreme wave of violence, leaving 100,000 victims, either dead or missing.

If we compare the prior period of 2007, under the rule Vicente Fox, with the more recent period, during the governments of Felipe Calderón and Enrique Peña Nieto, all categories of crime have risen. House theft rose by an average of 33%, while drug cartel crimes and kidnappings have shot up to 174% an 150% respectively.

In order to get a real view of the effects of this increase in violence on labor productivity, we introduced the fictitious variable the war on drugs to our research. Surprisingly, the impact on labor productivity was different between that of the crimes prosecuted by local or state authorities, and those prosecuted by federal authorities.

Federal forces vs local and state forces

We found that the effects of criminality differ depending on if the crimes are processed by federal authorities or local and state authorities. The former seems to be more effective when it comes to combating crime.

According to our results, the majority of crimes processed by local or state authorities, especially extortion, murder, kidnapping and vandalism have a clear negative effect on labor productivity and are statistically important. Nevertheless, the effects are much less for crimes processed under the jurisdiction of federal authorities.

One possible explanation has to do with the role that both play on the economic environment when tackling the violence.

Presumably, federal authorities have less cartel corruption, and have therefore been more effective in their fight against crime than their local and state counterparts.

More collateral damage for productivity

An indirect effect of the rise in criminality, but just as negative on labor productivity, is the increase in public security costs, which have continued to grow since 2008, despite the financial crisis.

Faced with an increase in violence, it seems logical that states are investing more in security. These efforts, while being useful in the fight against crime, are not immediate, and it can take years before they become an effective control against criminality and consequently benefit in higher productivity.

The immediate effect, however, is negative for productivity. Other writers have found that a reduced anti-terrorism budget has resulted in a larger economic increase.

The global financial crisis showed us that there is a need for appropriate identification and evaluation of implicit liquidity trading risks in investment portfolios. It is undeniable that many of the financial institution collapses, both in developed and emerging markets, as well as the subsequent financial turbulence, were, to a certain extent, caused by the impact of liquidity trading risk on structured stocks portfolios.

Liquidity trading risk increases due to the incapability of financial institutions to liquidate their shares at a fair price during the settlement period.

In the chapter “Liquidity risk management in emerging and Islamic markets” that I published as part of the Handbook of Empirical Research on Islam and Economic Life (Edward Elgar, 2017), edited by the renowned scholar Prof. M. Kabir Hassan, University of New Orleans, I empirically develop and test a strategy of measurement and exposure control of market/liquidity risks of investment portfolios that include illiquid capital shares in critical circumstances, proposing that there be a strategy for the establishment of maximum risk limits.

The market risk of a trading position is the risk of a shift in value of the position due to unexpected market variables or other similar affecting factors, such as stock index levels or individual shares.

In order to evaluate the risks involved in their trading operations, main financial institutions are increasingly adopting Value at Risk [VaR] techniques and models. They are also adapting each of their individual features. There is no right or wrong way to measure or manage liquidity risk. It all depends on the individual objectives of each institution, their lines of business, their risk appetite and the funds available to invest in risk management projects.

Despite much criticism and restrictions, the VaR method has proven to be very useful in the measurement of market risk, and is widely used in both financial and non-financial markets.

Throughout the chapter, I establish a practical framework for risk measurement, management and control, including the effects of illiquid shares that are typical in emerging and Islamic markets. These liquidity shortfall effects must be treated with the utmost caution, and be included into the optimization risk engine of L-VaR framework.

The results of this study suggest that there is an inevitability of combining L-VaR evaluations with other methods, such as scenario analysis and stress testing to obtain a full view of other existing risks. In contrast to other liquidity models commonly used, the strategy implemented in this study is more suitable, as it takes into consideration the daily liquidation of small fractions of the investment assets from short-selling and long-only trading positions.

In the last few years, there has been a notable improvement in the adopting of risk and regulation management cultures among local financial institutions and regulatory institutions.

This methodology and the optimization algorithms of risk evaluation represent progress in the practicing of trading risk management in emerging and Islamic markets, especially in the wake of the most-recent credit crisis and the consequential financial shocks.

Although the concept of intrapreneurship is over 30 years old, this type of activity is still not commonly seen in companies around the world. In Australia, the most “intrapreneurial” country in the world, according to the 2016 Global Entrepreneurship Monitor (GEM) report, the amount of adult population who have taken part in the development or launch of new products or services, or the creation of a new business unit, establishment or affiliate for an established organization is only 9%.

The number of intrapreneurs is not even 2% among the actively economic population in Latin America, with the exception of the countries on the Southern Cone: Chile (5.4%), Argentina (3.1%) and Uruguay (2.6%). This contrast with other sectorial and geographical contexts, which show a positive relationship between corporate entrepreneurship and business results, especially in terms of growth in sales and turnover, profit and an increased market share. In many cases, intrapreneurship has helped generate new and disruptive businesses, which were also very profitable, such as Play Station by Sony, Gmail by Google, Post-It by 3M or Java by Sun Mircrosystems.

Although corporate entrepreneurship is recognized to be a source of success and a competitive advantage, companies are continuing to squander the enormous innovative potential of their own employees. We will review a few common scenarios, and we will see who, why and how entrepreneurship is generated.

Identifying Intrapreneurs

Entrepreneurs are not “born”, but are “self-made”. However, there are some common psychological traits which make them stand out, such as a strong will to achieve, the ability to take responsibility and risks, and the desire for independence and internal control.

Equally, corporate entrepreneurs tend to take initiative, accept challenges and discover new opportunities of growth for the company that they work for. They look to be leaders and put their ideas into practice. Nevertheless, they have a lesser desire for independence and prefer the security of their workplace as oppose to the uncertainty of starting up their own company.

The similar actions they have to independent entrepreneurs: they identify new opportunities of growth for the company, they develop a business model, they form teams and present their ideas and projects to the various evaluating committees at the company. Overall, they are aware that their success will depend on their ability to manage their network of internal supporters, namely those people who are higher up in the organization and who support their ideas.

Intrapreneurs can also be identified by the following traits:

• The main motivation for a intrapreneur is hierarchical independence and the possibility of moving up the reward schemewithin the company.
• Their time orientation depends on the urgency to meet deadlines set by themselves and by the company.
• Their activity is based on direct participation and team leadership instead of delegation and supervision of others.
• Instead of carefully managing risks, which is a characteristic of management, an intrapreneur takes moderate risks, as if they were an independent entrepreneur.
• In terms of status, a corporate entrepreneur is not worried about traditional status symbols, they are looking for independence.
• When making decisions, they are not dependent on superiors, they are able to make others agree with them, in order to achieve their goals.
• Unlike management, which guide others, an intrapreneur guides themselves, their clients and their internal stakeholders.
• They predominantly establish transactional relationships with others, without being left out of the organizations hierarchy.

All companies need instinctive entrepreneurial moments from their employees, and the challenge for businesses is to include the tools to attract and retain people with these characteristics into their human resources policy. Correctly managing their motivation and competitive edge will stop them from leaving the company, whether that be to start their own business or to join another company with a more entrepreneurial culture.

How far does intrapreneurship reach?

Even though Corporate Entrepreneurship encompasses the strategies and practices that companies use to look for new business opportunities via the promotion and management of entrepreneurial competences, the overall impact of intrapreneurs can be seen in two ways.

On one hand, they may focus on generating new business for companies, or even new companies or spin-off companies. This involves searching for new opportunities to amplify the activities of the company in terms of its related sectors, as well as the development of new products, markets and technology. They create fresh activities within the organization which of course involves a larger risk of failure than the company’s business lines, as well as an overall degree of uncertainty. Firms such as P&G, 3M, Google and more recently Tesla are clear examples of strong intrapreneurial dynamics and a continuous development of new business within the companies.

On the other hand, a strategic renovation can take shape, which can imply a new combination of resources and a full transformation of the company’s foundations, changing it into a different company to what it was before. The process of strategic renovation often includes the redefining of the company’s mission, the creation of a new business model, the reformulation of the competitive base strategies, and the acquisition or generation of new competences. The success of this process mainly depends on the entrepreneurial instinct similar to what is seen when companies are first created, with a committed entrepreneurial leader who has the same motivation, attitude and behavior of a traditional independent entrepreneur. Some notable examples of intrapreneurial leadership, that drives relevant strategic renovation are IBM, Xerox and Lego.

Creating an entrepreneurial culture

The relative small amount of intrapreneurs in Latin America is not due to a lack of entrepreneurial initiative within businesses, but because there is a lack of an entrepreneurial culture in businesses. Unentrepreneurial companies are unable to generate an environment that encourages individual initiative among employees, and are unlikely to attract entrepreneurial leaders. An intrapreneur should be able to use their skills and knowledge creatively across different areas, and the company has to create a climate that encourages the development of this type of creativity.

A business with an entrepreneurial culture is characterized by:

• Having a system with information on the needs and opinions of clients.
• Being at the forefront of technology and including these advances into their value chain.
• Respecting individuals and the ideas that come from “lower down”, as any employee from any level can be a key player in terms of innovation.
• Tolerating well intended failures, because they are a learning tool, although intrapreneurs must also follow the rules established for the development of new ideas.
• Sharing knowledge and not allowing it to just stay within one department.
• Encouraging informal networking, as creativity often happens outside of designated frameworks in excessively rigid organization designs.
• Creating multi-skilled teams with different outlooks and complimentary skills, mirroring what happens in the creation process in independent businesses.
• Having a long-term objective, along with the pressures of a short deadline. Management allow new risky projects enough time to prove their viability.
• Having available and accessible resources for the development of new projects, even though they may be high risk.
• The higher Management supporting the initiatives and creating the conditions for intrapreneurs to strive in the development of their ideas.
• Celebrating internal success. Successful intrapreneurs are rewarded and recognized by the organization.

An “entrepreneurial” company is one that integrates these characteristics, regardless of the people who are leading the entrepreneurial process. Thereupon, the organizations with an entrepreneurial culture achieve a balance between individual entrepreneurial initiative and a spirit of cooperation, as well an overall innovative group identity. Thereby, the entrepreneurial culture can penetrate all levels of the organization, and the processes in the search for innovation can continue to strengthen in time.

November 9th was a very unusual day in Los Angeles (California). The faces of the citizens of this democratic state were painted with disbelief. There was fear in the eyes of the thousands of undocumented immigrants after Donald Trump’s seemingly implausible victory. A couple of months before, I had begun my project of collecting undocumented immigrants’ stories, and now my research had taken an unexpected twist.

According to the Pew Research Center, there are more than a million undocumented immigrants living in California -the second highest figure after the state of New York- and more than 71% of them are of Mexican origin. Many of them live in sanctuary citiessuch as Los Angeles, where the local authorities do not cooperate with the federal authorities for matters such as migration (migration agents are not allowed to arrest anyone without a court order). Therefore, irregular migrants living in these cities are somewhat protected by the law.

However, were they going to be safe from Trump’s finger-pointing (and his Twitter rants)? The purpose of my research was to ascertain insights on the working conditions of undocumented workers, as well as to understand the desires and aspirations that took them to the United States in the first place. I could then form a critical opinion about this phenomenon which affects such an important sector of the population. It is a fact that companies benefit from the constant flow of immigrants.

It has been noted that undocumented immigrants have a characteristic work ethic due to them working long hours for small salaries, and usually doing jobs that many Americans do not wish to do. Nevertheless, it is all too common for many companies to take advantage of the lack of rights that these immigrants are afforded, and even threaten to call the Immigration Crime Engagement Department (ICE) if they complain.

“Illegal” workers in the spotlight

One of Donald Trump’s main tools to win the presidency was his rhetoric about undocumented immigrants. During his presidential campaign, at a speech in Phoenix on August 31st, he said:

“While there are many illegal immigrants in our country who are good people, this doesn’t change the fact that most illegal immigrants are lower-skilled workers with less education who compete directly against vulnerable American workers, and that these illegal workers draw much more out from the system than they will ever pay in.”

These claims, as well as others by President Trump in which he specifically labeled Mexican undocumented immigrants as “rapists and criminals” generated much discontent among the migrant population of southern California, a demographic that generally works in the most demanding, monotonous and poorly paid jobs in the United States.

These undocumented immigrants see this speech by Donald Trump as “essentially permitting” the mistreatment and the precarious conditions in which they find themselves. Salary theft is disturbingly common among this population, as well as verbal and physical abuse. However, many are afraid of reporting their experiences to the authorities since the fear of being deported and having their families separated is common among the undocumented immigrants in the region. When asked if they feel that they are stealing jobs from American workers, the answer is “no”, as they are the ones working in the most demanding jobs at a salary that Americans would not work for.

Undocumented immigrants who continue to work in a wide variety of undervalued jobs (domestic workers, cleaners, gardeners, construction workers, etc.) now have to live in an atmosphere of persecution that has ben promoted by President Trump’s rhetoric. These are people who could previously go out and do their day jobs freely. Now, they have to look through their windows before leaving their home to walk in the streets that they helped to build.

The fear of losing what they have or have not achieved in the United States can lead to tragic situations. On February 22nd, Guadalupe Olivas Valencia, a Mexican immigrant, decided to take his own life just minutes after being deported. This attracted mass media attention from all over the world, as a clear sign of the consequences that these people face when they lose everything after years of sacrifice.

Are businesses responsible for migration?

There is still a lot to be done regarding those immigrants who leave everything behind in search of better opportunities across the border. Given that meaningful migration reform is highly unlikely under the current president’s administration, it is extremely important for both the Mexican Government and businesses to create more opportunities for those seeking work. This would ideally reduce emigration and give more opportunities to those who have been deported or who have decided to return to the country voluntarily.

Most recently, the Mexican Government has taken the following action:

• Education initiatives to ensure that young people who have been deported encounter few obstacles when enrolling in Mexican institutions.
• The “Somos Mexicanos” (We are Mexicans) program which facilitates the social and economic reinsertion of those returning to the country.
• The creation of a telephone hotline to help with any inquiries that migrants in the United States may have.
• Free legal services in Mexican Consulates.
• Psychological support for those Mexicans who are suffering from a trauma or crisis.

Nevertheless, it is critical that both the government and private sector develop initiatives to protect our returning fellow citizens. We must also consider that not only a reform of the employment infrastructure is needed, but also of the housing, education and healthcare infrastructure. To achieve adequate social reinsertion, we need the government and businesses to work together.

The challenge for businesses in the United States is just as big, as they must check the status of the people they hire using the e-verify system. Nonetheless, it is down to these large businesses to pressure the government on the issuing of work permits. This means that immigrant workers would no longer find themselves in vulnerable situations while having to work with false documents.

One of the people I interviewed summed up the complex situation in which many find themselves: “Here they don’t want me, and there they’ve already forgotten me”. These migrants, who fight day-in-day-out for a better future, need to know that we have not forgotten them.

Even though poverty has decreased in a decade from 43.9% to 27.9% (2013) in Latin America and the Caribbean, it remains the most-unequal region on earth. The region is home to 14 of the world’s 150 wealthiest people, while some 82 million people survive on less than $2.25 dollars a day, and another 124 million are at risk of falling into poverty.

While several programs have been put into place to reduce poverty and fight against margination and social exclusion in the region, for example, by educating the poor, little has been said about the role of the non-poor in fighting against or perpetuating poverty and inequality.

For those who are not poor, poverty is often a distant phenomenon for which they feel no responsibility, blaming those who suffer it. This social dehumanization exacerbates the patterns of exclusion and segregation that reproduce and generate poverty, hindering the development of poverty-eradication strategies. What if, instead of focusing our efforts only on educating the poor, we educated the non-poor, making them aware of the human and social consequences of poverty? Perhaps the answer is a dual educational process, which would not only increase the capabilities of the poor but also those of the non-poor, to create integration strategies that help to mitigate poverty.

This was the hypothesis of the research I performed together with Dr. Luis Portales, from the University of Monterrey, published in the article “The impact of university social services through social incubation and student engagement in poverty alleviation” as part of the United Nations project Principles for Responsible Management Education.

We look at Social Service in Mexican universities. After the Mexican revolution, under the guise of reciprocity and solidarity between universities and low-income sectors, the state established the Social Service, through which university students give something back to society for the education they are receiving—meaning that they perform 480 hours of service to the community or an organization before they can graduate. Because it is a decentralized program, each university regulates and organizes it as it sees fit; some private universities have geared Social Service toward learning competencies for social development and civic commitment, including management knowhow and practices and tools to fight poverty and economic exclusion in vulnerable communities.

In our research, we identify three poverty-reducing educational models used at nine private universities. The information was gathered from interviews with students, professors, and administration staff, as well as from fieldwork.

• The traditional model: The student develops teaching activities aimed at strengthening the entrepreneurial profile of the poor. Activities imposed by the program are carried out, but improvements are not proposed, so the students’ impact on poverty alleviation is limited to awareness and a change in their perception of the problem.
• The service-learning model: This model combines community service with curricular learning, with the intention that knowledge acquired in the classroom can be used to improve the lives of the poor through projects generally linked to increasing incomes. By designing strategies for a specific problem, students assimilate the concepts better and feel more committed, but a lack of continuity is the biggest limitation.
• The social incubation model: Students are involved in the process of social entrepreneurship to develop an idea or strengthen business capacities to improve the quality of life in the entrepreneur’s household. Not only does the students’ perception of the impact created change but also the perception the entrepreneurs have of themselves, their businesses, and their quality of life, which generates both a challenge and a commitment and helps to reduce patterns of exclusion and marginalization that exacerbate the cycle of poverty.

The primary difference between the three models is the students’ degree of autonomy and participation. While in the first model there is little involvement, in the second, implementation is limited. The third model strengthens empathy and generates supportive links between the entrepreneur and the student, who share the same goal. By appropriating the problems and applying solutions, students see themselves as agents of change for the poor, while the entrepreneurs receive training and advice that increase the impact on personal and business conditions.

Social incubation shows how knowledge transfer between students and entrepreneurs contributes to improving living conditions, especially for women. Still, the greatest challenge is to consolidate these business models based on shared value creation and to build more-inclusive economies.

Under this perspective, the university Social Service contributes to some of the United Nations Sustainable Development Goals such as fighting poverty and promoting justice and awareness by building associations between different actors in the society. These experiences with the Mexican Social Service program foster the creation of alternative models in universities to fight poverty and the dehumanization that goes along with it.

Taken from:

Book: “21st Century Management Education and the Challenge of Poverty”, (2015) Edited Carole Parkes, Milenko Gudić, Al Rosenbloom. Greenleaf Publishing Ltd. London, England.
Chapter X: “Combating poverty through management education and social incubation”
Authors: Portales, L; Garcia de la Torre, C.
ISBN- - 978-1-78353-257-3
E Book • ISBN-978-1-78353-256-8

Beginning in 2000, when there were promises of a more-democratic system and a stronger civil society, non-governmental organizations (NGOs) blossomed in Mexico, offering different social groups a new way to participate. In the international context of the previous decade, there had been a boom in alt-world movements and a worldwide explosion and expansion of foreign NGOs, some of which were present in Mexico and began holding the established powers accountable. In that same decade, and with increased strength thanks to the victory of a different political party, Mexican NGOs also became more vocal about issues related to development and transparency.

Although the first NGOs in Mexico were created in the middle of the eighteenth century, their public relevance took off with the development of the Internet and digital media, when their actions and claims spread all over the world. Particularly, NGOs emerged to fill voids lacking government attention, such as in health and education, promoting democracy and human rights, and tending to the most-vulnerable groups of society. Today, there are more and more NGOs in Mexico (around 28,000), but their aid approach has not changed much. Unlike their European and U.S. counterparts, they have not taken full advantage of the opportunity that supposes engaging with the private sector, partly because they think they hold contradictory positions.

However, since the Río 1992 Summit, it has been accepted that cross-sectoral alliances involving the state, businesses and civil society are one of the most-efficient means of bringing about significant changes to complex, intricate social and environmental problems. Particularly, the most productive alliances between NGOs and the private sector have come about mainly to promote environmental conservation, the creation of sustainable value chains, and the implementation of Corporate Social Responsibility (CSR) programs and policies. NGOs have proven to be effective allies in mitigating business impacts on the environment and on local communities, and in creating innovative practices. The stronger the relationship, the more decisive the transformation has been.

But in Mexico, what is the likelihood of NGOs engaging with the private sector? How willing are NGOs to work with corporations? And what are the experiences so far? These are a few of the questions that led to theresearch project “NGO-Business Engagement in Mexico,”which I conducted in 2016 along with Dr. Dennis Aigner, professor at the University of California, Irvine, and financed by the University of California Mexico-U.S. Institute and CONACYT.

To obtain a general panorama, we surveyed 364 Mexican NGOs, of which 78% were identified as social NGOs and 22% as environmental. The survey asked about the level of engagement between NGOs and the private sector, the motivations behind it, some insight on how the engagement initiated, and the percentage of NGO employees and budget that are dedicated to private sector-related activities. We also evaluated some aspects relevant to building cross-sectoral trust, such as how much information NGOs make available to the public about their mission, their performance, and the media they use, as well as how much trust respondents have on institutions such as the government and the private sector, and whether they have experienced corruption in their activities with firms.

In general, the main findings of the study confirmed our hypothesis: In Mexico, only one-third of civil society organizations have had any type of engagement with the private sector in the last five years. Of the remaining organizations, very few taken a position that is openly contrary to businesses, thus showing a complete disconnection or indifference between the two sectors. This becomes problematic when we consider that the complex problems we face today—climate change, biodiversity loss, political instability, pollution, and others—cannot be solved by governments alone. Private actors, that is, NGOs and businesses, also share an essential responsibility in the development and implementation of creative alternatives and in the generation of knowledge and expertise that helps us to move toward fairer and more sustainable models.

Transactional Relations at Most

Previous studies on cross-sectoral collaboration have revealed that the depth of the commitment between NGOs and firms depends on the level of interdependence and the complexity of the interactions among organizations from both sectors. Accordingly, the engagement can be purely transactional, giving priority to fundraising through corporate philanthropy, or it can be transformational, aiming to change business practices or social structures.

• In Mexico, most NGOs establishtransactionalrelations with businesses mostly in the form of project implementation, consulting services, and participation in government-led initiatives. Even though this engagement goes beyond thephilanthropystage, most NGOs do not reach theintegrativestage, which includes NGO participation in consulting processes with the private sector or the co-design of CSR initiatives. Even fewer reach thetransformationalstage, which implies shaping public policy and pursuing change backed by civil society.
• Currently,transactional initiativesare focused on carrying out conservation, education, health, and social development projects, as well as raising awareness and providing environmental training. Such initiatives pursue narrow goals and are short-termed. On the contrary,transformational initiativesseek to generate new rules or management processes to achieve structural change. An example in this regard is El Triunfo Conservation Fund, which since its creation in 2002, brings together more than a dozen private actors, institutions, and communities to assure the conservation of El Triunfo Biosphere Reserve in Chiapas. Besides protecting the rich biodiversity of this forest area, the initiative has designed a model of shared management of natural resources, combining conservation and productive activities such as sustainable agriculture and ecotourism.
• Of the few NGOs that engage with the private sector, almost half of them do it out ofstrategic considerations, while the other half do it as a result of an unforeseen opportunity, implying that few NGOs have formal procedures to screen possible partners. Most NGOs perceive collaboration with the private sector as anopportunityto acquire and manage resources, to extend their networks, and to boost their reputation.
• Most NGOs believe that working with the private sector can represent a larger opportunity than a risk. They regard engagement as afeasible option, despite the different visions and goals of each sector, and they do not perceive firms having morepoweras an impediment for pursuing common goals.
• Generally speaking, NGOs are not completely sure that “businesses are atrustworthy partner,” even though most believe that they are more honest than the government and have not witnessed corruption within businesses first hand.

Absence of a Strategic Approach

Aspects of trust, transparency, and strategic alignment can hinder cross-sectorial collaboration. Assuming that transparency helps to build mutual trust, it is commonly believed that the more transparent an organization is, the more opportunities for collaboration it will have. But collaboration is also a result of certain strategic considerations at the organizational level. Is engagement with businesses aligned to the goals, model of change, and allocation of resources of the organization? Apparently not.

• Only one-fifth of the NGOs earmark aspecific budgetfor activities related to the private sector and most of them do not have employees dedicated to these activities.
• Even though 84% of the NGOs seem open to working with other actors, such as local communities, other NGOs, or the public in general, only 31% work with the private sector. This goes to show that the degree of “openness” of an NGO towards other groups in society does not determine the likelihood of engagement with the private sector.
• Less than half of all the NGOs surveyedpublish informationabout the activities they perform related with the private sector, and very few publish financial information or data about how they assess their projects internally. This prevents businesses from being able to identify the most effective and efficient organizations.
• Regardingtransparency, of the NGOs that make their information public, only 61% could be considered transparent based on the type and amount of information they publish. Of these organizations, fewer than half of them work with companies, which implies that being transparent is not a necessary condition for engaging with the private sector.

The Purpose of NGOs: A Model Unique to Mexico

Studies about collaboration between NGOs and businesses show that in many countries relations have shifted from a confrontational to a cooperative approach. Still, even though Mexican NGOs are also becoming more practical, flexible, and less dogmatic, they are far from building lasting relationships with businesses.

Our research shows that there are many areas of opportunity for NGOs when communicating with civil society, businesses, and other organizations. Even though they use social networks widely to disseminate their activities and goals, NGOs do not know each other. Let us now imagine how much work is required for businesses to identify trustworthy, competent allies to carry out programs with ambitious goals and a long-term commitment, both necessary to achieve positive, scalable, replicable effects that could bring about important transformations.

In particular, the results of our survey identified a broad lack of understanding about what NGOs actually do, their functions, and what their possible contributions to solving complex problems might be. Much has been written in other countries about the roles of civil society in denouncing unfair or incorrect situations (watchdogs), their ability to set little-known or poorly understood issues on the global agenda (agenda setters), their capacity as resource and contact intermediaries (brokers), and their contribution in the provision of basic or emergency services (providers).

But the functions of NGOs in Mexico and the goals they pursue are often not made explicit. Their most obvious contribution lies the realm of service provision, covering many needs that the government has left unattended for years. But perhaps less clear is their role in representing the interests of vulnerable, excluded, and minority groups in public or private decision-making processes, such as consultations about public policies, local community consent in the exploitation of natural resources, and international human-rights agreements, among others.

So, if in Mexico neither the degree of openness of an NGO towards other sectors of society, nor its degree of transparency and accountability determine its propensity to work with the private sector, what does?

The only factor that might have a significant influence on cross-sectoral collaboration is the strategic decision to integrate business engagement as a specific component of an organization’s intervention model or theory of change. That is, to openly and decisively seek corporate engagement as a means to achieve the organization’s ends. Models like this one have been adopted by international NGOs such as Conservation International, Oxfam, and WWF, which engage with the private sector to boost and gain leverage for their ambitious conservation, anti-poverty, and climate-action agendas, respectively.

Obstacles to Cross-sectoral Collaboration

Engagement is not free of obstacles and it is important for organizations that choose this alternative to keep this in mind. In this regard, we have identified at least two main obstacles that Mexican NGOs will have to face when opting to engage with firms.

The first obstacle has to do with overcoming the lack of knowledge and experience regarding:

• How to interact with the private sector,which includes defining intervention formats, project length, managing resources and workloads, dealing with power relations and reputational aspects, among others.
• How to choose adequate partners,including decisions about whether to engage with multinational or Mexican firms, to act at the national or local levels, and about whether to engage with one company at a time or several simultaneously.
• How to manage cross-sectoral projects,which refers to the type of organizational skills and expertise each project requires, as well as demands from the private sector regarding reporting, accountability, confidentiality, responsibility sharing, and more.

The second obstacle has to do with the political implications of openly engaging with the private sector, which might force NGOs to:

• Reconsider their positionor mission in order to move ahead with the common goals of the engagement, going beyond the organization’s particular goals or views of the situation.
• Become vulnerable to criticismfrom other “natural” constituents (i.e., the social groups they represent and other NGOs) because of their proximity the private sector, perhaps causing them to lose credibility in these social circles.
• Take a position against the status quoand the interests of dominant groups by means of fighting for the rights of vulnerable groups, environmental conservation, or other politically-sensitive topics.

To help overcome these obstacles, universities can play an essential role in building bridges between NGOs and the private sector by means of creating spaces of interaction and expanding their traditional spheres of action to jointly create solutions to complex problems. One example in this regard are the activities promoted by SUSTENTUS, EGADE Business School’s sustainability and entrepreneurship center, which promotes + Talento, a training course that motivates firms to hire people with disabilities and gives insight into how to develop inclusion policies. Another example includes research projects such as this one, where ten representatives of civil society and the private sector have participated as members of an advisory committee that helps to ensure that the study is socially relevant and that the information produced includes robust and actionable data and insights.

Despite the obstacles mentioned above, cross-sectoral collaboration is still considered one of the most-effective ways to address society’s most complex, intricate problems. Both NGOs and firms in Mexico could benefit from embracing this model as soon as possible.

We are living a Big Data revolution. Yet the huge volume of data transmitted every day over the Internet and from millions of interconnected sensors might be overwhelming to organizations that are just beginning to get started in the Big Data world.

The volume of data generated in the world is calculated at more than 2.8 zettabytes and is expected to rise to 50 times higher by 2020. Likewise, the number of nodes and sensors is growing at an annual rate of 30%. This data explosion surpasses the ability of organizations to collect and process it and to extract value from it, so they can continue to be relevant in a very competitive arena where no organization can escape from this new reality.

As it is critical to collect this data, businesses must design a Big Data digital strategy to be able to face the growing volume of information and to create competitive advantage. The strategy is always one of selection, because not all data can be used. An organization must make decisions about prioritizing and implementing a short-, medium-, and long-term portfolio of initiatives. They must be aware that the most-valuable data are not those stored in databases but rather data that have not yet been created.  

In the chapter “The Strategic Business Value of Big Data,” coauthored with Dr. Jorge Ramírez and published in the book Big Data Management (Springer, 2017), we analyze how Big Data impacts business competitiveness and innovation, to identify different digital strategies to be implemented to gain competitive advantage. The disruptive power of Big Data requires businesses to get involved at the strategic level, because they can change the competitive environment by the transformation of processes, the alteration of corporate ecosystems, and the facilitation of innovation through products and services they had never imagined. Businesses such as Uber, Waze, Airbnb, and Tesla have helped some industries to transform, but not all sectors adopt Big Data at the same pace or give it the same relevance.

Many technology, media, auto, and telecommunications organizations are taking advantage of Big Data, while other types of businesses such as financial services, health, construction, energy, consumer goods, and the public sector still have a way to go. But they should pay attention. The rapid change in sectors such as mobility and transport shows the size of the phenomenon; today auto, technology and startup companies are both competing and complementing each other, reimagining their processes, their ecosystems, and their value creation in a world they had never considered.

Mapping out opportunities in the algorithm age

Opportunities from Big Data can be framed through two dimensions: reengineering the value chain and reimagining the offering. Think of any product, service, or company and how its value chain is organized. It has several clients and suppliers, and many data are generated not only at the point of sale—through online, physical, or mobile channels—but also at the different stages of the supply chain—automated order and delivery processes, financial processes, or even human-resource management. Meanwhile, reimagining the offering requires creativity and vision, and Big Data offers ample opportunities for new products and services.

Essentially, the goal of a Big Data digital strategy is to turn data into information and knowledge, which over time leads the business to transform. Leading companies are constantly threatened by new players who approach client needs in different ways and force businesses and entire sectors to be reinvented. They require agile methods to test and improve prototypes, products, and strategies along with clients. One example is Amazon which, in only ten years, introduced electronic-book readers, tablets, smartphones, cloud services, delivery services, and online markets.

Before setting up a Big Data strategy, it is necessary to identify in which maturity stage the organization is situated:

• Enhancement: Even though it is the least-radical stage, it can provide immediate value creation and fund the broader Big Data strategy growth. This stage includes predictive maintenance and streamlined digital links to help suppliers and clients make better and more-accurate decisions. This enhancement includes ‘recommendation engines,’ a useful and sometimes necessary tool.
• Exploration: The organization investigates offerings adjacent to the current business or pursues larger adjustments of the value chain. These decisions involve management and require significant investment in infrastructure and technology, and their performance must be closely tracked.
• Transformation: This stage is relevant for organizations that need to face deeper changes. This all-encompassing strategic move has the greatest potential to generate competitive advantage, but also implies the greatest risk. It requires major investments and the development of new partner ecosystems and key alliances.

To achieve this vision, businesses can attract scientists, experts, or organizations who can find patterns in data and translate them into useful business information. But the CIO should be the one to run this transformation and to make decisions above and beyond the technology architecture and the traditional processes.

The Big Data strategy depends on the maturity levels and on identifying and prioritizing strategic choices. An intuitive tool is the digital strategies matrix (see Figure 1). Organizations must take into account both the external environment and the internal capabilities. As a result, the digital strategy is an iterative process that is continually adapting and identifying new opportunities.

Figure 1. The Digital Strategies Matrix, authors’ elaboration based on the IT Value Performance Tools Link to Business-IT Alignment Gartner Research.

Big Data for decision making

It is not enough to trust intuition and experience, because we are seeing the emergence of a culture of data-driven decision making. Companies that use their data more intelligently have a better performance in financial and operational results and are better able to realize their business objectives.

Organizations with a higher maturity level are better positioned to carry out key business strategies using accurate, real-time data. Furthermore, the data tend to be fragmented and out of date at lower maturity levels, which makes it difficult to make adequate, timely decisions.

The realization that fact-based decisions are critical at every level of the organization has led to a need for technological tools and advanced analytics techniques. Groups of data on clients are analyzed—for example, their preferences, purchasing habits, website browsing, purchase histories, physical position, response to incentives, and other demographic information—and the relevant decision makers in each case receive this information. The greatest benefit of Big Data analytics is improving and speeding up the decision-making process and supporting decision making with automated algorithms.

Five Industries Impacted Greatly by Big Data

Several organizations from the following sectors are using Big Data to enhance, improve, or transform their value and performance:

• Retail: With data on online transactions and client behavior, the retail industry is taking advantage of the value chain for merchandising and pricing, improving customer service or using location-based marketing strategies to send offers to their key customers’ smartphones. They are also optimizing distribution and logistics thanks to data from GPS-enabled telematics. 
• Manufacturing: In their production processes, manufacturing companies are incorporating real-time data from sensors. There are several advantages, from reducing waste to maximizing yield throughout larger, more-complex, more-globalized supply chains.
• Telecommunications: By analyzing network traffic in real time, businesses in this sector can optimize service quality, develop new products, identify fraudulent behavior, or prevent the loss of customers, among other things.
• Public Sector: Big Data can help governments reduce administrative costs, collect taxes more efficiently, and increase transparency by making the most-relevant data on programs and public policies available to citizens.
• Health Care: The integration of nanotechnology embedded in people, for example, is an innovation that could be used as a tool for monitoring and diagnosing, integrating and sharing different datasets with biological information and high-resolution tools such as x-rays, CT scans, or MRIs.

In these sectors and others, Big Data will have a profound impact on business as we know it today. To be successful in the digital transformation, businesses must link their offerings to their strengths—what they know how to do well or what makes them stand out—and identify where they can add value for their clients. In data processing, volume and speed will continue to present challenges for businesses to become more agile than their competitors, but in the end, it will be the ability to create a culture that fosters innovation and experimentation that will make the difference.

Traditional methods to assess multi-asset portfolio trading risk do not generally consider liquidity risk but assume a perfect market. However, not paying attention to liquidity risk could lead to a considerable underestimation of total risk, especially in emerging markets, which tend to be more illiquid.

Now that developed economies have stagnated, investment funds and portfolio managers are once again looking to emerging markets and their attractive returns. On this type of illiquid market, liquidity-risk measuring tools take on a new importance, allowing risk and portfolio managers to assign a preferred liquidity horizon and to distribute rationally short- and long-term trading assets.

Models to assess liquidity risk (Liquidity-Adjusted Value at Risk – L-VaR) provide tactics for assigning assets to be used in trading portfolios in adverse market conditions. To estimate liquidity risks, in my research I have applied RiskMetricsÔ (J.P. Morgan), Al Janabi 1 and Al Janabi 2 models (the latter is known in specialized literature as the “Al Janabi Model”). I compare the results of these three models in different trade portfolios in my latest chapter, “Value at Risk Prediction under Illiquid Market Conditions: A Comparison of Alternative Modeling Strategies”, published in the book Risk Management in Emerging Markets: Issues, Framework, and Modeling.

I have focused on the relatively unexplored region of the Gulf Cooperation Council (GCC), made up of Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates, and Oman, comparatively more-illiquid emerging economies. A daily dataset of market returns from these countries was selected. By applying different asset-liquidity models in a multivariable context and with financial and operational limiting factors, I found that, with certain trade strategies, such as short-sale stocks, the L-VaR model chosen for capital allocation is critical, especially during moments of crisis. In these emerging markets, not paying attention to liquidity trade risk could lead to considerable underestimation of risks.

Calculating liquid asset risk can be useful for any investor with a trade portfolio, as well as for financial institutions, as liquidity crises have been the force behind many bankruptcies. That is why more and more financial entities are using L-VaR techniques to measure the different trade risks. Specifically, they turn to custom-made internal risk-assessment models to respond to the traits of each institution.

The Basel Accords for controlling and measuring financial risk allow each financial institution to build its own internal risk model, so they can reserve their capital cushion against possible market turbulence. In fact, these internal risk models can be used to determine how capital financial institutions need to back their securities and comply with current risk-management regulations. If liquidity risk is not considered, financial institutions could use improperly their capital cushion, which is needed to absorb unexpected market shocks.

In general, asset liquidity trading risk stems from the difficulty in trading with it. This affects the ability of financial agents to trade or unwind their trading positions. Many insolvencies arise when financial bodies cannot get rid of their holdings, so the liquid value of the trade assets can differ considerably from the real market value.

Obviously, the growth in asset trading in emerging markets demands a reevaluation of market and liquidity risk-management techniques and methods, such as the L-VaR multivariate methodology, considering different liquidation and correlation factors, trade volumes, volatility prevision, and expected profit. As is suggested by the findings of this research, asset liquidity trading risk should be included in any performance assessment, as part of risk-adjusted compensation.