This crisis management guidebook, Dangerous Markets, is written from a microeconomic and practitioner’s perspective. It is drawn from McKinsey & Company’s extensive client work globally and our significant firm-funded research into the causes and impact of financial crises. It is not an academic treatise, nor does it necessarily address all crisis-related topics for all occasions. Rather, we have drawn upon our practical crisis management work for the private and public sectors in numerous countries.

Why manage financial crises proactively?
Financial crises are simply to important and too costly to shareholders and societies to leave unmanaged. There is no question that there are real dangers in financial crises: Companies go bankrupt, management teams are fired, investors lose their money, employees lose their jobs, pensions disappear, deposits are frozen in time, personal savings get depleted, civil unrest increases, public riots can break out, contagion spreads across political borders, secondary effects appear such as higher risk premiums in other unsuspecting countries and, finally governments fall – as they did in Indonesia, Ecuador, Russia and Argentina in recent years.

Financial crises are occurring more frequently, with costs that are measured by as much as one-quarter or one-half of nation’s GDP. They also have long time horizons, measured in years not months. At different levels, contagion is now a fact of life in the world. Moreover there is no end in sight. We believe firmly in the net benefits of dynamic market forces of globalization, but the collision of these forces with weak economies and weak financial systems exposes the rot lying below the surface in many countries and, in our view, will only increase the rate of intensity of crises in the future. That’s why financial crises need to be managed.

Dangerous Markets is written for all managers – CEOs, executive operating managers, investors of all kinds, public officials, and anyone else who has a self-interest in anticipating, weathering and prospering in a financial crisis.