Arsene Wenger - Remembering September 2008 (Final)

Fiery football with burning coconut in Palangkaraya in Kalimantan, Indonesia. Don't play, play football is big business.

I know, I know Arsene Wenger is the manager of Arsenal Football Club for the last 13 years and not a financial services executive. Ya, ya footballing is different from financing. As the most popular sport in the world it is there to bring a smile to all. Not unlike these financial services trio of private equity, banking and hedge funds that had brought so much grief last September 2008.

Recently the G-20 met in Pittsburgh. They enumerated some tough measures to prevent another September 2008 from ever happening again. Prominent is the curbing of bonuses that encourage executives to take unreasonable risks to fatten up their paychecks through contracted bonuses based on performance. Another was an an overhaul of financial regulation, with the aim of discouraging the high levels of lending to borrowers who were liable to default, that was a central feature of the crisis.

Back to football (smile on my face). These were the records of Arsenal under Wenger.
- League Champions - 2004, 2002, 1998.
- FA Cup Winners - 2005, 2003, 2002 and 1998.
- And who could forget the invincibles rampaging through the whole season (2003-04) unbeaten, a first in modern day football in England as well as an exciting young team for the 2009-10 season. Despite the lack of trophies since 2005 and a tight cashflow due to development of their new 60,000-seater stadium costing £0.43 billion, Arsenal was able to rationalise their financial situation through Wenger shrewd selling and discipline buying.

I was in Banker's Street in Canary Wharf, East London. On the left is Citigroup with the tower blocks and hallowed company of HSBC and Barclays nearby.

There are a few critical qualities financial services people can learn from Wenger:
1) He spends within his means. Hallmark of a good executive who believes in "cash is king" where cherry-picking can be had when opportunities knock.
2) He doesn't spend for the sake of spending. He has £60-80 million to spend on buying players but has yet to spent it. He maintains the current crop of players can bring honours.
3) He has consistently earned money from the transfers market. Lately he made about £70 million from selling Emmanuel Adebayor Kolo Touré, Alexander Hleb and Justin Hoyte.
4) Arsenal latest turnover is at £313.3 million the largest in British history with an after-tax profit of £35 million.

There were times I thought football has gone on the bandwagon of bad business practices of pre-September 08.
1) Real Madrid had just bought Ronaldo, Kaka, Karim Benzema and Xabi Alonso for about £226 million with borrowings. Their "galacticos" policy over-rides financial prudence.
2) Manchester United and Liverpool has debts to the tune of £700 million and £500 million respectively.

These clubs may be going Leeds United way where at the turn of the millennium a huge amount was spent on the transfer market with the risky proposition of earning it back through Champions League qualification. They failed 2 years in a row and is now languishing in England's 3rd-tier football. Many clubs had gone bankrupt from over-leveraging - from the British Isles and across Continental Europe.

UEFA chief Michel Platini has been trying to get the clubs to live within their football income. And by 2012 it will be enforced. The problems lies with those spending little of their own cash while leveraging the club assets and goodwill to the max. "Debt is good" mantra is at work. I have no problems where there is a reasonable amount of debt and greed (if not nobody will be in business) but not to the extent of crippling football daily operations and cashflow where profits and proceeds from the sale of players were used to service debts.

Wenger is a study in contrast when compare to many other football managers. He contrasted his policy with some of his managerial rivals. Quote - "I look back at everywhere I worked, when I left the club there was money in the bank," he said. "But when I see other clubs in the situation they are I still think it is in some ways not responsible to think you walk away and the club is in deep financial trouble. That cannot be accepted from any manager."

So I propose Arsene Wenger to take over as CEO of AIG or Citigroup tongue in cheek.