Chapter 8
The Transition From Relation-Based to Rule-Based Governance
CITIC’s (Failed) Attempt to Change the Old Way of Doing Business
In the late 1990s, in order to modernize its business operation, China International Trust and Investment Corp (CITIC; then the largest state-owned investment company) asked the consulting powerhouse McKinsey to develop an information system for its risk management. The system used statistical models that, based on the information about loan applicants, predicted the risks of issuing loans to them. After months of intense model building and testing, and some $1 million in consulting fees, McKinsey delivered the system to CITIC for use. Facing the issue of the high rate of bad loans and ...
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