Savvakis C. Savvides


Savvakis C. SavvidesSavvakis C. Savvides is a former Senior Manager of the Cyprus Development Bank with many years experience in the evaluation and financing of investment projects. He has also served in many Boards such as, the Interim Board of the Bank of Cyprus between April-September 2013 and is currently a member of the Board of the Cyprus Stock Exchange. Savvakis has been a regular visiting lecturer on investment appraisal and risk analysis at Harvard University and at the John Deutsch Institute for the Study of Economic Policy at Queen’s University in Canada. He is also a Professor and Director of the post graduate Program in Project and Business Financing at the Cyprus International Institute of Management (CIIM). Savvakis is the author of a number of publications in investment appraisal, risk analysis and the application of marketing and business strategy concepts in project evaluation. He is also the developer of professional software for financial modelling and risk analysis, such as RiskEase, which is used worldwide by professionals and academics to assess project risk.




Papers Published in World Economics:


Risk through the Looking Glass

This article argues that the general acceptance of volatility constituting a good measure of risk is not appropriate in the context of capital investment appraisal. It is argued that expected loss should be employed as a measure of risk. It is further illustrated how the risk aversion attitudes of potential investors can be taken into consideration in the capital investment decision. The pursuit of return without risk inevitably leads to the transfer of wealth through an underperforming banking system which collaborates with an unregulated financial market seeking low risk and relatively safe returns for the benefit of their wealthy clients. The promise of a ‘return without the risk’ leads financial intermediaries in an elusive direction: the only way to attain this is through directing funding to capture existing assets rather than investing in the real economy to create new wealth.

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The Disconnect of Funding From Wealth Creation

This article identifies concentration of money and power and loosely regulated financial markets as impeding the efficient allocation of economic resources. The pursuit of return without risk inevitably leads to the transfer of wealth through a failing banking system which collaborates with hedge funds and global wealth management groups, who constantly seek low risk and high returns for the benefit of their wealthy clients. It is further argued that conditions conducive to economic development hardly exist in highly indebted countries and that wasteful finance inevitably brings about financial crises and recessions. The promise of a ‘return without the risk’ leads financial intermediaries in the direction of a quest, since the only way to attain this is through directing funding towards the capture of existing assets rather than it being invested back in the real economy to create new wealth.

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Funding Economic Development and the Role of National Development Banks

Prior to its privatisation in 2008, the Cyprus Development Bank played an important role in the economic development of Cyprus, intermediating international finance from multilateral development banks. This function was subsequently undertaken by commercial banks, which are currently limited by balance-sheet fatigue, however, and lack necessary elements for successfully executing this role. Our analysis shows a current void of institutional capacity in funding growth-bearing projects. Proceeding in a normative way, we recommend reinstalling a development finance agency that will tackle the issues by swapping equity for debt relief.

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Neglect Private Debt at the Economy’s Peril?

The role of private debt as a cause of financial crises and prolonged recessions is often neglected. In Cyprus policy concern has focused on government debt despite the problem of a rapid growth of private debt and its wasteful use. Private debt in Cyprus stands at over 350% of GDP, but the European Commission’s policy of austerity and encouraging the redeployment of private assets through bankruptcy is based on a misdiagnosis of the problem. Studies of the importance of private debt and balance sheet recessions following financial crises conclude that policy-imposed austerity can only worsen and delay economic recovery. In Cyprus there is scope to raise productive government expenditures through using European Union funds, by raising revenue from the large base of unpaid taxes and by taxing the large shadow economy estimated at over 25% of GDP.

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