In the Bank of America/Exult case, the bank was looking to get out of the human resource transaction business. They looked to Exult to help them manage their 120,000 associates. To be successful at this, the bank needed an entire infrastructure including an 850-person call center, telecommunications network, and Web site to manage the volume. With the transfer of the bank’s HR call center to Exult, which had the infrastructure already in place, the bank could focus its energy on servicing its customers’ financial needs.

NASA is very capable of launching probes toward the sun. However, APL at Johns Hopkins has a track record of being able to launch targeted missions more economically than NASA. NASA’s real expertise lies in its ability to manage multiple missions while making sure taxpayers’ monies are being spent wisely. It makes sense that NASA, with its strong management competencies, provides mission oversight while others contribute based on their strengths.

While liquidity risk is primarily a function of the willingness and ability of banks and brokers to provide liquidity and of investors’ readiness to take on risk, in other words, risk appetite, the other two points are related to the economic environment. The companies’ ability to generate sufficient cash flows to service their liabilities is central for the probability of default and is reflected in ratings. In general slowing economic growth, usually coupled with lower private consumption due to weak growth of labor income and rising unemployment undermines the profitability of the corporate sector.

In this context, it is worth remembering the definition of a recession. Market participants often define recessions in terms of two consecutive quarters of decline in real GDP. The National Bureau of Economic Research (NBER) which is responsible for dating recession periods, however, claims that recessions are characterized by a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale–retail sales.