The investment was made before he joined, but it was Davies who had to deal with the fallout at the museum, which has about 130 staff and attracted more than 800,000 visitors in 2007-08. The saving grace is that the money is part of its reserves and was earmarked for education and other work, rather than its core business.
Davies is trying to look on the bright side: "The £900,000 was the result of two to three years of very good trading. What has happened is a fly in the ointment. There is no question of redundancies."
Maybe his positive outlook comes from the enthusiasm of being in a new job, but also from a can-do attitude gained during a long army career. He has served all over the world, including Northern Ireland, Bosnia and Sierra Leone.
"I joined the army at 16 as a private soldier. I was never going to impress academically, but the army was my great break. Contrary to some of the stereotypical views of soldiering, it is very much a meritocracy. I moved up quite quickly, despite having few formal qualifications."
Davies is not alone in following a military career with a top museum job. Roy Clare, the chief executive of the Museums, Libraries and Archives Council, became director of the National Maritime Museum after a long career in the navy. So how did Davies's 33 years in the army lead to the directorship of a museum of science and industry?
"Had my career been based on the toss of a coin at 16, it might have been railways or soldiering," he says. "Heads came up and it was soldiering. But my great passion has been railways and, more broadly, industrial heritage."
In fact, Lancashire-born Davies has been involved in Mosi from its beginnings in the late 1970s, when he was a member of the Liverpool Road Station Society, which became the Friends of the Museum after it opened in 1983. He retained his membership and kept a close eye on the museum wherever he was in the world.
Revamping in a recession
But a love of trains and being a Friend of the museum was probably not enough to secure him the top job when the recruitment consultants came knocking.
What also counted in his favour was the opening of the National Railway Museum in Sierra Leone, which was done in his spare time while serving there in 2004 and 2005. Davies would not be embarrassed to be described as train mad, and he has always taken an interest in them at home and abroad.
"A lot of my time in Bosnia, as we tried to implement the Dayton Accord, was spent sending notes back to various journals about locomotives that were still in operation around Sarajevo."
The development of the museum in Sierra Leone came out of his desire to spend his spare time doing something other than getting a tan. "Most people go to the beautiful beaches in Sierra Leone, but I am not beach man.
I did see this opportunity to try and rescue the country's railway heritage. It started when I went to look in this old shed and it was quite the most melancholy site. All the windows were broken and it was full of engines and carriages. Lots of things had been smashed to pieces."
Davies met the president of Sierra Leone and then the cabinet, who he persuaded to support the conservation of the engines and carriages and the creation of a museum. Other organisations were then brought on board, including the British Council, the Department for Culture, Media and Sport, and Andrew Scott, head of York's National Railway Museum.
The museum finally opened in 2005. As Davies says: "That looked pretty good on my CV when the directorship of Mosi came up."
Davies will need all the same energy and enthusiasm to make Mosi a success. The museum has had a few setbacks in recent years.
It all seemed to be going so well in November 2007 when the director at the time, Ian Griffin, launched Revolution Mosi, a £54m redevelopment plan with a major new eco-building at its heart. But a few weeks later Griffin, now the chief executive of the science communication organisation the Oxford Trust, suddenly resigned.
The museum said he stood down for "personal reasons", but the timing was not great. The next blow came in January 2008 when the Heritage Lottery Fund rejected a £15.5m application for Revolution Mosi.
The redevelopment plan is not dead, but Davies says it is now going to be done on a piecemeal basis and the creation of an eco-building, which would have cost about £24m, is unlikely to go ahead. The first work will be a £2.5m project to revamp the main building followed by a reworking of the air and space hall and the development of a road transport gallery.
Before all this, Davies is worried about some more down to earth matters. "Despite the fact that Revolution Mosi is still to be delivered, one of our priorities at the moment is to get the basics right. The museum is looking a little tired in places and little ropey at the edges and we are investing money quickly to sort that out. We are having a big clean up."
New horizons
Davies may be looking at the basics at the moment, but he does have big plans. He wants "Mosi to break out from its current physical and intellectual boundaries". This means integrating the museum and its work with partners in Manchester and further afield. Davies has lots of ideas.
"If you gave me blank piece of paper and asked what do you want to do with this place, I would pedestrianise Liverpool Road, cobble it and immediately lay a vintage tram system from Deansgate right down to the area where we have our existing museum. That would provide the transport umbilical cord with the top of the site and the bottom. I could see Mosi becoming what I would call Manchester's version of an urban-based Beamish."
Next year will be interesting for Davies and for Mosi. The museum's visitor numbers and finances have been boosted massively by two big temporary exhibitions, Dr Who and Body Worlds 4, but there will be nothing similar in 2009.
Dr Who ran from 31 March 2007 to 6 January 2008 and helped the museum double its annual visitor figures in 2007/08. It was also more than £500,000 above its target for trading from income in the same financial year. The figures have not yet been released for Body Worlds, which ran from 20 February to 17 August this year, but it was the museum's most highly-attended exhibition ever.
Davies says there weren't any suitable temporary exhibitions out there and he is looking forward to developing a series of smaller exhibitions for 2009.
"It will also give us the chance to look at the extent to which we are or are not reliant on exhibitions. I think our experience next year will be of interest to a lot of other museums around the country."
After the Icelandic banking investment, other museums will certainly be keeping their eyes on Mosi. And Davies will be hoping there are no more nasty surprises.
Steve Davies joined the army aged 16 and spent his entire career in the military before becoming the director of the Museum of Science and Industry in Manchester in August. He was most recently the chief of staff headquarters 2nd Division, based in Edinburgh, where he was responsible for about 250 central staff and 20,000 troops.
His military career included tours of duty in Northern Ireland, Canada, Norway, West Germany, Bosnia and Sierra Leone. He was awarded an MBE for his work in Sarajevo. During his spare time in Sierra Leone he created a national railway museum.
Davies was born in Darwen, Lancashire, in 1959, He was an original member of the Liverpool Road Station Society, which became the Friends of the Museum of Science and Industry in Manchester after it opened in 1983.