“The end is nigh!”

When I was a teenager, working for my first summer holiday job in central London, there was an old man that used to walk up and down Oxford Street with a big placard with the words “The end is Nigh”. At 16 I laughed his prediction away, wondering what the scam was, what motivated him to make such a fool of himself.

However, 35 years later, with all the chaos that has hit the stock and financial markets, it is not surprising that among the thousands of articles one can read on the subject, there are many doom and gloom stories that sound very plausible: ‘Melt down’, ‘worse than the Wall Street crash’ and so forth. As I mentioned in my previous blog on the subject, ‘Crisis what Crisis?’ everyone seems to have an opinion, which is, of course, normal. But I am getting very concerned that many business people are missing the point entirely.

It is not important whether you believe everything will blow over within a few months or if the world's economy will not recover from this for a very long time. The important thing is that responsible business leaders must start to make serious contingency plans. Surviving is about adapting your strategy based upon realistic possibilities and not on blindly following what you think the outcome will be. A business is not something that should be gambled based solely upon what the CEO believes will happen.

Every business leader (regardless if they are running a small family business or a giant multi-national) has responsibilities towards their shareholders, employees, suppliers and customers – and these need to be taken very seriously indeed. Therefore I suggest the following:

DO NOT panic those around you BUT do:
1. Stop talking about how bad or ok things are going to be
2. Set up an analysis project – give it a name.
3. Agree at least three possible economic (short to medium term) scenarios from OK to complete disaster
4. Draw up a risk analysis for your business for each scenario
5. Adapt your current strategy plan for each scenario
6. Set clear economic/performance KPI’s (Key Performance Indicators) for each scenario that will clearly indicate when you need to begin implementing your strategy for each scenario
7. Have your project endorsed by your board, expert shareholders or advisory board – whichever is most suitable for your situation

What I am suggesting here is about anticipation and managing the situation as best you can. For example: imagine that you are in the retail business and you believe that revenues will start dropping (if they have not done so already) - at which point are you going to take action? When will you actually begin to look at alternative ways of shifting inventory, or closing down outlets and laying off staff?

Business people like to complain about politicians not doing enough forward thinking and planning – but to be honest I have the feeling that many business leaders are simply following a ‘lets wait and see’ scenario. By making clear plans and looking at the impact on the cash flow and credit liquidity etc. now, we will be able to make much better decisions later on.

I have been in situations like this before, but not ever as bad as it ‘appears’ to be right now. I know that when things get really bad, people start panicking and take bad and irrational decisions. In the quiet before the storm, we need to separate emotion from action and make plans for both our businesses and our families. And, if the storm missus us completely, then at least we can feel comfortable knowing that we had a contingency plan in place, had it been necessary.

Please do not misunderstand me. I am not suggesting going into minute detail and pulling your staff off their daily tasks to panic about things they have no control over. All I am saying is: if, for example, your sales team are currently putting all their energy in a direction that you think is not likely to be effective in three months time, then maybe it is better to divert them into a more profitable direction sooner rather than later?

If your radar is telling you there is likely to be an iceberg ahead, then you need to begin now to decide how best you business can steer around it, once it appears. For some it is already getting rather too late.

Crisis what crisis? Everyone’s become so boring…

Regular readers will know that my blogs are (more often than not) either inspired by a situation I encountered or by the people I have met during the previous week. But in the last few days my business acquaintances have become so boring. It’s not that they themselves are boring, it’s just that the enormity of what is happening in the world’s financial markets is so overwhelming that everything else seems to shade into trivia and insignificance.

Of course, if I switch the conversation to the crisis (which isn’t difficult) then everyone, including myself, wakes up and has an opinion. But the whole thing is very bizarre. Here in Brussels, now that two of the household name banks are in deep trouble, people are beginning to feel a sense of doom. However, I get the feeling that they are either trying to ignore it (like a family embarrassment) or are simply refusing to believe that it will have any effect on them.

The quote of the week for me comes from BBC 4’s, ‘News Quiz’ radio program when contributor Jeremy Hardy quoted John McCain “This is no time for politics” – well excuse me, if ever there was a time for politics, it is now! With the apparent collapse of capitalism (albeit temporary – one hopes) in the US, one might imagine that it is time for the politicians to do what they are paid for? It’s weird how the word ‘politics’ has been so much over used by business people that it now has come to mean, ‘plotting’ and ‘underhandedness’, when according to the English Chambers dictionary it actually means ‘the art or science of government’.

The whole scene reminds me of the image I have of Pompeii at the moment of Versuvius’ eruption – in a modern context you can imagine Mum and Dad and their two children in the car park of Delhaize supermarket loading ready made meals into the trunk of their Porche Caynne.

Everyone is an expert but no one knows for sure what to do – and those with the loudest voices are often taken to be the wise ones, until someone in a quiet voice calmly suggests a total other alternative that spins your imagination into another unwelcome direction.

I train my teams to think out of the box and to be creative but this advice is not given for crisis situations that have been predicted and when there is a well thought through risk analysis strategy that has been painstakingly prepared and tested beforehand. Or am I wrong? Was today’s situation so completely unpredictable, were there no warning signs at all? In ICT we are trained to ask the big ‘what if’ questions and to build complete solution scenarios for them, so I find it kind of weird that the US politicians have no such risk strategy prepared and in place, especially as there are ample previous examples of similar situations, albeit on a smaller scale?

Hopefully next week everything will be back to normal, and my blog will be back on the topic of everyday management issues? I just hadn’t thought that risk strategies might end up being one of them?