Preparing for a financial crisis
The world’s sharemarkets have had a bumpy time. Australia’s housing market is under price pressure and word is that the same tensions might come here. Europe’s economic strength is again being questioned. Even China’s legendary growth rate has slowed.
There’s plenty of commentary around suggesting that things might start to get a bit tough. Some say that we have another GFC coming. Others predict a more mild correction. Either way, economic factors, mainly happening overseas, but with a sprinkling of our own challenges, will eventually contribute to whatever the next global downturn looks like.
Most of us have now lived through at least two and possibly up to four of these major financial collapses. And yet, when they come, they continue to take us by surprise. As panic sets in, we run to our bankers, downsize our teams or try to hustle cut-price product out of our warehouses, all with the aim of surviving the downturn.
In other words, while we might see it coming, we have not historically been very good at preparing for it.
Now that we’re seeing some early signs, I’ve seen a couple of businesses start to feel the pain. But what I’m not seeing, is businesses actively thinking about what they can do now, before the downturn, to build a foundation to get through what might be a rough road ahead.
The reason is simple. Most of us are so busy keeping our businesses going, day to day, that thinking about the future is a luxury we don’t have time for.
So to avoid spending three days we don’t have in a crisis meeting, surrounded by whiteboards and Post-it notes, here are a few things we can be doing now, and ‘‘in the normal course of business’’, that will put our businesses in better shape to handle whatever may come.
1
The first question to ask is this. Do you have the right people? Take a look at your team. Are they the best they can be? If you were going into a battle with a real enemy, you would want to have a team alongside you that was up for the fight.
If you have doubts about the capability or reliability of any members of your immediate team, fix that now rather than be try to deal with it when you have new pressures. Note, fixing that capability doesn’t necessarily mean replacing the person or people concerned. They may simply need additional resource, some training support, or better communication from you, in order to get on top of their game.
2
While you are talking about your people, do a ‘‘status check’’ on the performance and support you get from your most important external advisers. Again, they are the people you will be calling on more if you start having trouble. Keep these people close. Think about the role your banker, lawyer, accountant, and even any mentors you have, will play in helping you through the maze. Start building or rebuilding those relationships now. Tell them what is important to the business: the more they know, the more they can do to help you if called upon.
3
How about the state of your customer relationships? Most businesses I see don’t know the names of their top 20 customers, let alone the state of those relationships. Now is the time to tell those customers how important they are, and find out what is important to them and why they like doing business with you. The more you can understand them, the better the service you can provide. And the better they know you, and the more important you become to them, the less likely they are to drop you during their own crisis.
4
Be open to input from others. Get the views from your people closest to the coalface. They will see things that you don’t. Talking with your team about their ideas, and perhaps some alternative approaches, helps you to focus and shifts your mental state from your current problems to your future opportunities. And of course, you get to increase the engagement of your people if they feel listened to. Not every idea is a great idea, but even if some end up in the wastebasket, the debate will help you focus on the right things to do.
5
Finally, be open to input from those closest to you, even if it is about your own performance and difficult to hear. There are very few highly successful people who haven’t had to have hard conversations about their own performance with their closest advisers.
Irrespective of what is around the corner, these simple steps will see you in better shape to deal with it.
While we might see it coming, we have not historically been very good at preparing for it.