THE PULSE ON THE NEXT FINANCIAL CRISIS

For policymakers and economists, the most important learning point of the 2008 Global Financial Crisis (GFC) is not about how the dominoes began to fall, but its roots and build-up to arrive at culmination point. As George Santayana would remind us time and time again: “Those who cannot remember the past are condemned to repeat it.” A decade on from the fall of the Lehman brothers, there remains a large group of people out there who lick their wounds from the disaster. Some of us might recall that the crash in the US housing bubble, and the subsequent subprime mortgage market spill-over led to a major failure in the financial sector, and a global credit crunch as investment money dried up. The problem was that the banks involved directly in this situation sought to maximize the mortgage-backed securities to increase their return on equity since they had initially built their flawed rationale on the premise of continued rising house prices and rents. Thereafter, collateralized debt obligations were sold to clueless investors and insured with companies in the form of credit default swaps. Needless to say, it was a house of cards waiting for a disastrous end. Systemically speaking, the crisis is not over yet because the DNA of the 2008 crisis is inherent in our financial system. By putting in a bailout plan, using quantitative easing, and deploying a whole load of taxpayers’ money to avert a bigger scale disaster simply masks the problem and builds momentum for a greater one to take place sometime down the road. While we are now seeing signs of market trouble around the corner, how then should each of us, from apex leaders to the common manon-the-ground, prepare or respond to the impending catastrophe? Firstly, build bulwarks strong enough to withstand impact, and high enough to prevent spill-ins. This could range from job, asset and/or investment upgrading and diversification. Traditional businesses that range from telecommunications, media, banking, and the like have made good forays into other sectors, which would be useful in adding a cushion to the revenue stream should main sources of income become negatively impacted in some way through the constantly changing tide of consumer behavior. Secondly, strengthen brand and social capital. Soft power and its intangible cousins that include robust relationships and trust can provide a good float during a storm because sometimes, it is not the mere ability to pay/repay that automatically qualifies one for credit or debt-loan deadline extensions. Like the term ‘capital’ suggests, it can only be accrued over time so that when the emergency button is hit, it will be available. Thirdly, practice mindfulness. While this happens more at an individual level, organisations are made up of people too. Making it a widely accepted organizational practice would translate to an overall ‘cool headedness’ at an institutional level. This way, decision making would be more objective-based with the long-term perspective in mind rather than reactive-shortterm measures that result in disastrous decisions. To sum it all, as with all things in life, there is always an ebb and a flow. Observing the waves on a beach gives us a better perspective of how life is meant to be lived. Throughout human history, crisis has always been a part of story-making. What matters most is how we have lived through ours, made the right calls to hold steady in the midst of turmoil, and thrived to tell the story. P