Global Financial Concerns

Fall 2007

Global Financial Concerns


We really don’t like reading “alarmist” articles.  Some trend sources we read tend to be regularly alarmist, perhaps to boost readership.  However, multiple sources are now pointing consistently to some financial problems that may affect us fairly soon – from the next few months to the coming year.  When multiple independent sources seem to foresee the same eventuality, it seems to happen fairly reliably … though the time frame may vary a bit, usually toward the foreshortening side.  Here are some pieces, we read about.  Then, some thoughts about what the impact might be for your practices.

  • With our massive debt, some major investment sources, including China, have been shifting from the dollar to the Euro, and other currencies.  The dollar has been weakening, and was even surpassed last week by the Canadian dollar.  Some forecast the dollar will plummet in 2008, and it’s standard, as the world’s trading currency, will diminish … further affecting our economy.
  • The sub-prime failures have had global repercussions.  One bank in the United Kingdom has had a run;  others are feared.  Leaders of several European countries are discussing ways to avoid bank failures, which affect citizen confidence in their economies.
  • The Treasury Department is running bank failure simulations, trying to forecast and prepare for that eventuality.  Representatives of some major banks are meeting with Treasury officials, to discuss those prospects, and what actions might be taken.
  • “Quants” – mathematicians and others working in the investment industry, who develop models for different investment packages, are reported worrying about the sub-prime problem becoming the “canary in the mine” … the prelude to massive failures.
  • John Peterson, president of The Arlington Institute, a Washington, D.C. futurist organization, just announced the likelihood of a major recession “or worse” beginning near the end 2007 or the early part of 2008.  John looks at a lot of trends data, constantly, does extremely thorough analyses, and makes fairly conservative projections.

Most firms in our profession are busy.  The rate at which senior people are retiring has been greater than the influx of younger people, so the demand has been greater than the number of people available to respond to it.  So …

Don’t go running down the street thinking the world is coming to an end.  But if these forecasts do occur, what actions might you take to remain viable?

  • Prioritize your prospects and your backlog.  If the financial picture looks bleak, developer-based projects can be quickly canceled, while Federally funded projects are likely more stable.  Conduct strategic market planning meetings, and do some if/then forecasting, to get a sense of which markets may be vulnerable and which might not be.
  • Invest extra energy in client satisfaction.  Your Mandeville feedback form and process, plus some “Client Services Management” guidelines, can both serve you well.  In a tight market, firms are more easily seen as commodities, and clients can more easily shop prices.  Unless you clearly stand above others, you could be vulnerable.
  • If the financial environment weakens, cash is king.  Minimize your indebtedness – business and personal.  Hire when everyone else cheers the day that new person shows up.  Buy things when you really do need them, but hold off on marginal purchases – again, both for business and home.
  • In pursuing new business, apply go/no go criteria more carefully.  As one client said, “If we could just stop going after work we really shouldn’t have gone after anyway, we’d slash our marketing expenditures and feel a lot more successful.”  Apply the principles and methods you’ve learned in Mandeville and other relationship-based marketing techniques.  Some firms have fewer young staff that know the methods, so give them some training.  If you can’t apply methods which increase your odds of success, let that marketing pursuit go.
  • If you work internationally, consider keeping some business (or personal) funds in Euros or Pounds.  It’s easy to do, even electronically.
  • John Peterson indicated his book may be coming out within a couple of weeks.  Email and ask to be notified when his book is available.  As a firm leader, the more you know of coming conditions, the better you’re prepared to cope with them.

These recommendations are all generally useful and positive, even if all the forecasts we’ve seen turn out to be totally wrong.  No “Chicken Little” scurrying.

Times of potential stress are also times of great opportunity.  Some firms did amazingly well even during the Great Depression of the 1930s.  We just can’t continue to do “business as usual” without at least looking outward, at our “enabling environment,” projecting some “what if” scenarios, and thinking about the most positive actions you can take for each one of those scenarios.