Finding your feet
Andrew Kureth: Considering the toll the current global financial crisis is having on companies around the world, what can a company do before such a situation hits in order to avoid the worst repercussions?
Grzegorz Szatkowski: The scale of the crisis we are going through currently has gone beyond the possibility of complete protection of a company. The risk models made by various institutions for the purpose of analyzing a company's immunity to given events did not take into account the possibility of such deep slumps on the stock exchanges taking place in such a short period of time.
Today we need to analyze why systemic solutions such as risk projection, supervision and the transparency of financial results did not bring the expected effects. It is also necessary to examine the foundations of the functioning of economies and companies, including decision-making processes, both in the companies and among individual consumers.
It is evident, for example, that we believed in the interminable bull market, and this weakened our vigilance - because everybody was making capital at that time.
Companies' managers should certainly know and understand their credit and debit. It turned out that the systems called "risk management" are worth extending and renaming "risk and motivation/reward management."
We also need to remember that every transaction has two sides and that consumers' decisions also contributed to the bloating of the economic balloon. On the one hand, they received interesting offers from the financial sector, such as cheap loans; on the other, they invested their assets in instruments which they did not understand.
Both loan-takers and investors in the "exotic" - or rather "toxic" as they are called today - papers put their faith in a permanent bull market, as well as in considerable financial profits.
The way to prevent such processes, although only in part, is by educating the consumer. But can we avoid the irrational behavior of large groups of investors, even with the full transparency of financial products? It's doubtful.
In difficult times like these, how would you recommend that companies ensure the security of their business?
It is worth keeping our balance and making sure that our assets are properly diversified. A good evaluation of the liabilities to consumers is also important, especially in the case of insurance companies. In short, we have to do what we know well and what we understand. This is how we can protect ourselves from losing balance, especially in these times with an increasingly complex economy and sophisticated transactions.
No one probably ever supposed that the world would undergo a crisis of liquidity and that the sources of financing for these economies would dry up almost overnight. Those who are winning today have a number of such sources and a number of partners. While we do not know what kind of risks may surprise us tomorrow, diversification into a number of business areas enables us to reduce risks related to the insolvency of a contractor.
When a crisis like this one hits, what should a company's first moves be?
The most important thing in this current turmoil is trust, or rather its rebuilding.
Entrepreneurs are asking themselves a question: "Who can be trusted?" Trust is the scarcest commodity nowadays. It cannot be lent, bought or sold. Thus, the recent situation is forcing entrepreneurs to increase their caution in managing their assets and taking loans. And the prospect of a further economic slowdown also tells us to re-analyze investment plans.
It is important today to find one's feet in this crisis and [try to emerge from] it perhaps even stronger. This will often require decisions completely different from those we have been making during the recent years of prosperity.
