Resilient

It’s a word we are hearing increasingly of late, and will hear more in the future. It’s a word that we often associate with strength. The strength to absorb pressure; or the strength to fight back against adversity. We are going to need plenty of both of these qualities over the next 18 months.

As change sweeps through the relationships between financial institutions and their clients, resilience will be needed on both sides to absorb the discomfort of increasing interest rates for borrowers, and decreasing asset values for many. But resilience is not just about strength in the face of adversity – because no amount of strength will assist if there is inadequate preparation.

We live in a world which is very much subject to economic cycles. Just as residential building has always been a boom followed by a bust industry, so too does the rest of the economy follow a very cyclical path. Perhaps not always boom, then bust, but certainly up, and down.

The press might focus on the spectacular extremes of players who pick the boom, and then exit before the bust. Or conversely those who buy at the top of the market without the resources to sustain any downturn. Or those whose financial literacy and management expertise is inadequate. But the modern press is about clickbait for the voyeuristic. Largely ignored are those who use the good times to squirrel away resources for the tough times which inevitably follow. Those stories aren’t newsworthy. But they are the resilient ones. Those who recognize that farmers make hay when the grass grows, to supplement feed in the winter when the grass stops growing.

I am certain that in the months ahead we will see more than ample news coverage of the “bad luck” stories of businesses and individuals who for various reasons have been unable to sustain themselves in the face of increased costs, decreased demand, inadequate labour etc. Is the reality of the story much more that there has been a lack of learning from history (that cycles occur) and from nature (that squirrels hoard acorns when they are plentiful and farmers make hay when the sun shines)?

It’s not so much about circumstances conspiring to hit balance sheets and bank accounts where it hurts, as about failure to prepare for the inevitable. We need to start assessing resiliency as more than just the strength to stand up to adversity. We need to plan for that adversity by squirrelling away resources during the good times. That doesn’t just apply to financial resources – although that is a great start. We have noticed a recent upturn in the number of sales calls we are now fielding. Obviously from businesses realizing they need to drum up more customers. But what is also interesting is the numbers of these businesses who didn’t return our calls during the good times. They didn’t nurture relationships with clients then, but expect them to come back into the fold when the chips are down.

Another form of preparedness is taking the time to learn and understand how business, commerce and industry really work. There are many whose decisions are made on the basis of following media headlines – crypto traders are just the tip of the proverbial iceberg. Learning the basics of financial literacy would go a long way towards being resilient when the tough times hit. But perhaps that is too much to expect when our political leaders still believe that real money can be created by a printing press. It’s likely they also believe in Santa Claus and the easter bunny.

There is a lesson for all of us – that to be truly resilient we need to be prepared in advance.

We need to not only put aside resources in advance, but also accumulate skills and relationships, to be able to be truly resilient.