Today, crises are part of everyday life. The modern, networked society is more vulnerable, as the digital bank run on Credit Suisse shows. This is a plea for dealing with crises. After all, it is clear that companies with experience of crises often have a better culture and, as a result, a better performance.
A year has passed since Credit Suisse met its demise. We will read and learn a lot more about the cause of its failure in the future. But a few facts are indisputable. The extensive digitalization of the financial market presents a myriad of advantages as well as inherent challenges. The ability to transfer funds quickly exacerbates the risk of bank runs, thereby jeopardizing financial market stability at an accelerated pace. The antidote to this precarious situation lies in bolstering stability, often interpreted as the need for “more capital.”
However, those advocating for higher capital requirements are making it too easy for themselves. Credit Suisse did not collapse solely due to a lack of capital. Instead, it was the result of an ill-timed strategy and likely an escalating culture of decay, leading to the erosion of trust among clients and employees.
In numerous firms, stability is artificially tested through crisis simulations. These exercises not only highlight organizational deficiencies and enhances leadership skills but also cultivate and promotes a culture of accountability and challenge, where processes and learnings are documented in a manual.
Dürrenmatt helps
Organizations often only make ground-breaking decisions when the situation appears dire. Prior to that point, the hope that things will get better and management-denial prevent organizations from resorting to real coping strategies. But having the worst-case scenario in mind requires courage or Dürrenmatt. The Swiss novelist explains, that a story reaches its conclusion only once it encounters its most dire outcome. Adopting such a mindset and basing decisions upon it ultimately reflects foresight… It allows the organization to plan in good time and act quickly and decisively.
A healthy culture fosters challenge
Crisis frequently stem from decisions made without sufficient foresight, a consequence of stifled dialogue, inadequate delegation of responsibility and a deficiency in requisite expertise. Nurturing a positive culture is thus paramount for enhancing resilience and, consequently, achieving greater success. Ciris management, sustainable profitability, and strong culture are intricately interconnected. Or as Churchill says: “Never let a good crisis go to waste.”
Samuel Brander, Partner
