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The Nolan Company is pleased
to bring our readers a special series of new articles covering the
surprising opportunities and the risks of these turbulent times.
In each of the coming weeks, we will share our insights and
experiences in managing toward the upside during a time of unique
market dynamics.
Finding Opportunity in
Crisis
Bob
Grasing
President
First, the bad news. It is an old myth that the
Chinese word weiji (危機 translated as
"crisis") is made up of two characters—one meaning danger, the other
opportunity. JFK employed this myth routinely in his speeches, and
it was then appropriated by Richard M. Nixon and others. The usage
has been adopted by business consultants and motivational speakers
and has gained great popularity in universities and in the popular
press. For example, in 2007, Condoleezza Rice repeated the
misunderstanding during Middle East peace talks; Al Gore did so in
testimony before the U.S. House of Representatives Energy and
Commerce Committee, and in his Nobel Peace Prize acceptance speech.
I am a little befuddled why speech writers don't check Snopes.com
before adding such quotes—Kennedy and Nixon excused.
The good news: there is a reason this myth is so
pervasive and persistent. It goes beyond the drama of the two
symbols and a western bias for inspirational oriental wisdom. It is
appealing for a very simple reason—many people believe it to be
fundamentally true that there is opportunity in a crisis. There is
sufficient statistical and anecdotal evidence that this is the case.
Emerging markets generate more millionaires per year as a percent of
their population than established markets. Industrial market segment
leadership change is its greatest during periods of turmoil.
Optimists often say when a layoff is announced, "When one door
closes another door opens." But more relevant to our current banking
and economic crisis, consider what we are hearing in the
marketplace:
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Banks without sub prime mortgages in their asset
mix or securitized packages at risk in their investment portfolio
are looking at the industry massive deleveraging as an opportunity
to capture market share of their weaker brethren. One CFO told me
last week that he had a commercial lender from a competitor walk a
25-year client across the street to his bank to get a needed loan.
The competitor could not bank the loan due to a concentration
problem and a need to lower assets.
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Another Bank CEO indicated he was going to apply
for the Treasury's second wave of capital infusion and will use
the funds for acquisition. In fact, the Treasury has stated that
it will assess each application as to how it will be utilized with
a bias toward system consolidation. You have evidence of that with
the recent announcement of PNC acquiring National City Bank with
the funding received from the Treasury.
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The CFO of another client told me they were going
to concentrate on securing new clients with a deposit strategy
targeting new customers and new deposit dollars using the
C.D.A.R.S. program as a tool.
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Another CEO of a Midwestern bank said that he was
paying much attention to improving his operating efficiency and
concentrating on his collections activities. They were positioning
the bank for their planned increase in "targeted new customers"
while getting stronger in both the income statement and balance
sheet.
They all see the opportunity and are prudently
taking the necessary steps to limit their risk as they take action.
A crisis is painful and full of difficult choices. A bank can become
overwhelmed easily with the negative market news, and it is nearly
impossible if they are forced to shrink assets. However, as we have
seen in previous industry upheavals (including the thrift crisis and
the commercial real estate crisis) during our 35 years serving the
banking industry, the opportunity window is open and it is always
most significant at the beginning of a crisis. The Nolan Company
stands ready to help your bank find that window and position itself
to get stronger. Take advantage of this significant opportunity with
our assistance in consolidation, operating efficiency improvement,
or collections activity and incentive redesign. I'd be glad to
personally share some of our relevant experiences and advice. Please
email me at bob_grasing@renolan.com or contact me at
800–653–1941.
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