A Treasury Department report out today states that the potential credit default by the U.S. government could be “catastrophic,” resulting in frozen credit markets, a plummeting U.S. dollar, and “skyrocketing” U.S. interest rates. In sum, we could have the Great Recession II, making the debt-limit war between Congress and the White House your emergency too. Thanks for sharing, Uncle Sam!But, could there be a silver lining in this tempest via the way the federal government is handling the current shutdown?
There may be some clues and lessons for financial services firms in how to proceed operationally. Apparently, instead of learning how to prevent shutdowns, the federal government has put more effort into learning how to cope with them. In any event, since the shutdowns of the mid-1990’s, the government has devised and implemented plans for “a slow-down” of government operations as some pundits have defined it.
The government shutdown is yielding some best practices for business contingency that could be useful for managing a slow-down, credit crisis or a major internal political battle of your own:
- If you haven’t already, define among staff those that are essential and non-essential—knowing this may help if layoffs or furloughs become necessary. It might be wise not to share these designations across the enterprise;
- Identify the extremists and moderates within your organization as it will be useful to know with whom you can negotiate;
- Give yourself as wide a portfolio of IT alternatives as possible. Consider onsite IT, consultants, service providers, cloud options and outsourcers that can keep systems running even if people are not there to oversee the machines;
- And establish multiple means of reliable communication—email and social media for starters— that will keep people informed and connected throughout a crisis, wherever they may be.
We are also learning a few lessons from the multiple fiscal crises in Washington such as:
- Ultimatums and absolutes cannot work in an organization that has to serve multiple constituencies, meet sometimes contradictory demands and, at the very least, be functional;
- Attempts to subvert governance might work for the short-term but generally will have devastating consequences for the long-term, especially via disastrous outcomes that were completely unexpected;
- And clearly you cannot rely on the federal government to be there for assistance in a crisis especially during one that it has created. Firms have to be prepared to rely solely on their own resources because during the next crisis, the government might be bankrupt and closed indefinitely.
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