Most firms on Wall Street, regardless of political affiliation, probably see the federal government shutdown combined with the debt ceiling crisis as a waste of time and money especially when the U.S. recovery needs all the help it can get from Washington. For securities operations, though, there is a little cold comfort in the takeaways for negotiations during a crisis.Many key relationships in operations require some level of negotiation. Conflicts can range from internal connections to get IT initiatives, business projects and new business practices off the ground to external links to clients, counterparties and regulators. It’s not unheard of that firms will have to sometimes interact directly with competitors.
Having great negotiating skills will always come in handy when hammering out reconciliation and exception disputes, settlement problems, issues with vendors, collateral and margin management, and compliance with FATCA, AML and know-your-customer requirements — just to name the major ones.
Without rehashing what has already been in the major media, it appears that one of the most important lessons is the need to build coalitions even when things are at their worst.
It’s been reported that an alliance between Senators from both major parties, in part led by Senator Susan Collins, a Republican from Maine, worked to break the logjam in Washington by putting forth proposals that got intransigent sides to start talking to each other. In the U.S. Senate, even majority leader Senator Harry Reid of Nevada and minority leader Senator Mitch McConnell of Kentucky, normally bitter rivals, found the need to build a working relationship to get through the crisis. Of course, having a common enemy in the Tea Party may have helped to build that temporary bridge.
As for negotiating stances, it pays to think through a strategy beforehand and try to anticipate as much as possible.
As we’ve seen, it’s best to set realistic expectations for all parties involved and agree upon what is achievable, regardless of unforeseen circumstances. This is different from making demands that are fantasies followed by kneejerk rejections of any offer that doesn’t meet every aspect of ridiculous requirements.
Once a reasonable strategy has been agreed upon, it’s important never to waiver and give in to requests that are beyond the pale. This implies setting parameters for negotiating in a realm where the important issues can be resolved. It’s important for both sides to know which items can be negotiated and which issues are off the table. If one side says that all issues are off the table and has a take-it-or-leave-it stance, then nothing will happen, as we saw in the 16-day standoff.
While admittedly not an original conclusion, the biggest lesson is to almost always avoid brinksmanship and delusional demands. There may be occasions when things have to go to the edge but those times are extremely rare and usually end with severe consequences for all involved.
The lingering question for the federal government and Wall Street is whether the players in Washington have finally learned something from this bare-knuckled battle.
If they haven’t, we’re in for another brutal round in about three months.
Need a Reprint?
Leave a Reply