Enduring Fundamentals in a ‘Relocated World’ (Recovering From This Dislocation)

From Mike Cohen

“Where do we go from here, and what have we learned to help us arrive there safely and prosperously?” What risk management lessons have been learned?

Dislocations have occurred many times in history, and have occurred in many societal areas, changing many aspects of life profoundly:

– Economy: Agrarian, manufacturing, technology, service

– Military history: Strategies/tactics, weaponry

– Social/family mores: Many, many variations with intensely personal and emotional elements

– Political systems: Capitalism vs. socialism, big vs. small government, government leadership vs. self-determination

Dislocations will, without question, continue to occur in the future, and just as surely manifest themselves in unpredictable ways. Survivors, and ideally ‘thrivers’, will understand when dislocations occur and make the changes necessary to operate well in their new environments.

There are a number of business and societal behaviors that have been culpable in contributing to the interim demise of our socio-economic system:

– Greed

– Poor analysis

– Nonchalance

They are not effective, and have eerie parallels to the seven deadly sins.

While many aspects of our personal and business lives have changed, certain themes remain the same. Righting the ship will be driven by adherence to a number of fundamentals that have driven our success over history and will drive our success in the future.

1) Responsibility and trust: Our actions … what we say and what we do … are our legacy. Do we stand behind them in terms of honesty and wisdom?

Kahlil Gibran, in his epic work ‘The Prophet’, said that “You are the bows from which your children as living arrows are sent forth.” Quite so, but we need to make sure our aim is straight and sure. Our children are our most sacred trust, the most important manifestations of our legacy. Our actions are right along side in terms of importance.

2) Be ‘students’ of what we do:

– What is the purpose of our actions? What are we trying to accomplish?

– Are people or institutions going to be hurt by what we are doing?

– What risks are we taking?

– Functions of all kinds … how do they need to be performed?

3) How do our products work? What needs and wants do they satisfy? In life insurance, for example, those needs and wants to be satisfied are:

– Protection

– Asset accumulation

– Transactions

– Advice:

* Our financial world has never been more complicated and uncertain, and customers (both individuals and corporations) have never had a greater need for guidance

* ‘Caveat emptor’ (let the buyer beware) – Is this too difficult a burden for the consumer of the 21st century?

4) What do corporations need to do to succeed?

– Satisfy their customers’ needs and wants, more effectively and efficiently than their competitors can

– Manage the profit characteristics, for themselves and their customers, well

– Understand the risks in their enterprise, and ensure that they don’t interfere with the interests of their stakeholders

– Operate with integrity and transparency

We have recovered from dislocations in the past; we’re here, aren’t we? Understanding change, that it will always be occurring and how changes have manifested themselves, is critical to our evolution. Not recovery, but evolution. If we forget history, then we are doomed to repeat it. The same is true for understanding history, although the understanding of history is affected by the authors who report it. “How was your vacation?” “I don’t know. I have to wait to see the pictures”

We will solve the major issues confronting our financial system, but we will in all likelihood come out the other end in a very different place.

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