It’s time for some black swan contingency planning « New Rules of Investing

Black Swan Contingency Planning

What’s the issue: There is an incredible amount of interdependency we’re witnessing across businesses, sectors and geographies.  When a mortgage bank fails in the US, it has far-reaching consequences felt around the world.  Little events are exacerbated and seemingly discrete events domino into global markets tanking.  While banks like Merrill and Morgan looked as if they should weather this storm OK (albeit with some lumps), Lehman’s demise called into question these firms’ viability overnight.

What to do:

Always have a “what if everything goes wrong” Black Swan contingency plan: I’m not talking about preparing for a nuclear war or a situation where all money loses its value — if that occurs, quit your business, hock everything and buy some ammo and head to the hills.  I’m talking about that Black Swan type event that could impact your business so acutely that your business may not be the same for years in its wake. Financial partners have their funding means dry up.  Customers push out purchasing decisions indefinitely.  Distribution channels close.  In fact, small businesses are much more nimble than large firms in dealing with these types of changes but lack the staying power that comes from being a larger company.

Is”safe” really safe?: During a black swan type event, things go wrong that we didn’t expect.  Is your banking partner really solid?  Ask him.  What if one of your trading partners goes under?  Can you continue buying/selling?  In my business, core money market accounts are what clients use to park their money.  We’ve read of a few of these types of fund cratering.  What’s going with in your firm’s products?

Backup everything that can be backed up

You can’t be too conservative: Taking risks isn’t going to be rewarded in the short term.  Cash is king in this market and it will pay to preserve your business capital and business processes so that you can take advantage of the situation when the markets rebound.

via It’s time for some black swan contingency planning « New Rules of Investing


About zyakaira

Investment Banker, 40s, Bangalore This Biopic and this web recreates how one point of view, one person can impact a tremendous economic engine that the world thrives and mis-thrives on. This one has the knowledge and the civil sense , the art of conversation and some good writing to mentor others as powerful and help global managers develop and fine tune their approach on US markets, China, India and the world. Read on here, and let me know what you need. It can be a race for TRPs, a race for new markets and a race to do what is right. I have the pulse of the crisis, the recovery and the market direction and can help you build and refine your strategy as i have helped thousands of managers and multiple global corporations. Of course, it’s more fun if you talk to me. I am in favor of leading this moving of the economic crisis and will partner with you in a soft and subtle way, just the way we both ride to the top. But you can write with us, opine and just reply with aplomb and shine on Twitter , 4 square , Facebook and any other social “choupal” of choice via zyaadakairaada Profile & Portfolio - SocialPicks Different flavours at:

Posted on November 12, 2008, in Financial Markets, Global, India, Investments, US. Bookmark the permalink. Leave a comment.

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