FINspeak

Probably some of you might have watched the zombie comedy "Zombieland". It is a hilarious movie about a motley crew of 4 people who are trying to survive the world overrun by zombies.  Columbus (the lead, of course) follows a set of "rules" designed to ensure maximum possibility of survival. Just one bite from these zombie-like-predicaments and you are pretty much looking down the barrel.

I was going through an article which listed down rules and was amused when I tried to fit the same over the prevailing business conditions affecting the "Living" in the Banking & Capital markets world. So why not check out some of these rules and who knows we might yet live to tell the tale.

1. "Know your way out"

Always have a way out when you are getting into a building which, you suspect, might be full of zombies.  Leverage is that building for us.  A two edged sword which, if not handled appropriately, can lead to unprecedented disasters as was evident from the financial crisis of 2007-08.  Western banks which usually held up to 20% of their total assets as core capital did not hesitate from over leveraging to a situation where this core capital came down to less than 3 % of their assets.  Moreover, liquid assets among these accounted for less than 10%!! This simply meant that these big guns did not have enough buffers to find a way out of this "zombie" infested financial crisis. 

Are you prepared to handle this two-edged sword and most importantly-do you know your way out?

2. "Double tap"

Just one tap may not be enough to vanquish a zombie. You probably might need to give another tap to ensure your survival.  Lehman brothers had a Risk committee (supposedly one of the strongest of its time), which met twice a year!! You might have all the state-of-the-art risk management and compliance systems, but if your risk team is having limited interaction with the day to day activities of the entire firm, you might find yourself way behind the 8-ball. 

Does your organisation have a double tap to ensure that the Governance, Risk & Compliance systems are in order?  Has your organisation revamped its risk and compliance departments to meet these new challenges?  Certainly, something to chew on.

3. "Cardio"

A bit of cardio exercise goes a long way in helping you flee from a group of zombies.  Have you ever thought about it? How much "Cardio" does your bank do?  Stringent Stress tests & scenario analysis are crucial in averting liquidity problems in this credit crunch hit environment.  Does your organisation have the strength to run - and run hard?

These rules are only too well known to us.  But the crucial aspect is that small oversights related to these areas might snowball into situations which are uncontrollable.   As the old adage goes, "A stitch in time saves nine".  Well, the current situation is that even nine stitches may not be enough to survive and so these rules might come handy in trickier times like these. 

Do let me know your thoughts on this!