headlines.gifIt was true… Until it wasn’t.

Years ago, a wise friend made an observation about a certain aspect of the financial market. Something was a given, a known, considered a sure thing. Then something unexpected happened (as sooner or later it always does, human memory is so forgetful especially when it wants to be), and the markets reacted and the stars re-aligned and what once was thought to be dependable, reliable, and certain––a fundamental truth––was no longer.

Risk. The chance that things might turn out differently than expected or projected. How good a guide is the past to the present? To the future? Actually, not very.

I am a student of steward leadership. I take my responsibilities to ALL stakeholders seriously, including team members, customers, vendors, investors/lenders, and the community as a whole. If the enterprise I lead flounders, many lives would be disrupted. I have numerous team members who have been with me many years, and serving as a worthy custodian of the source of their livelihood is important to me. We have life insurance companies and pension funds that have lent us money, and many everyday people depend upon our timely repayment for the security of their lives.

Times may be troubled in the financial markets, real estate may be entering a downward portion of the cycle, local markets may be getting overbuilt. My job as a leader is to have laid up sufficient reserves (cash, system improvements, organizational re-alignments) in the good times to weather the bad times.

I’ve often thought we could have grown much faster, perhaps created even more value. But it would have entailed much more risk. I’ve always asked myself, if the merry-go-round stopped today, how well could we handle it? How well positioned is the organization if suddenly the music stops?

Managing the downside risk is a vital part of a leader’s job. Never assume blue skies from now to evermore. “It never rains in California” but man it pours, it pours.

And when one thing goes wrong, often other things go wrong as well. Are you prepared to handle multiple hits? Cascading failures? Self-perpetuating downward cycles? For example, foreclosures in a given area due to declining property values creates vacant homes leading to unkempt lawns and vandalism, which in turn further reduces property values, which in turn can lead to more foreclosures.

What are you assuming will always be true? What if it no longer is? What are your contingency plans? How deep are your reserves, how redundant are your backups?