Jeff Judy

Jeff's Thoughts - July 11, 2007

Ripples in Your Pond from Distant Stones . . .

When major natural or business disasters strike, financial instituions that aren't directly affected are sometimes too quick to sigh in relief. They often fail to foresee significant indirect impacts, through local customers that are surprised to discover that these events can hurt their businesses.

I frequently encounter people working in financial services who just can't seem to look beyond their local geography -- and worse, beyond the largest customers in their local market -- to anticipate problems. We talk all the time about the global economy, and we all know we're part of a national economy, but if our customers aren't in a national or international business, we may miss even obvious challenges that originate elsewhere.

I'm not talking about businesses competing for customers or sales. I'm thinking about events that may suddenly, and dramatically, change their costs of doing business. Very simply, new rules of the game can be established almost overnight, in practically any business. And it is a very rare, but very wise, individual who reads the newspaper with an eye to which businesses in the target market may find themselves operating in new ways, in response to distant disasters.

Most of us think of Katrina and the devastation in New Orleans when we hear the word "disaster" these days. And hopefully anyone who had customers that had operations there, or that were directly affected by the storm, would have taken a close look at the impact on the customer's business.

But what about your local building contractors who have to get lumber and sheetrock at reasonable prices? Massive rebuilding efforts in one part of the country tend to suck supplies out of other regions, as we saw a couple of years ago when a series of hurricanes swept across Florida.

Or take Enron. Most of your customers probably had no direct ties to Enron, and weren't directly affected when Enron unraveled. But how many businesses are finding new demands to meet higher standards for transparency and regularity in accounting practices to be a significant drain on their time, attention, and other resources?

And what businesses are finding new opportunities not only in accounting, but in training and documentation services, under the new rules?

When catastrophe strikes a region, or a large business, elsewhere in the country, it is natural for everyone to say, "That's too bad." But the smart people will go on to say, "I wonder who that's bad for in my market." And the very smartest ones will also wonder, "Who is that good for in my market?"

If you believe that the world is getting smaller, you're right. If you act on that belief in your own local dealings, you're smart!