The Notebook: Neil Bennett on corporate disasters, Paris on fire and signs of hope for Wandisco
One of my favourite business quotes comes, inevitably, from Warren Buffett: “It is only when the tide goes out, that you discover who has been swimming naked.” In the past two weeks it has become clear that the recent rapid tightening of rates has created to a strong ebb tide, and that there is an impressive pile of discarded swimwear on the beach.
The casualty list among businesses and banks this past month has been shocking, but most of them have in truth been architects of their own demise. First there was Silicon Valley Bank, which broke the most basic banking rule of them all – borrowing short and lending long and “failed Banking B1,” as Sir Howard Davies, chairman of NatWest Group memorably commented.
Then Credit Suisse found it could not survive a catalogue of poor credit decisions AND a liquidity crunch. Finally there have also been a few corporate disasters, most notably Wandisco, which was forced to admit that two thirds of last year’s revenues may have been imaginary, which frankly takes some doing.
Lots of people have tried to draw a Nostradamus-shaped line through all the corporate disasters, and the gloomier ones have inevitably predicted that we are on the verge of another financial nuclear winter. For me, the lessons are different:
- First, no amount of regulation and oversight will prevent businesses and businesspeople making stupid mistakes. That’s strangely reassuring in a way, although little comfort to the people that backed them.
- Second we are living through a period of fiscal stress and there will be more casualties. But there is no sign of the sort of systemic failures that triggered the financial crisis in 2008. By contrast, stronger banks and businesses should be able to seize the opportunities that it throws up.
- Third, UBS has snagged itself one hell of a bargain, that would never have been possible in calmer times. It will have to wade through a sea of pain to integrate Credit Suisse and there will no doubt be a trail of litigation and regulatory tussles that last for years. But in the end it has created the world’s largest private bank and one its largest asset managers for little more than loose change.
- Finally, we all continue to have 20:20 hindsight. Wouldn’t it be wonderful if someone someday could predict the next financial disaster, instead of raking over the coals of the last one?
Down at the disco
Speaking of the disaster that is WanDisco, I am not going to resort to those cheesy puns, tempting as they are (especially Stayin’ Alive). Things do look as grim as they can be there and it is hardly an advert for Britain’s technology industry, or for its own internal accounting controls.
When a company starts using phrases like ‘material uncertainty’, shareholders should fear the worst. But there is one gleam of hope – the company has persuaded Ken Lever to become interim chairman.
I worked with Ken when he was CEO of Xchanging. He is very much from the do rather than say school of management, clear sighted, diligent and determined and managed to secure a future for that business when it was far from certain. He has his work cut out this time though. It sounds like the business needs a significant injection of funds and a new business model, all in short order.
City of Light…and fire
I am in Paris again, and unlike the King it doesn’t appear that my visit presented a security risk (at least to anyone other than myself). On arrival though it seemed business as usual, people scurrying back and forward to offices, cafes open and the Metro trundling underneath the demonstrations. “We are still the City of Light – not fire,” my host explained succinctly. The most noticeable thing is the sudden thinning in the ranks of the tourists outside the Louvre and Eiffel Tower.
As a Londoner, it is hard not to be taken aback by the scale of the upheaval, which is worse than we’ve seen in our capital since the Poll Tax Riots in the early nineties. It doesn’t look like it is going to die down soon given that neither side is prepared to compromise (contrary to my confident prediction a few weeks ago) and it is hard to see where that compromise would come from. So they are potentially in for a long hot Spring, and even summer.
Can I quote you on that?
“Somehow in recent years you’ve let go of your soul”
Mary Portas sums up what many of us think about John Lewis and adds to the woes facing its chair, Dame Sharon White
Akh-naten like a night at the opera
It is easy to feel sorry for the English National Opera these days, banished from London by the Arts Council after having its funding cut to zero. The company seems to have resorted this Spring to a season of its greatest hits, to show us all what we will all lose if and when it is forced to quit the Coliseum.
Chief amongst these is the revival of its haunting production of Philip Glass’s Akhnaten, the Pharoah that discarded all the Egyptian gods to worship the sun – and paid the consequences. It is a glorious memorable evening and is on until 5th April, so you just have time to squeeze in a pre-Easter treat. While stocks last as they say.
Neil Bennett is global co-ceo of strategic comms and advisory firm H/Advisors
