There was an interesting article in the weekend papers asking how many private investors had heard from their financial advisors during the stock market turmoil of the past week or so. Not many I would wager. Indeed it would be interesting to know how many advisors of any kind had been systematically reviewing the impact on their clients’ businesses of the recent economic and social developments.
One of the benefits of working with an external advisor, such as a part time FD, should be that they are able to bring information and perspectives that those who are working on or in their business full time don’t get. I frequently get asked by clients about what is happening in the world outside their business, and what changes they may need to make as a result.
Having said all of that, how do you manage a situation where the FTSE can go from 2% down on the day to 3% in a couple of hours? The big temptation is to sit tight, hope that it will all blow over, and that everything will turn out well in the end. Nonetheless it is difficult to balance wondering about the impact of current events with maintaining focus on the medium to long term goals of the business.
Based on recent events I have advised clients trading overseas that managing their currency exposure has become even more important, that the riots are a timely reminder to check insurance policies and cover levels, and that a thorough review of all clients and suppliers, including credit checking, would help to minimise any negative impact.
With the constant talk of deficits, cuts, debts and global imbalances, it is easy to become despondent and tread water waiting for better news to begin to come through. It is worth noting that many large corporates remain in a strong financial position.
However should financial Armageddon ultimately occur I suspect there is little anybody will be able to do about it. For advisors and managers alike it all comes down to managing what you can, being as good as you can, and keeping focussed on the bigger picture of what you are trying to do, whilst always of course looking for opportunities or dealing with the risks that present themselves in the short term.