In the land of my Flemish forefathers, I draw a key lesson for 2011: always have a Plan B
To Ghent, in the land of my ancestors, to address a conclave of ‘risk managers’. Though the mother tongue of most participants is Dutch or French, the conference is in English — and I feel obliged to explain that despite my surname that’s what I shall speak too, because it’s 200 years since my silkweaving Flemish forefathers moved from Antwerp to Norwich to take advantage of a tax scheme for migrant craftsmen that would no doubt now be banned by EU ‘single market’ rules. I spare them the detail that I did in fact learn a few sentences of Dutch from a Belgian girlfriend when I worked in Brussels 30 years ago, beginning with telling the time — of which all that remains seared in my memory is the elementary question ‘Hoe laat is het?’, literally ‘How late is it?’, which one day elicited the answer, in English, ‘Too late for you, my new German boyfriend’s waiting outside.’
But still, learning from experience is what life’s all about. And as I relived that traumatic moment in preparation for my keynote speech, I began to ponder the strange new landscape of risks that has been left behind by the financial turmoil, technological breakthroughs and unexpected break-ups of the past few years.
I was especially taken with a presentation on ‘supply-chain risk management’. In essence, many big companies spent the past two decades finding smart ways to shrink their inventories of manufacturing components or of groceries for supermarket shelves while pushing as much responsibility and financial pain as possible on to chosen long-term suppliers. The holy grail was a ‘just in time’ system in which a factory or store might hold as little as two hours’ worth of parts or goods. But that left no allowance for what happens when there’s a flood or a blizzard, or an outbreak of panic buying, or (in a celebrated case study) a small fire caused by a lightning strike on a Dutch-owned plant in Albuquerque, New Mexico, which happened to be a key supplier of microchips for mobile phones made by both Nokia of Finland and Ericsson of Sweden.
And what happens if a fault is discovered in a component made by a sole supplier which forces a car maker to recall an entire worldwide model fleet; or that supplier is unable to meet its commitments because its credit lines have been cut off by super-cautious banks after the credit crunch; or the price of the essential raw material at the far end of the supply chain has gone through the roof because the market has been cornered by a gel-haired twentysomething trading from the deck of his yacht?
Thus the global interconnectedness of 21st-century commerce, which is so often praised as a force for growth and progress, carries all kinds of unfamiliar perils. If the key word in any boardroom PowerPoint slide of the last decade was ‘sustainability’ —combining connotations of greenness with operational leanness — the new mantra is ‘resilience’, which in its simplest sense means you must always have a Plan B.
Strange new world
My own contribution to our group analysis of this new landscape is the idea that, as the turmoil begins to subside, an awful lot of money and power seems to have ended up in some very strange hands and places. If you want to know what I mean, look at a list of present and past owners of Premier League football clubs, from the Glazers and the oligarchs to the billionaire Thai exile Thaksin Shinawatra — and consider what good all their loot has done for the game.
Or contemplate the international art market, and in particular the idea, which I wrote about recently, that the bidder with the deepest pockets at any auctions of Chinese artefacts these days is actually a business offshoot of the Chinese army. Even more disturbingly, much of this new money has no real home at all. The commodity trader on his yacht in the Caribbean can provoke a food riot in Indonesia; the short-seller domiciled in Zug or Liechenstein can start a run on a bank in Miami; bond traders around the world — knowing little, caring less, barely even talking to each other — can cause taxes to rise and governments to fall.
And besides these weird concentrations of financial clout, the internet has given another kind of power to the emotion of crowds. Businesses struggle in vain to rebut reputational assaults that spread like wildfire across the social networking universe — as happened earlier this year when Nestlé came under attack by Greenpeace and others for its use of palm oil from plantations which allegedly encroach on rainforests. Nothing Nestlé did or said could match the global impact of a YouTube video in which the fingers of a KitKat turned into the bloodied digits of a wounded orangutan. More recently, we’ve seen the role of Facebook in the violently anti-capitalist element of the London student riots, and of WikiLeaks sympathisers in co-ordinated hacker attacks on PayPal and Mastercard, threatening disruption to every business that depends on online payment systems.
Evolution creates new monsters, new epidemics, new patterns of human response. We’re just beginning to see what an era of amazing advances has really given birth to.
In Euroland
No one I meet in Ghent seems to take seriously the possibility that the euro might sooner or later disintegrate. When I wave a Daily Telegraph headline, ‘The eurozone doesn’t need a psychiatrist — it needs an undertaker’, during my speech, I get a politely dismissive laugh. Yet the lesson of the financial crisis is that the unthinkable really can happen — as it happened to Fortis, the venerable Belgian financial institution which had to be nationalised and sold off in pieces. Now market sharks are circling Belgium itself — because its debt-to-GDP ratio is high, its government is weak, its banks lent a lot to Ireland, and it is small enough to be put into play. The sharks move on from one member state to the next, but they’re never going to leave the crippled euro alone. My continental cousins need a Plan B.
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