When allocating capital, lenders always have a risk-return trade-off measurement in assisting with securing their expectations for profitable lending. At times of a New Normal (translated as a new attitude in how business is done) their preference results in far fewer options offered. So far, and with more to come, the resulting responses and shocks to the New Normal have triggered thoughts of the 2008 Recession Cocktail, created from inertia and the blame-game. While some bigger organizations are managing to scramble through the devastation, what about the smaller ones? As a measurement of caution, is risk-weighting going to be intensified on all sides? Or are lenders and businesses unequally weighted in respect of having sufficient provisions to hold back retraction?
To handle a New Normal successfully is a fine balance. With this one, on the one hand, rebuilding health (in every considered area) needs immediate attention, while on the other the New Normal is an unchartered territory (like nothing we have ever known). To be able to see further down the line of a New Normal, be that twelve months, two years, three years, or beyond, takes tough early choices and capacity. For lenders, the longer the retraction goes on, the further options are reduced, with inertia seldom seen around lending capital and nowhere to be seen near stress/risk-testing. Rebuilding resilience never stops for the bigger organizations and, as I have said plenty of times before if it’s good enough for the big boys and girls it’s good enough for the not so big. The lender approach for risk-reduction is not only fewer options; lowering limits and new restrictions are also implemented.
So, when everything is at a point of being difficult, challenging, and not an easy task, what approach could the mortgage, re-mortgage, or loan Applicant take to rebuild and create some resilience? What new, fresh thinking might help when comparing standing still (where nothing happens – and when nothing happens, stagnation sets in) to rebuilding (Plan, Strategy, Review) which never stops?
Strategy needs a tactical structure – Being tactical means being ready for the unexpected.