If it is broken can we fix it!

I have to admit that when I posted my first Blog anticipating the Olympics I did not realise that the Games would actually contribute to to my failure to post a second Blog until now

I have to admit that the usual bile and vitriol that I call upon as my muse for my various Blogs has been hugely dissipated by watching London 2012 and a family holiday in the Basque country. Every time I have felt the need to wax lyrical on the failings of the global financial services industry I have only managed a Tweet in support or deriding the hard work of somebody else.

I have long since returned to a normality, the warm feeling of pride in the fact that we all managed to deliver a wonderful and uplifting spectacle has long since been replaced with huge personal cynicism by confronting the absurdity of the current financial services market.

Firstly and or a more positive note whether it be the often ridiculed organisation committee, the Mayoral office, the competitors, the volunteers or the spectators, all and I mean all deserve praise for delivering beyond expectation. I wish our politicians and lawmakers were not exhibiting the exact antithesis of these Olympian values!

I was recently looking at a PowerPoint slide originally produced by Pwc two or three years ago entitled the regulatory Tsunami ( see attached). I have since adapted it and in reaction to several commentators and retitled it the Regulatory Ice age. Tsunami is a misnomer because although destructive, tsunami's engulf but ultimately dissipate and things get back to normal with the obvious acknowledgement of the human and personal traumas that inevitably remain. Life however goes on. If the current set of regulatory developments, laws and directives are implemented as drafted or consulted on, God help us!

If the dinosaurs were wiped out by an Ice age caused by a huge meteorite strike somewhere in Mexico (bare with me if you don't subscribe to this particular theory as it matches a tortured analogy) then the same thing may happen to the leviathans of the financial services industry! This time the Ice age follows not a meteorite strike but a paper based onslaught of game changing laws and regulatory upheaval. It is not that any one individual text is flawed in its thinking or objectives (although some are and admittedly some I can't even bring myself to read the synopsis of, so could be anything) it is the interaction or lack of coordination whichever way you wish to look at it that gets me.

 I pride myself on trying to understand the objective behind the law or regulation before I get caught up in the individual clauses and detail. This allows me to take part in pre-implementation consultation and hopefully have influence on the eventual outcome. Even if it is only a clarification request, or more fundamental observation, in my experience the authors need practitioner help. Afterwards I get to grips with the detail.Therefore I get that; Solvency II and Basel III are about prudential standards and making sure the Dinosaurs have enough to stave off starvation; I know that MIFID II is looking to level the conduct of business playing field in European Markets; UCITS V and VI  are about saving the brand of the only truly pan-European regulated product; Volcker preventing poacher being gamekeeper in the Investment banks, and AIMFD ensuring that managers of Collective investment Schemes are subject to regulation and oversight by a third party. The UK's RDR wants to see transparency in charging for advice while challenging the advisory industry to show their worth. There's my favourite of all in FATCA which is probably the most ill conceived of the lot (forgive the simplification) whereby anybody investing in American financial instruments will have to prove to the US revenue that all Americans who have beneficial ownership of said instruments have been identified as such, the costs of this I only shudder to think. There you have it a series of single focus developments that create a barren wasteland of entrepreneurial opportunity. Outwardly there is no acknowledgement of the "law of unconsidered consequences". I am finding it difficult to believe that the large institutions are not caught in a web of regulatory impasse, having to consider structural change and adaptation at the expense of viability.

When the meteorite hit 65 million years ago it is estimated that half the species on earth were wiped out, only those that could adapt to the environmental paradigm shift did and then evolved into the present flora and fauna we have today (with the exception of the species hunted into extinction or denied environments in which they can survive). I obviously don't know that half the businesses in Financial services are going to disappear but I do know their chances are slimmer than they were now that we are entering the regulatory Ice age.

HRP 20th November 2012

Thirty-Metres in 9.5 seconds!

For my first "Tortured Analogy" I take the impossibility of my good self beating Usain Bolt in the London 2012 Olympics and compare it to the lack of realism in business strategy.

As an eternal optimist I have had to learn how to be cynical. Playing the Devil's Advocate is sometimes easy but not without value because the positive traits of optimism and unfettered entrepreneurial energy can often be broken on the rack of reality.  A belief that all can be achieved if you set your mind to it is a romantic maxim. I may have even reiterated to my children that all is possible in the countless "take every opportunity, live life to the full, the world is your oyster" cliche ridden motivational speeches that is the want of a father trying to guide but not dictate a life path for their offspring.

I do not however make my living as a motivator but as a strategy consultant and I would give up if ever I uttered anything as trite as "all is possible". Not only it is patronising and although my kids may appreciate the literal benefit in the future, I would not expect a client to pay for it. More importantly it is not true.

At this point if there is anybody deluded enough to disagree with me while bound by the accepted laws of physics and common understanding that Harry Potter is not real consider this; in about three weeks time Usain Bolt will attempt to cement himself as the face of the 2012 Olympics by winning the blue ribbon one hundred meters final.  I do not have a chance of beating him in the race!

There will undoubtedly be a pedant somewhere that will wish to challenge me on that one, siting that Bolt could be injured, a handicap system could be put in play or he could be disqualified. Absolute rubbish! Although the spectacle of Price versus Bolt will amuse those that know me it is not going to happen in the one hundred meters at London 2012. The important point here is whether or not it is possible not my relative ability against Bolt.

The mentioned scenario is impossible because of the restrictive nature of the deliverable. Beating Usain Bolt over one hundred meters is highly unlikely whoever you are, however Yohan Blake did beat Bolt in the Jamaican trials last week, therefore beating Bolt is not the issue in isolation. The issue is the race itself which is a final and follows two semi-finals, four quarter-finals, heats and pre-heat qualifying. It is restricted to three competitors from each country who have achieved a preordained qualification time of 10.24. Qualifying closed on the 8th of July. Forget that at the last recorded attempt back in 1984 I recorded 14.5 seconds for the hundred meters and certainly have not improved since then; forget I would have to beat all but seven other competitors to get into the final, forget there are at least three Britons more eligible than me. The simple fact is that I did not enter and I do not qualify for the race. If however Usain wants to take me on somewhere else at a different time I am open to offers, the handicap, injury and a multitude of other factors make my victory possible if somewhat improbable.

In stating the mind numbingly obvious that I will not be beating Usain in London 2012 I bring your attention to a common failing of business strategy; the failure to set realistic objectives. Whether it be a measurable achievement, the time period and budget in which to achieve it or a combination of these many business strategies are doomed to failure at outset because of a lack of realism. With the best people, an appropriate budget, common vision, achievable time frame and strong leadership business change and improvement can be massive. Failure to put any of these elements in place will compromise any goal. A common error I often come up against is that businesses put a relatively large budget in play to compensate for inadequacy in the other areas. Weak leadership is the most common source of failure and usually manifests itself in an inability to compromise. It is the first days of the project when the terms of reference are being drawn up that will dictate how the project is run and by definition its chances of success.

I welcome a vision that is ambitious, "number one in every market", why not!  However if any of the elements are unrealistic they must be challenged at the outset. Strategies are implemented by hitting a series of milestones on time and on budget, significant failure to hit these milestones will accrue and accumulate until the whole project is in danger, the staff will doubt feasibility of the objective, become demotivated or potentially leave. Project sponsors will blame everybody for the failure with the exception of themselves.

Therefore, if you want to be "number one in every market", show me the plan with ambitious but ultimately achievable objectives. I will ask, Over what time? By what measure? Define "Every Market". Who is delivering this? Are they qualified? What is the budget? How is it being spent? What is Plan B? A thorough tyre kicking exercise is warranted before any major strategy or project is implemented.

Finally in the absence of my participation at London 2012 I will attempt to run 30 meters in 9.5 seconds while Usain runs 100m. I will start just outside my front door and run down the street while Usain blasts out of the blocks in the Olympic stadium. If I finish first I will have achieved my objective!!

Huw
July 2012