Crisis: Is it Really a Time of Opportunities

Many believe that the current scenario of downturn or recession is a time of great opportunities. Let us try to have an insight into what really are the opportunities, if any available.

A pessimistic businessman, who has lost millions of dollars in a span of 3-4 months, whose value of business has plunged significantly, would not say so. For him, this is a time to play safe, get his business insured properly against the risk of such unprecedented periods. But still, the viability of his business cannot be guaranteed. During the recent months, we have seen something unparalled. We have seen the giant businesses collapsing in merely a few weeks, especially those relating to stock markets, real estate, mutual funds, etc. This also inevitably has a disastrous effect on relating business. A 50- year old restaurant in Wall Street had to be shut down as it could not find any more customers; it was flourishing a year ago.

If this is the case, then where is the opportunity? Some economists suggest that it is an opportunity as something has to be learnt from the mistakes of the collapsing companies. Something can be surely learnt from the cases of Merrill Lynch, Morgan Stanley or AIG, or even the once biggest investment giants Lehman Brothers. These companies have seen the hardest times in the recent months. If others cannot learn from their experiences, then they should themselves do so. General Motors and Chrysler should learn not to burn excessive cash in the times when the apprehensions of bankruptcy are being felt.

The construction and real estate business is no exception. Builders are now backtracking from their mega projects and are rapidly running out of cash. The construction giants, who were in the Forbes 50 list last year, have disappeared into thin air. What should they learn from this? And what are the opportunities available to them? The most appropriate opportunity available to them is nil, but to close down their business for a period of time, so that they do not pile upon the unnecessary debt as finding customers for them has become similar to finding water body in a desert, that too at a time when the real estate prices have been eroded to rock bottom level since decades.

It is learning experience for the US Govt that what harm can CDOs cause. It is learning experience for European countries that not to follow something blindly, which the Americans strongly believe in. And it is also a learning opportunity for the top executives to brush up their economics skills, before being a part of introducing CDOs at such a giant scale level. If they would have done their basics of supply and demand relations properly, then we would not have to face such testing times today.
So the outcome is that no matter how resilient you may be, you have to bow down before the basic principles. Having farsightedness, optimism, cautiousness and intellectuality is extremely important. A manager in these times should have these characteristics in addition to flawless leadership skills.

It cannot be considered as entirely the mistake of managers like us who failed to perform at the time it was needed the most. Indeed, the current scenario can be looked at as being inevitable. This is because as there are different phases in the life cycle of a business, the same applies to the economy as well. It is now facing a phase of depression, having no near signs of recovery. As it was in 1930s, the same is the situation today, and probably it would repeat itself in future also, but there is always an opportunity to learn from our mistakes. We cannot defy the rules of nature and thereby cannot have a boom period running throughout. But we can surely learn and learn and learn and implement the outcomes effectively.