| If you have not heard the phrase Fortress Balance | | | | 4. What would be your total exposure, and in what |
| Sheet, you probably are taking more risk than you | | | | areas of your business, if that worst thing happened? |
| thought. This phrase received prominence in the 2004 | | | | 5. How would you quickly and efficiently react if that |
| JPMorganChase annual report letter to shareholders. | | | | event occurred? |
| Evidently most people ignored the concept and | | | | 6. Would you survive that worst event? If yes, how |
| concerns it raised. | | | | significant would the damages be? |
| You may have heard different versions of the | | | | 7. What can you do now or in the very near future, |
| concept. All are geared to the idea that liquidity is | | | | to prevent, or at least reduce the possibility to a |
| crucial and balance sheets should be cleansed of | | | | more prudent level, that chance that worst event will |
| questionable assets so management truly knows the | | | | occur? |
| assets they have available to use and the liabilities | | | | Once you have done this strategic or facilitated |
| they must satisfy. These flight to quality or safety | | | | process on the worst risk, repeat the process for |
| companies have much more flexibility strategically. | | | | what you feel are the next two catastrophic events |
| Think of this as access to cash, ability to take | | | | that have some conceivable likelihood to occur over |
| advantage of opportunities going forward or having | | | | the next two to three years. |
| powder to purchase competitors on incredible terms. | | | | Think of this as a common sense application or test |
| Very few people see a rapid return to growth. Most | | | | of your present risk management process. Different |
| see either a L shaped slow incline, AFTER we hit the | | | | companies may call this enterprise risk management, |
| bottom of the downturn, or a W shaped projection | | | | ERM, strategic planning, risk assessment, risk |
| with some improvement in the next year, flowed by | | | | management assessment, entire enterprise risk |
| another drop and then growth. If you are in either | | | | management assessment, operational review, due |
| camp for your strategic planning or risk management | | | | diligence, or scenario budgeting. When you find the |
| process over a very choppy next two years, what | | | | process owner, or create it in your business, dig a |
| are the major strategy level risks you might plan for? | | | | little deeper to determine if the process is siloed or |
| Consider the 7 questions below as a common sense | | | | departmentalized. This process should involve all units |
| approach to improve your present situation. | | | | of your business. |
| 1. Where could your company be whiplashed from a | | | | After all the company this planning might save is |
| prolonged slow return to growth or another | | | | yours. And the opportunities you may create from |
| economic drop? | | | | improving your company's resources toward moving |
| 2. What is the worst thing which could happen to you | | | | toward being a fortress balance sheet company may |
| from either event? | | | | open up some incredible opportunities for you on the |
| 3. How likely is that event to occur within the next | | | | companies that have less staying power. |
| two years? | | | | |