The Worst Week Ever

When Bad Things Happen to Good Companies

NOTE: This article originally appeared in the October 2008 issue of Flawless Compliance, under the "What in the World" section. The link to the actual issue is at the bottom of this article.

The DOW just lost 1874 points last week. That’s a staggering 18.15%, marking the largest one week loss ever both in absolute point value and in percentage points.

I have to admit, I was glued to the television on Thursday, the morning of October 9th. I sat in awe as I witnessed a good portion of my wealth evaporate in a matter of hours. I’m lucky I didn’t get into an accident driving to my office as I floated around all day in a zombie-like daze.
Well, that’s life I guess. This isn’t normal. Friday we’ll see a correction, right?

Wrong!

When I woke up, I was nervous to turn on the TV, so I left it off for a while. I went through my typical morning routine, wondering how the market was doing. Finally, after realizing that the market is going to do whatever it’s going to do, regardless of whether or not I turn on the TV , I flipped it on.

Unbelievable -- down another 700 points! Holy smokes (okay, okay, I had more colorful explicatives, but this is a family newsletter)!

Then up 300, Go! Go! Go!

Finally the bell rings -- down 89, whew thank God it’s over. No wait, down 111, down 125, down 128. Okay, now it’s over – did it stop? – Okay, it stopped.

By Friday afternoon, I had a hangover without the fun drinking party the night before. Several records were broken last week – and not in a good way. As mentioned, it was the work week ever for the Dow, both in point value, and in percentage drop. On Friday, the one day trading range was 1,018 points, the largest swing ever. The volatility index ( VIX ), also known as the “fear index”, saw an unprecedented intra-day high of 76.94.

Wow, what a week!

On the seven year anniversary of the September 11th attack on the US, I wrote an article on my blog at Quest Software, entitled “The 3 Key Meetings to Hold Once Disaster Strikes.” In the article, I characterize a disaster as “a risk event that hasn’t been previously identified (otherwise known as an “unknown unknown”), that carries an extremely high degree of impact.” In other words, really bad stuff just shows up sometimes. Of course, back then I was talking about an unprecedented attack on US soil. Today, I’m talking about an unprecedented tumble in economic health. And tomorrow, you may be dealing with an unprecedented compliance disaster. What should you do?

If a compliance disaster strikes your company, the first thing you should do is – PANIC!

That’s right – scream, yell, grieve, curse out loud, shake your fist at the sky – anything that makes you feel better about the situation, just don’t take any action to fix the problem. Not at first. When disaster strikes, you will be “tilted”, like a pinball machine that’s been roughed up too much. If you try to take any action at this point, you will do more harm than good.

It might take you some time to get everything out of your system, but once you do, take swift action with your team to construct a brand new plan of action. Make absolutely sure everything is out of your system. You know you’re ready when you’ve truly accepted the situation for what it is, and you don’t really feel terrified anymore. You’re still concerned, and there’s a sense of urgency, but no real panic or disbelief. Do not try to salvage old plans because they were based on old assumptions. Everything’s different now, just start over. Everything will be okay pretty soon.

In your plans, make sure you allow for some quick successes early. Once your team starts experiencing success, your confidence will start building, and good things will start happening, and you’ll start experiencing more successes. Once this cycle is set in motion, it will logarithmically pull you out of doom and gloom.

Remarkably unfortunate things can and do happen to companies. To be fair, remarkably good things happen too. Perspective is the key to getting through everything. Just like the Great Depression, the S&L fallout, the Dot Com bust, and the September 11th attack, life continues beyond disaster.

Store this progression in your memory banks, just in case one of these unfortunate events shows its ugly face. If it happens to you, flash back to this framework, and take appropriate actions at the appropriate times. Knowing and understanding is half the battle.