Editor's letter: No need for panic

No point panicking when things are all going well. It’s when the interaction
between solids and fans is at its worst that panicking is most appropriate, if
not necessarily very effective.

The survey that we publish this month carries the views of more than 400 FDs
and the like, and presents a picture of grim-faced determination to get on with
the job in hand, armed with a well tooled-up finance department and a good dose
of realism as to just how bad the storm is outside.

You have to be about as old as me to remember and to have worked through the
recession of 1990-92. It was a truly horrendous time for businesses and
homeowners. We came out of it, of course, but what was interesting was the
doom-mongering that started gathering pace even as the recovery was set in
motion. Though the economic dials were all in the green (or at least, yellow),
the lack of a feel-good factor meant that most people were expecting another
downturn to strike in the second-half of the 1990s.

So bad was the mood that we carried a cover story in November 1998 about how
to predict corporate failure. Recession seemed imminent so we tried to provide a
few pointers on what to look out for. Six months later, our April 1999 cover
story was about the “sunny side up recession” ­ the downturn that never
happened. Part of the explanation for the economic storm bypassing us appeared
to be the fact that memories of the slump at the start of the 1990s were still
so fresh. The scars on the corporate psyche were still throbbing and so
businesses were well positioned with relatively low levels of debt and high
levels of experience at dealing with difficult situations.

Today, we are particularly encouraged to find from our survey that FDs have a
high level of confidence in their teams’ ability to deal with the current
challenges. To some extent, this is an environment that plays well to the
beancounter’s natural disposition, but there is so much uncertainty ­ and a
plethora of scary headlines ­ that trying to forecast and rebudget is like being
a circus knife-thrower’s blindfolded victim. It’s good to read that FDs think
they’re up to the task.

One finding did disturb us, and that was the minority of readers who said
that it is sometimes necessary to make short-term cost cuts that are potentially
damaging over the longer term. We understand that there are times when ‘needs
must’. But if it’s not an issue of sheer survival, then this is, indeed, no time
for panic measures.