Do we want our banking systems to be “Fail Safe” or “Never Fail”? Both could work (and not work), making the choice all the more hard to make.
At the moment some commentators and regulators favour “Fail Safe” and are arguing to split up the banks so that none are “too big to fail”. However this option has its own widespread consequences for the international banking system. While it may reduce the risk of system wide failure it does not necessarily avoid risk at the individual firm level.
Other commentators and regulators favour “Never Fail” strategies but, as opponents point out, that comes at a price in terms of high capital reserves, less flexible rules, and potentially higher cost of doing business. So a “Never Fail “culture can be reassuringly predictable yet low on customer responsiveness and innovation.
Many organisations struggle with exactly this dilemma in their own internal culture. Should your culture encourage people to experiment and take manageable risks with no loss of credibility, or do you want your managers and leaders to make sure they have no failures? The decision drives not only how the organisation bears risk but also its ability to innovate and to attract and retain different types of talent.
It will be interesting to see how the debate unfolds in the financial industry. To what extent will the decision making be affected by being in the full glare of a critical public eye, amidst the high emotions and painful aftermath of the 2008 crash?
As David Dotlich, Peter Cairo and Stephen Rhinesmith say in their book “Head, Hearts and Guts: How the Worlds’ Best Companies Develop Complete Leaders”:
“It is easy to choose between right and wrong. The difficult bit is choosing between right and right.”
Rosie Miller is an international executive coach and author