Dennise Williams, Staff Reporter
BYLES - IAN ALLEN/STAFF PHOTOGRAPHER
"YOU DON'T have a lot of wiggle room once the crisis begins. You need to develop a risk/reward strategy."
Richard Byles, chief executive officer of Life of Jamaica, spoke to the 15th cohort of Fitz Ritson & Associates (FR&A) portfolio management programme at the Courtleigh Hotel last Wednesday.
Mr. Byles spoke on the guiding theme for FR&A's 2006 programme, 'Managing in Turbulent Times'.
Having gone through the turbulent 1990s as head of First Life Insurance Company, one of the few insurance companies to remain solvent during the financial sector crisis, Mr. Byles spoke on how to manage business challenges.
"It is important to enter a crisis in good condition. You need a survival kit."
Mr. Byles explained that to survive turbulent times, there are three essential ingredients for companies.
Risk/reward strategy
It is important for companies to develop one and stick to it.
Corporate governance
Companies need a board of directors who are independent thinkers with clear corporate governance strategies
Regulators
Especially during turbulent times, there should be a regulatory environment that is tighter, more professional and proactive than ever before. In fact, Mr. Byles noted that one of the key differences between the financial sector crisis of the 1990s and the turbulent times now is that regulators are here to force minimum prudent policies upon all regulated entities.
Therefore, "Those three things negate insolvency and companies desire to do nutty things in turbulent times."
The bottom line? Mr. Byles states, "You have to sense trouble before you see it to be able to position yourself early."
But this doesn't mean you fold up during turbulent times. "As a chief executive officer, you are always looking for the next growth opportunity. That is why you will see banks go into insurance and insurance companies go into banking."
In fact, during turbulent times Mr. Byles noted that you find companies willing to merge rather than just wither.
And speaking about the challenges in the economy, Mr. Byles said, "We have an economy that has positives and negatives. Our economy is fragile because we have massive debt to gross domestic product. This dwarfs everything else.
FISCAL TIGHTNESS
"And so the risk, I think, is in our fiscal tightness. If the budget gets loosened up, the debt will grow and international creditors will punish the country. If they lose confidence in Jamaica, then the bond market, the foreign exchange market and the stock market will fall out."
Yet, things are not so bad, as Mr. Byles noted, "On the other hand, there is significant investment in the country, so that is a big plus."
Another interesting point about turbulent times is the somewhat 'nutty' behaviour of individual investors. To them, Mr. Byles said, "Many investors have a very short-term get-rich-quick mentality. They are in for rough times. However, there are opportunities to grow your wealth in real terms if you are prepared to be a more longer-term investor. My experience is that the stock market has delivered real returns over the medium term. Additionally, our bonds do well and as the country's economic outlook improves, the bond return to the investor improves."
Overall, during turbulent times, companies and individuals are urged by Mr. Byles to take a calm, rational approach to decision making.
