• Daphne Chen Matthews

Think Like a Bank: Your World Is Not So Different

Banks come in all shapes and sizes. There are community banks, regional banks, international banks, and banks deemed too big to fail. There are Monopoly banks and banks made by Fisher Price. But how does banking relate to your business or industry? Turns out, a lot. Banks deal with risk, conflicts, regulations, compliance, all the while focusing on business development. It is rather difficult to think of a sector devoid of rules, following those rules, calculations, and making profit. Even non-profits have their share of legal concerns.

For as long as the earth has rotated, banks in some form have existed. One autumn day around the year 8,750 B.C., Bogg said to Groof (names have been changed to protect their identities), “Please lend me your club so that I can slay that giant mammoth.” Groof pondered this request, knowing he spent the best part of last spring creating this massive weapon, which he deemed a stroke of engineering genius, and Bogg had not been the most responsible with his tools. Groof performed a risk assessment: if he lends the club to Bogg, will he even slay the mammoth, or will the mammoth’s tusk shatter the club right before he tramples Bogg to death? What sort of collateral is enough for such potential loss? Is collateral necessary in this situation? What recourse does Groof have in the case of loss or theft of the club? Would this affect any future opportunities, considering Bogg’s brother is rather crafty with his loincloth-making skills and Groof has wheels to exchange with him?

Groof excused himself and ran down the path to consult Lala. Lala, best described as the mountainside lawyer, often opined in these scenarios. She said that Bogg’s track record for killing large mammals was rather high and efficient, but there was that one time when Bogg’s wife had to hand over most of the berries she had gathered because Bogg had somehow shaken the bedrock of Kak’s dwelling (we are not sure why and how), leaving Kak’s family caveless for at least twenty turns of the sun.

In your industry, what risks do you have? Do you have a trusted counsel like Lala to turn to, and what would she advise? Does she provide adequate risk analysis while maintaining an entrepreneurial frame of mind? What can you do if Bogg gets trampled and the club is destroyed? Do you have other reserve clubs? If you do not do this for Bogg, what opportunities might you miss out on within Bogg’s network? Are you permitted to place conditions on Bogg’s request? Are there any conflicts of interest for lending to Bogg if you want to barter with his brother down the line? How strong of a client is Bogg, and do any risks outweigh the return of maintaining the relationship?

These types of questions exist for every business. Pros and cons are weighed daily, legal and compliance risks are analyzed in every cubicle, coworking space, boardroom, you name your type of office. Money is earned and opportunities forgone, governing bodies watch, and auditors monitor. Banking is just another industry, and it helps to think like one. Just make sure Lala is on speed dial before that mammoth wanders off the glacier.

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