Experiencing and reading about how economic crisis occur around the world is fascinating. In the book “Too Big to Fail” by Andrew Sorkin, where he details a meeting between AIG and JP Morgan in late 2008 he says:
Even worse, Dimon didn’t think that they had an accurate read of their financial data. As far as he could tell, Schreiber was simply reading off a sheet of siloed information that had never been aggregated and analyzed in one piece. “You guys need to get a handle on the numbers,” he said. “The real numbers. You need to sit down with those numbers and figure out the size of the real hole, not the made-up hole. How big is the securities lending? You have to go contract by contract, like bottoms-up, real work. Then you need to make a list of who can help you fill it. This isn’t like, you know, you’re going to be late on your credit card bill.
I have been surprised at the “professionals” that are not accurately bringing together the balance sheet, profit and loss, 90 day cash flow and financial ratio analysis into a real world, real numbers, summary format. It makes it harder for business leaders and their teams to make good decisions in steering the company if the data is not clearly and accurately compiled.
Part of what we have learned is that we need to be responsible for pushing/challenging private business to NOT do what the supposed “professionals” did above. While we may be private businesses, we are still tied into the overall financial system and banking/bonding companies take our numbers seriously and are making decisions about who to keep in business and who they will put out of business.
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