Start With Humility
We cannot know the future — so we should be humble first.
There are too many uncertainties in the economic, political, and technological fields. There are no clear signs of improvement, and they may even intensify over time. Therefore, companies should focus on what they can control and ensure they can cope with potential variables.
The Key Is Weighing Pros and Cons
On one hand, companies should strive to carry out scenario planning. On the other, they should evaluate various options and provide standard processes for major decisions.
But many companies simply don’t do this in a structured way.
Learn From the Oil Giants
Look at how some large oil companies operate: when oil prices fall, they actually consider how to benefit when oil prices rise. After considering various scenarios and options, they strategically “bet” — and it has worked very well for them.
Why? Because they lock in the goal of “robustness” and base large capital investments and long-term goals on it.
Take “robustness” as the foundation — and find options to adapt at the same time.
Read the Classics. Think Like a Value Investor.
Many companies should read the classics — such as The Art of War — and practice value investing thinking:
- How do we strengthen our own strength?
- How do we prepare for a rainy day?
Companies should use their balance sheets more wisely:
- Which parts of the value chain deserve more investment?
- Which industries, which countries?
- Where should we give up some profits to reduce risk?
Calculated Risk Is a Responsibility
Taking the risk of using capital after careful calculation is the responsibility the company sets for management — and an important part of the business itself.
The board of directors, CEO, and all responsible persons must:
- Be truly careful about the calculations
- Think not only about the current situation
- Consider how to allocate capital between investment projects in different countries, factories, and production lines
Deploy resources wisely. Build valuable, difficult-to-replicate advantages. Ensure that no matter how the future evolves, relatively positive results are achieved.
Looking Forward: Structured Risk Management
Experience is accumulated. Companies may have had an easier time in the past — but going forward:
Taking a structured approach to risk management — actually calculating probabilities and possible outcomes — is the direction many companies need to work toward.
Key Takeaways
- Be humble — the future cannot be known
- Weigh pros and cons — scenario planning + standard decision processes
- Anchor on robustness — like the oil giants’ strategic bets
- Invest like a classicist — The Art of War meets value investing
- Calculated risk is a duty — for boards, CEOs, and managers alike
- Structure the future — probability-based risk management is a must
Wenzhou Yeshine — Navigating Volatility With a Steady Hand.