Being fearless with …a KISS

23 January 2017

I’ve been thinking a lot recently about simplicity and the KISS principle – Keep It Simple Stupid (or keep it short and simple’). The phrase is attributed to the US aircraft engineer, Kelly Johnson, in the 1960s when he told his team of design engineers to remember above all that any jet they designed would have to be repairable by an average mechanic, using only a standard set of US Air Force tools and under combat conditions.

A similar perspective – ‘simplicity is the ultimate sophistication’ – was held by the greatest of innovators, Leonardo da Vinci. The principle that most systems work best if they’re kept simple is difficult to argue against.

The trouble is that the modern world is anything but simple. And at the moment, we also have tremendous uncertainty. There are some fundamental socio-political challenges that impact and are shaped by the macro-economic environment: what does a sovereign British economy look like; what will a great USA look and feel like; how long will Xi Jinping stay in control of China; will the world make the climate related changes it signed up to in Paris? It’s hardly surprising that many businesses are waiting before committing to significant investments. There are a myriad of reasons to stop, pause and hold back. Wait and see what happens, the path to success will become clearer.

The Financial Services sector is no exception – in fact, it is affected more than most. Big, necessary, strategic decisions have been put off and it feels like we’ve been standing still for far too long. But as I’ve said before, these strategic decisions are critical – institutions need to think fundamentally about who and what they want to be in the modern world, to all their stakeholders. 

It’s easier than ever in this environment to find an excuse not to do something. But we need to remember that the world is inherently uncertain. Time will sort out some of the big challenges we face; in a year the new US President will have settled in, and in five years the Brexit storm will have evolved into some sort of new normal but will that mean the end of uncertainty? Of course not. Something else will have taken their place. However much we’d all like a peaceful life and a predictable future, that’s not what life is all about.

Once you understand what’s stopping you from moving forward, you can make a decision. And part of that is being willing to fail. That’s the central point of our Be Fearless campaign – FS is all about taking well-informed risks; this means you know how much you are willing to lose.

I think the best place to start, as Kelly Johnson and da Vinci advised, is with a simple lens. The regulation that has swamped FS in recent years has been a huge distraction; it has forced financial institutions to focus on how they’re organised, particularly when it comes to risk and compliance.

Firms need to keep it simple. All that’s needed is that they demonstrate to regulators that they’re taking risk effectively, managing and controlling it well and pricing it accurately. If you have clarity on the risks you need to manage, and have an understanding of those that may crystallise in the future then you will start to see where to focus. Life is complicated, of course, and FS is a more complex business than most – but that doesn’t mean that a bit of simplicity won’t be welcome.

To find out more about how we are helping clients in managing Risk and Regulation effectively, speak to us.

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