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Scenarios that go beyond worst case can—and will—happen in the business world, so plan accordingly, advised Jamie Dimon, president and CEO of JP Morgan Chase Financial.
“Always have a column called ‘worst ever’ and make sure you can survive under that,” Dimon told a packed conference room of Chicago GSB students at a fireside chat with dean Edward Snyder January 12 at the Hyde Park Center.
Dimon recalled that after September 11, CEOs claimed to have faced the “perfect storm” of terrorist activities, a recession, and a financial bubble that had burst. But if economic history is examined, he said, “It wasn’t even close to being one.”
Among relatively recent economic downturns, count the crash of 1987, the mini-crash of 1991, and the Chrysler bailout. “This is business. It happens. You better get used to it,” Dimon said. “The only thing you don’t know is when it’s going to happen.”
Dimon knows about dealing with major bumps. He was a top executive for Travelers in September 1998 when a major hedge fund, Long-Term Capital Management, was failing. The Federal Reserve System sat the nations' big bankers, including Dimon, in a room so they could work out a solution. Dimon said the equity volatility index, historically around 20, back then had climbed from 25 to a record 40 and in parts of the world skyrocketed to a “ridiculous” 180.
In the end, eleven banks contributed $300 million a piece to the bailout and forced liquidation.
— Mary Sue Penn