Too big to fail is a term that was quite commonly used during the Great Financial Crisis (GFC) in 2008, but it’s stuck around since then and is sometimes used to denote companies or industries that cannot or should not go out of business.
There’s a lot to unpack with that latter clause, since in a more free-market capitalistic society, businesses that fail, especially consistently and severely, can and should go out of business. Government intervention is often seen as a means to simply reward poor, inefficient market practises, and it only feeds into the notion that developed economies like the UK are in fact suffering from crony capitalism and too much government intervention.
Whatever the case may be, all businesses can fail and the root causes of failure may not always be immediately evident. Since most business leaders don’t want their business to fail (there should never be a genuine incentive to want that to happen), the responsible way to minimise the chances of failure and to maximise success is to understand and manage all of the potential risks to the business in the short-term and the long-term.
Is the UK Repeating Canada’s Mistakes?
Although Canada and the UK both share a common heritage and many other similarities, the former has been under the tight economic grip of what amounts to cartel behaviour in specific industries. Canada’s telecommunications, rail, and air travel industries are just a few of the more noteworthy examples of oligopolies that produce expensive, low-quality goods/services for a large number of essentially captive buyers.
Canada’s telecommunications, for example, are essentially run by an oligopolistic cartel of three major companies and their subsidiaries, Telus, Bell, and Rogers. Many competitors that started out as genuine competitors were bullied out and absorbed by these three.
The UK’s economy should take heed of what has been developing in industries like these in Canada over the past few decades, as it could quickly lead to cartels and powerful lobbies that are a little too close to the government.
Whether these industries are indeed “too big to fail” or they simply deserve to be run out of business to pave the way for fresh competition, better prices, better quality, and a more meritocratic market is a matter of debate, but the potential risks in either case should be taken into consideration as well as their subsequent potential effects on consumers.
Can Risk Management Help Business Avoid Failure?
Most of what was mentioned in the previous sections applies to major industries and big players in those industries, but what about small to medium-sized enterprises (SMEs) operating in the UK.
The reality is that a lot of small businesses get the short end of the stick - and that’s not always a bad thing. Small businesses are forced to be competitive. They aren’t powerful enough to lobby government for preferential treatment, bail-outs, or other free lunches like big corporations can.
What this means is that SMEs stand to benefit from risk management in a perhaps more equitable way than companies that are in bed with government (or at least adjacent). While this might not justify hiring dedicated risk management professionals for a small bakery, for example, it does mean that SMEs can benefit from a robust risk management software package that identifies and helps to manage risks.
Risk Wizard UK
Businesses in the UK, big or small, can benefit from the superb features of Risk Wizard.
Contact us at Risk Wizard UK.