Solutions: Our customer magazine is called Solutions. Which special solution do you remember from the last weeks?
Benedikt Hintze: Over the past few weeks, we have all learned that the world is not sufficiently prepared for such a crisis. How do you deal with a sudden, massive downturn in demand? What a company can do beforehand is to build up reserves to ride out the crisis. I compare this to nature's hibernation - the way a hedgehog feeds on winter bacon in time and reduces its energy consumption for a few months.
One problem with the current crisis, however, is that the state has intervened very quickly. And with the full arsenal of economic policy: subsidy programmes, immediate loans, credits and major economic stimulus packages. On the one hand, this makes sense, but on the other hand it prevents an important learning effect: companies do not learn how to pull themselves out of the crisis or how not to manoeuvre themselves into it in the first place. Some companies have called for rescue packages after only a few weeks - after sunny record years, mind you.
What is missing here is some kind of punishment for those who have not prepared themselves properly. Instead, many companies will announce at the next crisis: "When COVID-21 comes, the state will step in again. But: will it really do so? Can it still do that at all?
Solutions: So to a certain extent the massive state aid prevents initiative, creativity and real problem-solving, which means that companies are in danger of falling back into their rut very quickly?
Benedikt Hintze: Yes, I see the danger. Assuming there were no state measures: What would be the alternative scenario? We would probably have an enormous wave of bankruptcies, we would experience mass unemployment - just like in other countries. In the USA, over 30 million people have lost their jobs within a few weeks. That is in stark contrast to our German situation. If our policy had not reacted, we would probably have got there. But: most companies would have learned from the pain, the mistakes, the omissions. They would have wanted to be better prepared for such or similar situations in the future. Then, as an entrepreneur, I need crisis management and risk management. This drive is now missing. There is also a need to discuss where the state intervenes and where it does not. If it "gets us out" as private individuals, then that is a laudable thing in terms of our community spirit. But is it intended to help corporations with investors, often other corporations as well?
Solutions: The crisis has shown that nobody is an island. No company, no human being, no economy. We are extremely networked. Sweden is a good example of this. Sweden has not imposed a strict lockdown, but has nevertheless been hit hard economically. Now the issue of risk management is always a trade-off between opportunities, risks and yield decisions. Would you say that companies have put their main focus on returns and profitability and therefore have not put enough bacon on the table?
Benedikt Hintze: I think this is a problem of efficiency. We have managed to build global value and supply chains over the past centuries. Higher, faster, further. Every day, ships with more than 20,000 containers arrive in Hamburg. This is symptomatic of what we consume and of how much more powerful the network nodes are swelling. As traffic increases, so does the risk of accidents. And: as the number of nodes increases, so does vulnerability. This is what I call the 'progressive-invulnerability paradox'. This means that the more progressive a society becomes, the more vulnerable it is to injury. Dense, unknown interdependencies arise because we are nowadays travelling at very short notice. The just-in-time principle in particular has further increased our vulnerability. Why? Because lean management is exactly the opposite of robustness. This means that companies have no reserves. Lean management is certainly justified, but only as long as it works. If something unforeseen happens, everything collapses like a house of cards.
Solutions: So build up redundancies?
Benedikt Hintze: Redundancies are not harmful per se, it is always a question of the time axis. In the long run, only those survive who have endured an existential crisis. Take inventories, for example: Of course, capital is tied up. However, if you have too little or no stock, you are more dependent on others. If the supply chain breaks down, production and sales stop. That is the main problem we have manoeuvred ourselves into in good faith. We rely on each other far too much these days. Blessing and curse of our modernity.
Solutions: Do you see a chance that we might return to other location decisions? For example, to a safe and reliable delivery service instead of a low-cost one?
Benedikt Hintze: Yes, opportunity as the return of the idea of risk. However, the crisis was not yet deep enough and moving enough for a rethink. But perhaps we will only be able to judge this conclusively in a few years' time.
Solutions: Could you imagine, assuming there is a vaccine or promising treatment options, getting back to work as it was before the pandemic?
Benedikt Hintze: That would mean that you have not learned anything along the way. No, I think we are working together in a different way, more thoughtful, with a more alert consciousness. What does that do to our children? What does that do to us adults, now that we have not shaken hands for so long? Or so they say: No, the virus still exists in the world or it can mutate. So maybe it has been buried in the long run. The world does not stand still, it changes. We will soon be talking again about new topics or old topics that are breaking up. We will always do our work a little differently than yesterday.
Solutions: One thought: the GVNW, together with the Funk Stiftung, conducted a survey on the topic of risk management last year or the year before last. My impression was that risk management is not good at actually showing the successes, the benefits. You have to convince management of the added value of issues. How do you do that?
Benedikt Hintze: I find it difficult to do so when there is a need to talk about added value. If there is an added value, then others will recognise it too. Our "problem" is that we are preventing crises. But how can you sell it? You are only walking into the one future, only experiencing the one truth. Hopefully you will not suffer any damage at the end of the road. The reasons for this: ability, luck or probably a combination of both. But what do we experience in our society: the crisis managers are celebrated, not the crisis preventers. As a risk manager, I must therefore trust that someone will appreciate our loss prevention efforts: and the test will come at some point. At some point it will burn. It happens because you are constantly exposed to danger. That is why I argue: we are prepared. We have taken various risk measures. We have the best possible insurance. We use reliable service providers. We can do no more than that.
Solutions: Thank you very much. That was an exciting conversation..