by Stephen McPhie CA
Partner RSD Solutions Inc
Tuesday and Wednesday of last week saw budgets delivered by the finance ministers of both Canada and the United Kingdom. To be more accurate, the budget was delivered in Britain by the Chancellor of the Exchequer. As an aside, the British Prime Minister also has another title which is First Lord of the Treasury.
Both finance ministers had different agendas. In Canada, the trick was not to get blamed if the budget was defeated resulting in an election call (which is indeed what happened but on a different matter). In Britain, it was an imperative not to force the Liberal Democrats to abandon the coalition government, thus causing an election. In both cases political timing is all-important.
Actually, in the latter case, the hard work was already done late last year and this budget only really consisted of some tweaking. However, in both cases, a major consideration was essentially hedging against external factors that could not be directly controlled but which could result in major adverse consequences, at least for the finance ministers concerned and their political parties. Politicians are masters of this type of risk management - pursuing sub-optimal agendas and policies to manage a political outcome. In other words, taxpayers and the country as a whole pay an option premium on behalf of politicians.
There are often a lot of things not to admire about politicians and their methods, but sometimes you can admire some of their risk management abilities. Can many company executives say the same about how people would see their companies’ risk management capabilities?
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