There’s nothing quite like disaster to remind us of the importance of effective leadership. As the recent sea disaster off the coast of Italy illustrates, when the captain fails at risk management, tragedy can occur.
Unfortunately, there are a number of parallels that can be made between the ship’s crash and the crisis we’ve experienced in the mortgage business. “There’s no way this can be compared to managing risk in mortgage operations,” you may be thinking. Well, let’s see:
Fact 1: The captain of the Costa Concordia dismissed the need for effective risk mitigation processes by not undertaking the lifeboat drills before leaving port.
Parallel 1: Mortgage leaders eliminated documentation that would have raised awareness of risk, thus eliminating the practices that could have saved us.
Fact 2: The captain was overconfident in his ability to guide the boat outside of proven safe channels and followed a route he thought was more appealing, effectively leading the ship onto the rocks.
Parallel 2: Mortgage leaders were overconfident in their ability to safely steer away from proven risk practices and implemented practices that appealed to their bank accounts. They steered us into a major collapse of the industry.
Fact 3: Even when it was obvious that the boat was in trouble, the captain did nothing to address the problem but jumped onto a lifeboat to save himself.
Parallel 3: Many of our mortgage leaders also provided themselves with a safe way to shore, letting their companies flounder in the mess they had created.
It should be obvious that when leaders fail to manage risk, whether it’s on a ship or in the mortgage business, they are responsible when a disaster occurs. Well-managed companies have leaders who take risk seriously. Those that don’t, such as the Costa Concordia’s captain, should be removed from leadership positions. The cruise industry is learning this lesson. We’ll have to wait and see if our captains learned this as well, based on the actions they take. As it looks now, I believe our captains have learned very little, despite airs to the contrary.
