Maximum Reasonable Adversity

written by CHRC
4 · 01 · 20

A long time ago in a galaxy far, far away…. a galaxy that did not know Excel, but used a language called Lotus 1-2-3, I was a credit analyst. There I learned financial modeling and was taught a concept called Maximum Reasonable Adversity. In our modeling class, we were assigned a case study about a company that catered meals to airlines. Our credit officers were trying to impart the wisdom that a swing in interest rates or inflation were not the greatest threats to repayment. The greatest risk was an exogenous shock, which while possible might not be probable, at least not highly probable. After much debate, my case partner and I settled on an airline strike: How many weeks of an airline strike could this company withstand and still stay afloat and cover their interest payments?

Enter COVID-19 which seems to have taken the world by surprise. Experts who study pandemics, however, have been modeling the adversity scenarios preparing for the next pandemic. 

A recent Economist article highlights another sort of expert who is always looking around the corner anticipating some exogenous shock that could put a company on its back foot and necessitate an immediate and intelligent human response. For those of us who have been in the HR field for decades, this article is a long overdue exposé on what we really do. For those who complain that HR is always planning for worst case scenarios, constantly assessing risk, and planning for succession, perhaps now you will start to understand the lens through which strategic HR views business: how to stock and cultivate human capital inventory not just for the good times, but to weather maximum reasonable adversity.  Read More Here 

Related Posts

Hidden Talents

Hidden Talents

Checking twitter for some of our favorite labor economists, the app declared that Jerry Orbach was trending. Jerry Orbach? Hasn’t he been gone for several years? But funny enough, I had just been talking about how much I loved his portrayal of Lenny Briscoe on “Law...

Labor Day Contemplation

Labor Day Contemplation

Labor Day evokes many images.  For some of us, it’s a time to savor the last days at the beach, perhaps with a good read? Most of us hope to find meaning and purpose in our jobs.  In this era of The Great Reassessment, maybe this is the Labor Day to reconsider our own...