Trust doesn’t come with refills!
Before any transaction can take place — whether it is an investment, a sale, or any monetary exchange — what has to exist? Yes, you guessed it: trust. Without it, there is nothing. I love to work with others from all kinds of backgrounds. I like to trust people, but I trust only once. I suggest you do the same, because as you know, a leopard doesn’t change its spots and trust doesn’t come with refills. In my experience, most of the time, trusting again after a betrayal doesn’t work. There are so many pretentious people out there that investors have had it. They (especially the ones in New York) have their BS detector always on high alert. So if you are for real and genuine, you will have a much easier time finding capital and clients, no matter the venue. People will trust you if you are a real person who has integrity, keeps his or her word, and who can’t be bought.
The primary currency in business is trust. Trust has two foundations: credibility and reputation. You have to guard them with all you’ve got. They are difficult to build, and it can take a long time. They can easily and quickly be destroyed. The way you guard them is not by doing damage control but by preventing problems. The key is to build a margin of safety.
Every business you start is regulated by or under the oversight of a given agency or jurisdiction. There is usually a set of rules and regulations to follow. You want to go above and beyond to build your margin of safety. This is especially important if your name is on the door. For example, in the financial industry, which is highly regulated, a customer complaint can go on your record and tarnish your reputation. You can have a surprise audit, receive a deficiency letter, or worse, a suspension or a fine. You can even get barred from the industry or receive jail time if regulators uncover serious irregularities or fraud. The margin of safety is also important because your neck is also on the line for “failure to supervise.” You are considered as guilty as the person who does something wrong on your watch that you miss, even if you are a good guy doing the right thing. You’ll go down, too.
One solution could be software that alerts you if the wrong trading pattern is on, or having two people approve a transaction when official rules require only one, and so on. Prevention is priceless. If you consistently work in a fiduciary capacity, do the right thing and document everything. Use mock audits and call your customers to make sure all is OK. You’ll prevent dangerous situations if you put in standard operating procedures that go above and beyond what’s required.
You know what’s at stake: your credibility and your reputation. If you lose those, you are done. One mistake could ruin everything. Do you remember Arthur Andersen, the once-mighty giant accounting firm? It had over eighty-five thousand employees in eighty-four countries. It closed shop after eighty-nine years in business. It made one mistake: Enron.
Originally published at www.samalaoui.me on January 29, 2016.