Planning for disasters from floods and pandemics to major fires and transportation accidents might seem a world away from investing. Yet, there are striking parallels. Much of the preparation happens before a crisis: identifying risks, imagining plausible outcomes and creating robust response plans. When an incident does occur, the decisions made under pressure can shape outcomes long after the initial shock has passed. In preparing for future crises, the investment industry can draw valuable lessons from emergency response.

Plan, practice, test

Some things will always be out of our control, but we can control how we prepare for crises. Emergency plans can provide a map to follow when the worst happens. They shouldn’t be expected to predict every detail, but the process of planning forces us to confront difficult questions while we still have time to think. Who has authority to act? What information would change our minds? Which trade-offs are we prepared to accept?

Preparation also means practising how to respond to the ‘startle factor’: that moment when the news is worse than expected and everyone looks to the person in charge. Uncertainty can’t be rehearsed away, but people can become more familiar with making decisions during stress conditions.

Testing plans can challenge their robustness and identify any flaws. Does a decision depend on someone who is unavailable, or on data that cannot be obtained quickly? A simulation provides a useful starting point, promoting the flexibility to adapt when reality differs from a scenario.

Such exercises should test the decisions people least want to make. It takes a brave organisation to confront its most difficult choices, but testing can reveal whether systems work, exposing where a team would hesitate, what information is lacking and how leaders might behave when the easy options have gone.

Encouraging dissent, discouraging hopium

A testing environment should offer a safe space for dissent. Having someone adopt the role of a “wild card” – someone explicitly encouraged to offer a contrary opinion – can challenge a prevailing view held with too much certainty or spell out the cost of being wrong. This can be an effective way to ensure reasonable worst-case scenarios are factored in.

Yet the wild card role carries responsibility. People can react strongly to negative or provocative viewpoints. Like ostriches, many people would rather bury their heads in the sand than confront unpalatable truths. All participants – particularly the wild card – must therefore feel able to speak plainly, otherwise a weakness may be correctly spotted but members, particularly junior ones, opt to stay silent.

It is equally important to avoid being too hopeful. Blind optimism or “hopium” is closely linked to denial. It ignores reality, dismisses evidence and encourages passivity. Preparedness can appear unnecessary if the feared event never arrives. Yet successful safeguards make it impossible to know how bad an outcome might have been without them. Measured hope means we can still be ambitious while taking adverse possibilities seriously.

Managing consequences

Emergency planning doesn’t stop as soon as the immediate danger passes. The response to an event can determine how well we recover from it and consequences need to be assessed. Initial harms can be compounded by poor decisions, even those made with good intentions. In an investment context, this could mean selling into illiquidity, abandoning a sound process or communicating too confidently before the facts are clear. Before acting, ask “What does this fix today?” as well as “What options does this close tomorrow?”

A crisis does not end when the most dramatic phase is over. People often summon extraordinary energy at the start, then face a slump while the work of recovery continues. Taking stock throughout the aftermath records intangible effects as well as measurable losses; these might include fatigue, diminished capacity, operational clean-ups and difficult client conversations. There is also a need to process what has changed. Declaring victory too soon may overlook the harder work of recovery. Leaders need to distinguish what must be done today from what can wait, setting priorities for the next phase rather than expecting everyone to resume business as usual too quickly.

Learning from past crises

While no two crises are identical, a knowledge bank of previous disasters can help spot patterns that are easy to miss in the middle of a new one. Maintaining an accurate archive is essential; the internet is imperfect and records disappear.

Institutional memory can aid preparedness. Experienced colleagues can explain the decisions they took and the trade-offs they faced, while newer colleagues can challenge assumptions formed in a different world. Combining different perspectives can make planning stronger.

We cannot remove uncertainty, but readiness can make a difference. A credible plan, a rehearsed response, a protected dissenting voice and enough humility to revisit a decision once its consequences become clear.