Saturday, April 20, 2024

Building wealth and taking risks

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FOR MANY BUSINESSES and individuals the creation of wealth has become more challenging in recent years to the point where, following so many years of modest growth at best, one has to postulate that this is truly the “new normal”.

We all have stories that begin not with “once upon a time”, but with “remember when you could make very strong returns in banking or insurance or apparel or in some cases even education?”

Perhaps those days are not entirely gone as there are always a few opportunities in higher growth technologies and industries but they remain scarce.

These are tougher conditions in which we have to continue to find ways to achieve acceptable returns for shareholders and at a personal level for our families. The financial obligations to run the country, to run a business, to run our families, haven’t changed, so how do we make our way and succeed in creating wealth? Note I didn’t say getting wealthy, that is an entirely different subject.

The Barbados Chamber of Commerce and Industry has retained, as one of its points of focus, growth in the economy which obviously supports the same key platform at a national level. We all know the challenges to energising the economy at a macro and micro level in order for the growth to become a reality. Investment and financing for investment underpin the growth agenda. As I would have mentioned before, we have a range of points of view from our membership when it comes to investment.

These views generally fall into three categories: those who continue to wait for things to get better. They generally are quite risk averse and don’t want to make a move which has any appreciable potential for loss. While no strategy can be wrong at an individual company level, I would say that taking a very passive role and waiting it out could prove to be a long way yet. There is something to be said for waiting but only if the company or individual is also happy to forego even the potential for growth.

Then there are those who already have investments that need to be shored up, protected and in some cases expanded. This, to some degree, is what many companies and individuals are doing. Staying the course, sticking to core business and topping up or adjusting current investments to try to maximise returns. Then there are those who actively look for opportunities to expand their investments, and maximise shareholder value. But as we all know these active investors have a greater appetite for risk and in many cases are not typically born on this island but seemingly a little further south.

We are all watching the ongoing bidding process for Banks Holdings Limited shares with great interest. A number of people have been bemoaning the possibility of a takeover of the company but these are the realities of business today. When a company has successfully built brand equity, has expanded into new markets, has increased capacity and therefore offers potential for greater returns in the future, it cannot be a surprise that there is buyer interest. yes, there are the complexities of share trading and business valuations and due diligence of potential buyers but in the end, shareholders are looking to create wealth.

The era of shareholdings being fully Barbadian is passing quickly as the necessity for expansion into higher growth markets and rigorous brand development becomes normative. Both export development, brand building and capacity expansion require significant additional investment for most companies and I believe that as Caribbean people we need to come to a realisation that any combination of regional ownership is still considered indigenous. Faciliating trade as a nation is part of what has to happen and the other great leap is facilitating trade at a regional level which sometime soon will include most of Latin America.

As Barbadians we have to decide whether we have the courage and the determination to accept that investment is about actively seeking the opportunities, wherever they are, and seizing them. We also have to do all we can in both the private sector and Government to ensure that Barbados is attractive for investment. That will allow for greater regional and foreign direct investment which leads to job creation, economic churn and eventually the creation of wealth for citizens.  I maintain that it ought to be a singular focus of a small working group in this country to ensure that the [competitiveness] indicators steadily improve. There is no time for us to stand still or fall back in competitiveness rankings while losing potential opportunities for growth.

While investments always carry some risk, every investor has the responsibilty to do all possible to ensure that the risks are reasonable. For those who are by nature very trusting people, that needs to change. With tougher times come more swindlers and those trying to prey on people and businesses who already have financial vulnerabilities. How many of us can point to part finished projects long promised but never completed. They become eyesores and drags on public and prirvate finance.

At all levels, national, enterprise, and household, we must understand that investing and financing of investments are legitimate economic activities with risk but that risk can be managed to ensure growth and the creation of wealth.

Tracey Shuffler is president of the Barbados Chamber of Commerce and Industry (BCCI). She made these remarks at the BCCI’s luncheon last week.

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