New business inside old business

New business inside old business

There were a number of times in my career when I was asked to start a new business inside of an old business. Sometimes management believes that it can use existing resources to get a new line of business going. Another step in mismanaging my career.

Here’s an example of a new business inside old business

While I was working at the Bank of Nova Scotia, I was asked if I wanted to get involved in a new business line inside the so-called Capital Markets Group. It involved trying to originate and execute structured finance transactions. You have to remember that the group included a number of interest rate and cross-currency derivatives and trading personnel. There were no corporate finance resources within the group.

I was never explicitly told why the sudden push into structured finance transactions, but it usually has something to do with the boss expanding their territory. In a financial institution context, it’s not unusual for managers to want more “turf” in order to expand their revenue base.

So I was asked to take this on. Here is what was going on in my head. I hated executing derivatives, so on the face of it, this was a way out. I was allocated one staff member to support me, someone who had worked on the trading desk. Stupidly, I accepted the assignment where I had no resources to support me, no budget, no commitment from the institution and no client base. Now aside from that, what possible reason did I have to turn them down?

Here are the straight goods

There was no upside to this, just downside. I didn’t even get the assurance of my boss that in the event the initiative failed, I would be given my chair back in the swaps group. Nothing, nada, zilch. So ranked on a scale of one to ten with ten being the most stupid, my decision here was an eleven. I thought that getting involved in a new initiative would be good for me. The reality was that much like my move to the tax group at Clarkson Gordon, I should have said no. It was poorly conceived and doomed to failure. Just an idea that popped into someone’s head. There were people out there who actually knew what they were doing. Unless we were handed a captive client, we were doomed to failure and so was I.

What should you do

If you are asked to move into a new line of business, treat it like you would any new job. Ask the right questions, have it “papered over”, make sure you have your deal documented. Just don’t jump at the opportunity unless you can make it work for you. If you don’t, believe me, you will be set adrift with no way to come back. If you can get your old position back after a failed experiment you should consider yourself very, very lucky.

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