by Steven Crimando and Cynthia L. Simeone
Like natural disasters, a sudden financial crisis can result in uncertainty, loss, and anxiety about the future. Much of what is known about the emotional and behavioral response to other types of disasters can be helpful in managing the psychological consequences of the financial crisis. Left unchecked, these consequences can further complicate individual, community and organizational recovery. Lessons learned and strategies for coping developed in other disasters can be employed in financial crises to mitigate the emotional and behavioral consequences of the situation.
It’s a Disaster
The wave of fear and uncertainty that has rolled over Wall Street is certainly different in many ways from the wall of water that inundated Galveston in mid-September, but from a psychological standpoint, both events are disasters. Whether you are a financial services professional directly experiencing the meltdown on Wall Street, an investor feeling the ripple effects or someone otherwise distressed about the current economic climate, the shock to the nation’s financial system can trigger a powerful and overwhelming emotional response. The September 15, 2008 Forbes.com article, “The Emotional Impact of the Wall Street Crisis,” reports that, “employees of the financial industry’s giants are likely experiencing an emotional state that’s unusual to them – complete and utter uncertainty about their futures.”
The terms “loss”, “grief”, and even “trauma”, can be applied to communities ravaged by the recent hurricanes and the financial communities in major cities around the world. Some of the core concepts in impact and coping with natural disasters can be helpful across a range of different types of crisis situations. It has been said that grief is our response to something good going out of our lives, while trauma is our response to something bad coming into our lives. In many disasters and crisis events, both grief and trauma are present and powerful forces to be reckoned with. Unfortunately, many individuals, communities and organizations have become too familiar with, and too practiced at dealing with the emotional consequences of natural disasters. A February 2008 Oxfam International study documented a quadrupling of natural disasters over the past two decades, from approximately 120 to more than 500 worldwide each year. But the type of crisis affecting the financial industry today has been a relatively rare, but not completely unprecedented event.
With the increase in other types of disasters, there has evolved a growing body of knowledge about how sudden, shocking and threatening events affect us, along with best-practices in “psychological consequence management.” Much of what we know about the emotional response to other types of disasters can be applied to and helpful in dealing with the psychological challenges of the current financial crisis. The noted statistician, George Box was credited with saying that, “all models are wrong, but some are useful.” While there is not a one-to-one comparison to surviving a hurricane and a financial crisis, many of the front line lessons in disaster response do apply.
What is Lost?
In major disasters there are unfortunately many instances when individuals and families truly do lose everything. Losses can include loved ones, a home, pets, irreplaceable keepsakes and more, including a sense of community or safety. Deeply-held personal or religious beliefs can be shaken. In many situations and specifically in financial disasters, those loses can be somewhat imperceptible and not obvious to others. A financial crisis can result in a loss of:
•Identity and belonging
•Security, financial and otherwise
•Status and role
•Future or purpose
Grief reactions, similar to those experienced after other types of losses, such as the loss of a loved one, are not uncommon. As stated, grief is our response to something or someone good leaving our lives and mourning these losses can be tricky. Survivors (and sometimes others around them) of financial disasters often don’t compare themselves to those who have experienced natural or technological disasters. However, loss is loss, and we are finding that this is a fair and useful comparison.
Phase-specific, Hazard-specific and Individual Responses
How individuals react during a crisis varies from hour-one, to day-one, to week-one and out along the timeline of the event. To help individuals and organizations predict and prepare for the emotional fallout from a financial crisis, a basic disaster-behavior timeline can be helpful. This timeline is marked by several foreseeable phases or stages, each representing its own challenges and perhaps, opportunities.
1. Impact: The initial phase of any disaster or crisis event is characterized by disbelief, fear and uncertainty. Fear of the unknown is a universal source of anxiety and the early phase of a crisis is often filled with ambiguity and a lack of information or clarity. Early emotional reactions often appear as shock and numbness.
2. Inventory: Once the smoke clears, people generally get a sense of how the disaster or crisis has personally affected them. It becomes increasingly clear what was damaged or lost and some of the initial shock often gives way to anger and blaming, sadness and feelings of powerlessness.
3. Disillusionment: It seems that many people slide into a period of disillusionment after a major trauma or loss, but to what degree varies with the situation and the individual involved. This phase is characterized by resentment, hopelessness, anger and sometimes shame or guilt. Often people report just feeling “stuck” and unable to make any forward progress in rebuilding their career or life. In work-related crises, this can be tied to perceptions of unfairness over pay and severance; difficulty finding a new job; and recognition of the permanence of change in lifestyle or work.
Disillusionment can also be compounded and prolonged by a cascade of secondary stressors, such as mounting financial pressures in the home or problems in relationships. This is a phase in which some people have great difficulty seeing the light at the end of the tunnel. It can seem bleak and hopeless for some and good emotional support becomes critical during this phase.
4. Reconstruction: Rebuilding a career, a lifestyle and a sense of optimism can take time, like rebuilding a home or community in the wake of a disaster. Everyone moves through these phases in their own time and on their own terms. There is no best way or specific timeframe in which people move through these phases. Moving through the phases and reconstructing a professional and/or personal life is very individualized. For some the process can be weeks or months long, for others it may take years. Establishing a “new normal” requires patience and persistence from everyone involved.
5. Integration: For the survivors of any crisis, the process of integration involves weaving the crisis into one’s overall life story. We never forget the crisis or disaster, but it becomes an important milestone or even a battle scar, rather than an obstacle or preoccupation that dominates our daily lives. In summary, it becomes a story, rather than the story, in our personal history.
And then there are specific personality traits, cultural influences and community norms (such as within the organizational culture, the community of financial professionals, etc.) that all come into play. Simultaneously, there are somewhat predictable responses to a financial crisis and totally unique responses that are not necessarily foreseeable or expected.
Exposure and Duration
In response to any real or perceived threat to our safety, survival or way of life, the degree of exposure and the duration of the threat are critical influences. Exposure can be thought of in degrees, first, second and third, much like a burn.
First degree exposure is experienced by those directly impacted by the event, in this instance, those executives, brokers and traders employed in the financial industry. The radical and sudden restructuring of the financial services environment has pulled the rug out from under tens of thousands of employees who face the loss of their livelihoods and stock value. Of course, the spouses, partners and children of those financial professionals are also directly affected as household incomes drop and economic security of the family becomes the dominant theme in everyday life.
Those who are not employed in the financial sector, but may experience significant losses in investments or are dependent on the financial industry for their incomes, would be considered secondary victims or having second degree exposure to the situation. With countless jobs evaporating in New York, London and elsewhere, the restaurants, retail establishments and service industry catering to the financial districts will also suffer substantial and perhaps irreversible losses. Many small businesses will also cease to exist with the sudden exodus of so many jobs.
As the ripple effect of the crisis widens and moves out from its epicenter, the circles become larger. Third degree exposure potentially applies to the wider U.S. and international community already anxious about instability in housing, credit, commodities and energy. This is the “Main Street to Wall Street” connection the current U.S. presidential candidates frequently reference. Many people will not personally know of someone working in the financial sector or in a business serving the financial community, but they are concerned and vigilant on a day-to-day basis about the price of gas, milk, heating oil and housing. For those with third degree exposure, the vulnerability of financial giants, such as Lehman Brothers, Merrill Lynch and AIG can heighten a sense of personal vulnerability, “If firms with literally billions of dollars in assets can’t make it, how can we?”
Obviously, how the crisis affects any one individual, family or organization is a function of their relationship, proximity and exposure to the event or situation. The closer you are to the fire, the greater the potential injury. Likewise, the longer the threat exists, the greater the impact. In many instances, natural disasters are sudden and devastating, but the initial event can end as quickly as it began. Tornados are devastating, but fast moving. Certainly it can take months, years or a lifetime to rebuild after a tornado strikes a community, but the initial threat passes quickly.
Typically, the longer a threat persists, the more damaging it is from a psychological and social standpoint. The financial crisis is in some ways both acute and chronic. The news of the Lehman Brothers collapse and sale of Merrill Lynch may have been sudden and unexpected by some, especially with the news of what is being referred to as “Bloody Sunday” being sprung on a weekend when the public’s attention is not usually on the markets.
But at the same time that the news was sudden and dramatic, many of the current economic problems that caught up with Lehman and Merrill Lynch have been creating instability in the markets for some time. Chronic stressors tend to exhaust us, some believe leaving us more vulnerable to additional risks. We seem to be much better suited to manage sudden, but short-term crises. But when a crisis is both sudden, shocking and prolonged, it can result in more complex and challenging emotional reactions. Every disaster is unique and at the same time, may have many similarities to other disasters. The current situation is unlike anything we have ever seen and yet bears a strong resemblance to many previous financial crises.
For several reasons, individuals experiencing distress related to the financial crisis may not reach out for help in meeting the emotional challenges. Not wanting to appear weak or worried in front of family members or colleagues; intolerance of our own fear or anxiety; and the need to appear in control, can all become barriers to seeking assistance or admitting that the situation is taking an emotional toll. It is useful to note that even following natural catastrophes, most people don’t go running for psychological support. There is typically a delay in seeking assistance, at least through the impact and often into the inventory phase. Most people facing a financial disaster, including layoffs or the disappearance of an entire industry similar to what may be experienced in large-scale natural disasters, don’t go on to become psychologically-damaged goods. Most people experience some degree of emotional distress, considered natural, expected and even helpful in surviving the challenges they face.
Across different types of disasters and crisis events, it is common for those individuals directly affected, as well as those in their immediate circles, to experience a range of reactions. And while these are natural and normal responses, they can certainly be unpleasant and add to one’s overall discomfort. Such reactions include physical, emotional, cognitive and behavioral changes that in some instances can complicate the situation and become barriers to coping with the challenges ahead.
– Shock-like reactions
– Loss of appetite
– Elevated blood pressure and heart rate
– Depression, anxiety
– Constricted range of emotions
– Guilt, shame, doubt
– Intolerance of emotional response
– Global pessimism
– Memory problems
– Decreased problem-solving ability
– Declining work performance
– Recurrent intrusive thoughts
– Thrill-seeking, risk-taking
– Preoccupation with related news stories, rumors, etc.
– Increased substance abuse
– Jumpiness, feeling “wired”
– Clinging, isolating
– Irritable, argumentative
– Distant, detached
– Increased/decreased need for physical intimacy
– Wanting to be only with co-workers/avoiding contact with co-workers
While these reactions are widely seen in response to natural and technological disasters, they are common in other interpersonal crises where there is an element of threat. Threat to one’s survival due to a financial crisis is no different. Most of these reactions are short‐lived and self‐resolved as the individual moves along the timeline of the event. For some, these reactions can be more pronounced and prolonged. There may even be instances in which, in a more extreme form, one or more of these reactions may represent the symptoms of a medical or psychological emergency.
Chest pains, arrhythmias or heart palpitations, as well as respiratory distress and acute abdominal pains may be the signs of something more serious and require medical attention. While potentially stress‐related, these reactions should not be ignored or thought to be “just in your head.” Likewise, suicidal and/or homicidal thinking, as well as serious mental disorganization or disorientation may the signs of psychological emergencies and should be assessed by medical or mental health professionals.
Emotional Consequence Management
The concept of “consequence management” is widely accepted by business continuity professionals across most industries (e.g. risk mitigation and planning impacts risk consequence). Managing the emotional and psychological consequences of any disaster, natural, technological or economic, is critical to the recovery of the individual and their family, as well as the community and organization. The psychological impact of the current financial crisis should not be ignored or minimized. For many people this crisis represents substantial losses and a threat to personal and professional survival. This should not be underestimated in any way.
During a time of increased personal and professional demand, the impact of sleep problems, poor concentration, depression, apathy and increased use of alcohol and other substances can become serious obstacles to problem-solving and decision-making. Problems in personal relationships can create tension and distance from those who might be most helpful and supportive. The emotional consequences can be significant and difficult to address if not taken seriously and proactively.
There are coping strategies and techniques that can be helpful for individuals and families, as well as organizations. Many of these are similar to those being used today to assist the survivors of the recent spate of tropical storms and hurricanes.
Here are some useful suggestions for coping with the stress and anxiety stemming from the financial crisis:
– Limit your exposure to news stories and constant alerts about the situation
– Get accurate, timely information from credible sources; avoid rumors if possible
– Try to maintain a routine, even if you must create a new one
– Exercise, eat well and rest, even though it may be difficult to sleep
– Stay busy – physically and mentally
– Communicate with friends, family and supporters; let people know how they can help
– Use spirituality and your personal beliefs
– Keep a sense of humor
– Take one day at a time
The great risk communications expert, Peter Sandman advises that, “Action binds anxiety.” Doing something is almost always more psychologically helpful than doing nothing. Past financial crises have demonstrated that investors tend not to fight or flee but rather to freeze. In natural disasters, there can be irrational fighting and fleeing, but in most instances people find purposeful “next steps” that actually make the situation better. Individuals and organizations would do well to heed Dr. Sandman’s advice. Getting people active in support groups and social networks, as well as practical hands-on activities is important. We know that people who actively participate in rescue and recovery tasks during disasters fare much better, physically and mentally, than those who withdraw, become passive or apathetic. Keeping busy, focused and productive during stressful times is essential to counteracting feelings of helpless and fear.
Use Available Resources
Many firms offer Employee Assistance Programs (EAPs) or Wellness programs that include stress management and support services. Such programs often extend their services via hotlines as well and many of these employee support call centers have already begun to experience noticeable increases in utilization. But many affected by the financial crisis, such as those with second and third degree exposure, do not necessarily have access to such resources. There are non-profit organizations, such as those affiliated with the National Mental Health Association, that provide no-fee helpline support, often 24 hours a day, as well as referrals to support groups and mental health professionals with expertise and experience in dealing with acute stress reactions. These resources are made available to communities struggling with the emotional impact of natural disasters and violence and they can be useful in a financial crisis as well. If reaching out to an EAP or Wellness Program is not an option, you can locate a nearby affiliate of the National Mental Health Association online or contact them by phone at (800) 969-6642.
No One is Untouched
Deborah DeWolfe, Ph.D., author of one of the first field guides developed for disaster mental health response stated, “No one who experiences a disaster is untouched by the event.” This is not to say that everyone is traumatized or damaged in some way, but a sudden, shocking and threatening event takes its toll. It is estimated that almost 9,000 employees lost their jobs in the Bear Stearns restructuring. Ultimately, job losses may be in the tens of thousands across the financial industry and countless more in service jobs that rely on financial sector workers as customers in the restaurants, bars and boutiques in and around the financial districts. A storm, earthquake or act of mass violence resulting in tens of thousands of lost jobs would certainly be called a disaster. Make no mistake, the life-changing events of the past several weeks in the global financial system are also a disaster and no one is left untouched.
Steven M. Crimando, MA, BCETS, is a noted author, consultant and trainer to governmental agencies, NGOs and multinational corporations. He is the Managing Director of Extreme Behavioral Risk Management (“XBRM”), a consultancy focused on the human factor in disaster recovery, business continuity and homeland security. XBRM is a division of ALLSector Technology Group, Inc., a New York based full service technology consulting company offering systems integration, managed services and applications development and implementation. ALLSector Technology Group, Inc. is a subsidiary of the F∙E∙G∙S Health and Human Services System, one of the nation’s largest and most diversified not for profit organizations.
Cynthia L. Simeone, PMP, CBCP, is a New York City-based consultant, specializing in business continuity and organizational effectiveness helping clients understand and navigate the complex environments, relationships, and controls that their businesses must master to survive and thrive.