What do we do now?

In the mid-20^th century, a military strategist, USAF Colonel John Boyd, developed a leadership strategy called the OODA loop. It was used initially to train soldiers to make time-sensitive decisions rapidly when they may not have had enough time to gather all the data needed to make the best decision. The goal is to execute the OODA loop quicker than an opponent to infiltrate and disrupt the enemy’s decision cycle.

Each letter of the OODA loop stands for a step in a continual cycle of leadership. Observe what is happening around you, the industry, economy and world. Orient yourself and your team based upon those observations. Decide the best actions to take. Execution on those actions. Once complete, you immediately go back to observe to see what impact the actions have and begin the process all over again.

The past two weeks have produced a complete change in our world. There is no place in our country where life is as it was last month. Some of you may be confined to your houses. Others may only be able to travel to pick up basic supplies at stores that are as bare as we see in South Dakota prior to a blizzard! We all realize life is different and do not know how long this situation will continue.

The COVID-19 virus situation has created a huge adversity, but it also has presented an opportunity we would not see in normal times. It is the opportunity to lead. You have many members who may be afraid for their own economic survival, some concerned with their health, and others who are adjusting from a life that may now include balancing teaching kids and working from home at the same time. Even though you do not have all the answers (news flash: no one has all the answers), you can still add value in people at a time when people need hope.

First, realize that we are all in this together. No one has a significant advantage over another during a time of national crisis. Seek to find ways to put people first as you work to meet their financial needs.

Next, educate and manage yourself. Now is a wonderful time to pick up that book, take a course, or sharpen your skills that will help propel you forward once the crisis is over. This time is also good to reconnect with your family and those most important in your life. Take care of your health.

Leverage and invest in your team at this time. Tough times can produce great opportunities to bond and learn more ways to work better together as a team. Avoid any temptation to push the weaker link in your group aside. Use this time to spend more time developing those who are less seasoned.

Avoid the easy path to allow the crisis to distract you. Many times, you may be tempted to go into a hole and hide until the worst is over. You may be consumed with negative thinking, uncertainty, or anxiety. Fear will spread faster than the virus itself and nothing creates more anxiety than trying to control what you cannot control. Continue to find ways to generate positive traction on a daily basis. Once you decide actions to take, have courage and act!

Any crisis requires adaptability. Think of a crisis as a case study in uncertainty. This is where the OODA loop comes in. Orienting yourself based upon what you see, is adaptability to the current situation and is needed to move forward in a positive direction.

The coronavirus will result in a huge increase in borrowers who will contact you to either take advantage of super-low interest rates to refinance, or those who now have seen their revenue stream dammed up to a trickle. Unfortunately, most of the work you will do over the next few months will probably be in the latter category. Then there are also those who you will not hear from at all who are people you need to contact because they are in trouble. How will you adapt?

In the area I am in, commercial and agricultural lending, staff need to shift their time to analysis and management of current businesses and credits. After the crash of 2008, the bank I worked in moved from a 30% focus on the existing portfolio and 70% on new business to a complete reversal, 70% existing, 30% new. At the onset of the crash, we spent all the time focused on understanding the financial condition of our clients.

You should divide the loan portfolio by industry, geography, and revenue stream as much as possible. Tier 1 businesses are those who are most impacted. Perhaps this could be restaurants that are shut down or if you have an entire community which is quarantined. Tier 2 businesses are those who are not directly impacted by the virus but are feeling an impact from businesses they receive revenues from. This could be a landlord who receives rents from a strip retail center with a restaurant or dry cleaner who has shut down. It could be a small manufacturer who sells parts to Ford or GM.

The results of your survey should help you stratify your portfolio into thirds or fourths, grouping those most impacted down to those least impacted by the virus. All businesses in your most risky two categories should be contacted in the next couple of weeks to see where they are at financially.

Be prepared to act to help your borrowers. Some options you may want to consider:

• Defer payments for 3-6 months or go to interest only payments for a period of time.

• Have borrowers seek help from state and federal disaster assistance sources. The SBA has the Economic Injury Disaster Loans (EIDL) which can provide funds up to $2MM for qualified businesses. More information can be found at www.DisasterLoansba.gov.

• Watch any government guaranteed loans that you have to make sure any modifications are completed according to their loan programs.

• Watch regulations to see if any modifications would trigger any reporting for Troubled Debt Restructure, non-accrual, and appraisal requirements.

• Move any borrowers that you have modified loans with and those with unmodified loans but you have concern with to monthly financial reporting so you can monitor and provide assistance quicker.

• Consider extending maturities on operating lines, offering lines of credit to borrowers with good equity position, or looking at SBA Express loans for those who qualify now before things become much worse.

Your goal as a lender is to help preserve as much of the business or farm as possible. In many cases you are the last line of defense of their business and also their equity, which consequently is their wealth. Changing your modes of operation based upon the current crisis is essential to leading yourself, your team, and your borrowers through this current crisis.