United States: Regional Economic Risk And Your Personal "Plan B"

Last Updated: June 15 2015

Lately I've been thinking a lot about what a "Corporate Event" at Humana might mean for Louisville. A rosy analysis I've heard suggests that Aetna might buy Humana, and then move its headquarters here.

We'd all love that outcome (sorry, Hartford).

Other Humana transactions may have collateral effects on our city that are to put it mildly, non-accretive.

But, if Tip O'Neill was correct when he famously observed that "all politics is local," then it's probably equally true that "all merger impacts are personal."

  • What would regional economic risk like a Humana event mean for you?
  • What are your particular exposures?
  • Most importantly, what can you do to get ahead of those risks?

Because I believe the right pictures help clarify things, I created an Economic Risk Quadrant to evaluate your personal impacts from regional economic risk (whether sudden, or gradual).

Locating yourself, your business, or your employer on the Economic Risk Quadrant suggests how you might be affected, what you can do to prepare, and how you can most effectively adapt and respond.

In the northwest "Local Income / Local Assets" quadrant of the grid, we have people and enterprises with income streams that are extremely anchored in local relationships, and balance sheets anchored in the same local geography.

The most extreme example of local income and local assets is a realtor with a side business flipping houses.

Other examples include a teacher or municipal government worker, because local tax revenues underpin their income and the health of their pension funds.

Similarly, a small business owner with local customers will see sales volume rise and fall with the health of the local economy, and the value of their business will fluctuate accordingly.

On the positive side of the ledger, this local/local strategy is resilient to economic shocks, because it usually has a diversified customer base. Income may be disrupted, but is unlikely to go to zero.

In extreme cases, however (such a as a realtor/flipper in a crashed real estate market), the local/local strategy can concentrate risk dangerously.

On the negative side of the ledger, individuals who optimize their careers for a local/local strategy usually lack geographic mobility. Most often, this isn't a problem, but in extreme instances, it's a hazard (e.g., New Orleans after Katrina, or pretty much anything in Detroit over the last 35 years).

To reduce risk, individuals in the local/local quadrant could shift their balance sheet on the margin away from local real estate and/or closely held business into a diversified portfolio of marketable securities.

In times of adversity (or, even better, before adversity strikes), the best adaptation strategy for the local/local niche is probably to find new or supplemental products to sell into the existing web of customer relationships.

Examples of this might include a realtor who expands into estate sales, or a municipal employee who develops a paid side income stream as a youth sports coach or referee.

Shifting to the northeast quadrant, we see "Local Income and National Assets." Individuals in this quadrant have income streams that are highly anchored in local relationships, but tend to build wealth in a diversified portfolio of national or global marketable securities (largely, inside qualified retirement plans).

Examples of this economic niche include financial advisors and regionally-focused attorneys and accountants.

Their skill set tends to be nationally deployable, so they can move if necessary, but moving will disrupt their locally-focused relationships, so it's an undesirable adaptation strategy.

In the local income / national assets quadrant, the best adaptation strategy when (or before) disruptive events happen is to find new service offerings to sell into preexisting relationships, or find new geographic territories in which to sell the same offering.

For instance, a regional law firm might develop an industry niche, and expand nationally within that niche. Alternatively, an insurance agency might expand into new lines of coverage.

To reduce risk, individuals in the local income / national assets quadrant could increase mobility options by participating in national trade associations, or becoming licensed in other jurisdictions.

In contrast, I think it's risk-multiplying for a regionally-anchored professional to invest in muti-family or commercial real estate in that same region. (In other words, be cautious about intentionally creating concentrated risks you don't already have.)

At the southwest quadrant of the grid, we see "National Income and Local Assets."

In most instances, this means that revenue arrives from outside the community, so events adversely affecting the home economy won't impair sales.

On the other hand, many "factors of production" such as a factory, warehouse, workforce, transportation infrastructure, and/or governmental regulation are influenced by local events.

Because disrupting factors of production is inconvenient, the short-term mobility of individuals or enterprises in this national income / local assets quadrant is somewhat low.

In the mid-to-longer term, however, it's easy for these individuals or enterprises to move if they need to, without impairing income streams.

Examples of these individuals and enterprises include manufacturers, college professors, physicians (their patient base is local, but revenues are very often sourced from the state and/or Federal government), large farmers, and business-to-business sales.

When economic disruption threatens, the adaptive response for the national income / local assets quadrant is to develop new sales relationships for the current product, or (possibly), new or different products to sell into the same relationships.

Finally, in the southeast quadrant of "National Income and National Assets", we see a situation like that many Humana employees might face soon.

For individuals and enterprises in this quadrant, income streams aren't anchored to a particular locality, and wealth tends to be invested in nationally and globally diversified portfolios.

Examples of this quadrant include executives of Fortune 500 companies, management consultants, attorneys with national or global practices, military families, and senior staff of Federal agencies.

This is a very mobile quadrant.

Sometimes, the mobility is by choice – better opportunities arise, and there is little opportunity cost for a move, particularly when one's employer picks up relocation costs.

Sometimes, the mobility is involuntary, when a transfer occurs, or when an alternative job in advance of or after a layoff or consolidation is located far away.

Adaptation strategies for this quadrant seem to me to be rather limited: find someone else who needs the same product you are selling.

I think the most effective risk reduction strategies for the national / national quadrant include intentional and sustained networking in your industry in other geographies (to assist mobility if needed), and developing a personal brand within your own industry that is independent of your current employer. (For a quick read with valuable advice along these lines, try The Start-up of You by Reid Hoffman.)

These investments aren't likely to be left "stranded" if your current employer transfers you, in the way community-focused investments of time and energy might be.

This brief overview doesn't claim to provide answers to some very difficult questions that may personally affect a lot of great friends and good people in Louisville in the months ahead.

Nonetheless, readers, I encourage you to carefully consider where your own income streams and balance sheet (both visible and invisible) place you on the Economic Risk Quadrant.

Intelligently assessing your current strengths and vulnerabilities helps you protect your human capital, and develop better options for mitigating career and income risk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions