By any measure, the United States—as well as the global economy—presently finds itself in what may ultimately become a fierce economic downturn. Clearly, the design and construction industries are not immune from these forces.

It is difficult to recall a previous time when global events have demanded so clearly that the public and private sectors "step up to the plate" in three key areas: business leadership, strategy, and financial management. Events that have transpired on world financial markets over the past months have seen many fundamental assumptions of how the world economy operates turned on their heads.

The ultimate causes of these recent events will be the subject of study for many years to come, but one can readily identify some of the bad factors and bad actors. One is the development of a range of financial instruments of increasing complexity to enable the enormously profitable repackaging and sale of mortgages as collateralized debt obligations. This problem was compounded because many, if not most, of those who were granted these sub-prime loans had demonstrated no ability or inclination to repay them. As a result, a series of dangerous "habits" took hold right down the line. One was a habit toward easy credit from the many households who could scarcely afford it. All the way from Wall Street and inevitably to other parts of the global finance markets, quick and substantial short-term profits blinded many to the fundamental dangers of this approach. The engineering and construction industry has been deeply impacted by these developments.

A combination of factors have brought our nation and the world to this point: a lack of corporate governance structures and processes, failure to instill a culture of compliance and ethics, and a culture of greed and hunger for quick profit. Ultimately, all of these factors could essentially be distilled down to a lack of leadership. So today, leadership from business and government is now more critical than ever to restore confidence in the global financial system and to minimize the fallout of what’s commonly known as the "real" economy.

The challenges that confront business leaders embarking on this task are many and varied. Issues of corporate governance, as they relate to assessment of risk, executive remuneration, and other affected areas will need to be resolved effectively if mistakes are not to be repeated. The role of boards will be critical. It is with them that ultimate responsibility for an organization’s activities lie. Regulators have a role, but it is incumbent on a board to impose a culture of risk assessment, compliance, and ethical behavior on an organization.

What comes next? Inevitably, the nation and the world have now reached the stage where the financial market turmoil has bled out to the broader economy, leading to a more general, global economic downturn. The credit crunch caused a drop in demand and spending, adversely affecting engineering and construction firms of all sizes and shapes. As it takes further hold, engineering companies need to think deeply about ways to insulate against the worst-case effects of tougher economic conditions. Businesses need to come up with new ideas and identify new markets and ways of doing business. The Office of the U.S. Trade Representative has repeatedly identified trade in professional services as one way of turning back the tide of economic downturn and the U.S. trade imbalances. One example, emerging markets, predominantly in Asia, Africa, the Middle East, and South America, are growing sources of demand for American expertise in engineering professional services.

But more fundamentally, there needs to be a growing emphasis on strategic business thinking, governance, and ethics in the engineering profession. These high-level strategic business skills are extremely relevant in the present climate and will be even more important in the years ahead. The ability to practice strong business ethics must become hallmarks of the engineering community. Engineers are critical to driving investment nationally and globally. Growing competition from China, India, and elsewhere is inevitable. For that reason, it is critical in the present circumstances that engineers take a broad global view. If engineers needed any reminding, recent events have shown just how interconnected world financial and economic markets can affect them as engineers. The issues of governance, ethics, and rigor in financial reporting and the importance of a national and global perspective are all integral to good business leadership, strategy, and ensuring financial stability.

Arthur E. Schwartz serves as a deputy executive director and general counsel for the National Society of Professional Engineers. He provides individualized ethics training programs to engineering companies and organizations of all sizes and areas of practice. For more information on the scope of services and costs, contact him at 703-684-2845 or at aschwartz@nspe.org. Visit www.nspe.org for more information on this or other ethical matters.