Short-term thinking is what got us into this mess. So, it’s certainly not going to be what gets us out. Instead, companies must focus on the long term, even when the immediate future appears so uncertain.

The economic forecasts seem to grow gloomier each day. Canada has just recorded its first trade deficit in more than 30 years. Unemployment is rising rapidly, which threatens to deepen the darkness by undermining consumer spending power and increasing defaults. Worse still, efforts to bail out the global financial system have fallen short so far.

Amid all the doom and gloom, a sense of insecurity is spreading. Indeed, many companies are reacting to the dire short-term outlook with what looks like panic. Budgets are being slashed, job losses are rising and tales of belt-tightening measures, such as wage freezes and unpaid furloughs, are becoming increasingly common.

Even the CEOs of Canada’s big banks are feeling the pinch. In sympathy with the recession, they have either seen their pay marked down by their boards or they’ve voluntarily given up millions of dollars in proffered compensation.

Although the forecasts are bleak and there are risks to the downside, these risks are certain to become reality if companies give in to their fear and downsize their way from recession into full-blown depression — panic disguised as prudence.

Not only can a single-minded focus on short-term misery destroy domestic demand, but companies that are too stingy risk undermining their own long-term viability. Fortunately, one of the strengths of the financial services industry is its flexibility. Despite the fact that revenue in some business units has plunged, there have been relatively few layoffs. Now, companies must also be mindful of long-term sustainability. That means sticking with businesses — such as wealth management — that provide an essential service to millions and can create genuine value.

Certainly, where there’s fat, it must be cut when times are tight. But companies must also be extremely careful not to slash their muscle. It takes years to build a business and moments to burn it down with myopic evisceration. At some point, recovery will come and, when it does, companies that have defended their franchises will be the ones that flourish.

Caution? Yes. Capitulation? No.