The theme for this edition’s cover story is “State of the Nation”, but I would suggest “State of the World [of Business]” is even more appropriate at the moment. I’ve just returned from nearly two months away, spending time in three countries – Canada, France and the UK – and although we have many problems here, so has everywhere else.
By Guy Whitcroft
The world really is facing a “Perfect Storm” of issues, and these will impact business greatly in the months and years ahead. If you’re not having monthly meetings with your leadership team and/or board to review the risks and develop plans, you should start doing so immediately.
To summarise the risk factors:
Supply chain – The IT industry is well aware of the chip shortages, but this impacts 169 different industries around the world, some even more so than ours.
Energy – Russia’s invasion of Ukraine has led to huge increases in oil and gas prices and a real fear that the availability will be curtailed for Europe, its largest customer. It’s also affecting fertiliser prices (a by-product) and CO2 availability which can impact the cold chain.
Inflation – It’s not just oil and gas prices causing this, but food prices too (all agriculture is impacted by fertiliser and fuel costs, plus the global wheat and sunflower oil shortages due to the war).
Interest rates – The cost of money is rising sharply, both as the pandemic-induced artificial lowering of rates ends and as governments now try to contain inflation.
Property – Commercial property is under pressure as the workforce migrates to a less office-dependent way of working. This is also impacting property prices in major cities as workers move further away to get better value and quality of life, without the worry of a daily commute, so large retail centres in these areas are seeing lower traffic.
Skills shortage – Another effect of the pandemic is people re-evaluating their work-life balance. This is impacting labour markets across the world with shortages of skilled staff beginning to impact, along with shortages of “blue-collar” workers too. Just look at the vacancy rates in most countries: the US has around three times the number of open jobs than its unemployed population, for example.
Recession – in the past, a period of high inflation has always led to a recession, and inflation rates in most Western economies are now at multi-decade highs. Analysts are currently divided on whether a full-blow recession will occur and, if so, for how long – but it should certainly be taken into your planning considerations.
And, on top of this some other potential areas: tax increases (to pay for the excess government spend since the start of the pandemic), labour unrest (inflation and skills shortages will lead to higher salary demands), and slow payments (customers under pressure).
Space doesn’t allow me to cover ways to minimise the risks of these to your business, although I’m happy to do so in future columns – simply comment to this article on what you’d like me to focus on next, or reach out to me directly if you’d like to chat.
In the meantime, remember that, as Benjamin Franklin said: “An ounce of prevention is worth a pound of cure.”
Have those monthly sessions with your team(s) to do scenario planning and preparation for the most likely and impactful issues.
Plot them on a two-dimensional matrix of impact and likelihood with high on both axes being most critical.
And adjust your strategy as necessary, remembering, as Kenichi Ohmae said: “What business strategy is all about – what distinguishes it from all other kinds of business planning – is, in a word, competitive advantage.”