The United States has experienced 13 recessions since 1945, according to the National Bureau of Economic Research. The shortest, in 2020, lasted just two months. The longest, at 18 months (about 1 and a half years), peaked in 2008. Many CFOs (Chief Financial Officers) remember that long stretch of dismal highway and the numerous strategies they used to stay afloat, but the counteracting moves that organizations should make in today’s market are starkly different due to a unique blend of 40-year-high inflation, record-low unemployment, and supply chain turmoil.
Many regions are experiencing levels of inflation not seen in decades and it has seriously eroded purchasing power and increased production costs. This reduced purchasing power and increased production costs have been putting serious pressure on businesses to increase profit margins.
Tensions on the global stage have led to uncertainty in international business. Trade disputes and regulatory changes have all contributed to disrupting market access for many businesses and restricted imports and exports. The global market has been dealing with widespread supply chain turmoil, compounded by various factors like shortages in labor and raw material and transportation bottlenecks. The turmoil in the supply chain has led to delays in production and increased costs for businesses.
The current market conditions present a unique set of challenges to organizations and require strategic planning and action. While memories of the economic turbulence of 2008 still linger, it is important to realize that today’s market has changed and requires different strategies to keep your organization healthy and thriving.
The number one mistake the decision-makers at your organization could make is waiting until disaster strikes to take action. Once an economic crisis happens, decision-makers at your company have very limited time to respond. If your organization waits until a crisis hits to respond, the ability to be strategic is incredibly limited, and instead, you’re forced into making reactive actions to steer your company away from turmoil.
Delaying action exposes your organization to much more risk. By waiting to address an economic downturn when it happens, the impact is extremely amplified and can lead to the collapse of your organization.
Inaction in the face of turmoil also erodes stakeholder and employee trust in your organization. Failing to take decisive action can quickly damage the company’s reputation. Reputation serves as the foundation of credibility and trust that relationships are built with stakeholders, customers, investors, and partners. Without maintaining a reputation for responding to crises well, attracting new customers and stakeholders becomes near impossible.
Do not wait to act until all your organization can do is slash spending and schedule company-wide layoffs. Start protecting your organization proactively and set your company up to weather whatever may come next.
Will there be a recession? When it comes to a market downturn, our crystal ball is broken. But we do know that smart CFOs are hedging via moves like:
CFOs are considering the financial health of both consumers and suppliers when calculating cash flow projections for their organization. This means not only assessing the capability of customers to pay invoices on time but also the stability of suppliers. By considering both customer and supplier health, CFOs can anticipate potential cash flow disruptions and take actions to prevent blockages.
CFOs are creating multiple forecast scenarios dependent on different levels of potential economic downturn. These models help organizations prepare for a range of outcomes, including low, mid, and high-level economic depressions. These tiered forecasts allow organizations to create cash-saving strategies for each level of the forecast.
Chief Financial Officers that are acting proactively are tracking metrics and key performance indicators (KPIs) to gain real insights and understand deeply how the company is currently performing. CFOs that are identifying strengths and weaknesses in their organization can make informed decisions that drive the organization towards success. Targeted initiatives can be built around current metrics and set up an organization to have a culture of continued improvement.
The team of experts at Para has created this guide to arm you with seven steps to take to ensure your organization is stable and flexible enough to survive any economic downturn. Download the white paper now to get prepared for whatever the economic future may hold.
At Para Business Systems, we specialize in custom-made solutions that help businesses overcome challenges and achieve their specific goals. Right now, we’re offering free initial consultations. Learn more about what solutions could help expand your business into the next level of growth, instead of shrinking it. Book your free consultation, now.
