Our world is on a constantly rotating rotisserie of inevitable events that affect economics, politics, and society, sometimes the changes brought have a negative impact on businesses. Preparing for the inevitable should help organizations better absorb or adapt to changes such as an economic downturn, conflicts, calamities, inflation, health crisis, and legislative mandates.
Potential Dangers:
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Economic Recession
Market trends and indicators may predict an impending economic recession. However, predicting its impact is pretty difficult because there are several factors to consider until when the crisis would last and what should be the precautionary measures to be used to mitigate its harm to an organization. The stock market crash of 2008, showed that government intervention may come a little too late to stop an economic crisis and members of the public are vocal when it comes to handing out stimulus packages to large companies. Ultimately, the effect of an economic recession may have far-reaching effects on the supply and demand of goods and services that will surely increase the price. And the risk of numerous bankrupt businesses, mass foreclosures, and mass-lay offs is always fresh in our minds.
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High Inflation to Hyperinflation
Currently, inflation is a hotly debated topic to talk about. As of this day, the inflation rate in the United States is at 3.2% lower than the record high of 8.5% in March of this year. Affects most if not all of the population with the high prices of all commodities. It is widely known that supply and demand cause inflation. With higher demand and lower supply for goods and services which in turn increases the price. However, that is not always the case. In 2022, high inflation rates are caused by a number of factors such as high oil prices, post-pandemic recovery, and high consumer spending. Inflationary conditions also affect businesses by increasing the cost of production and may create a trade imbalance if they source their raw materials abroad which is mostly the case. As a result of a weakening foreign exchange rate against other countries.
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Weakening Power of the Dollar
Since the end of the Roman Empire in 476 AD, in a span of more than 2000 years, the world had never experienced a world under a unipolar order but that all changed when the Soviet Union collapsed in 1991. Since then the United States has been the unchallenged dominant power in the world. However, the drastic rise of China is poised to challenge that unipolar order that we’ve been used to for about 30 years. As the global markets begin to shift from West to East. The power of the dollar slowly diminishes and with inflation at an all-time high. The contention against the dollar as the fiat currency for global trading would likely continue. The effects of a weak dollar would increase the price for consumer goods made in the US and also non-US-made goods. This means all products are going to be even more expensive than they are right now.
Solutions:
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Contingency Measures
Having a contingency plan is important for every business because it minimizes the risk exposure. Contingency measures would ensure the continuity of operations. The preparation of a contingency involves intense data gathering such as historical data and current trends on the stock market, geopolitical issues, and domestic policy changes. Whenever a harmful situation arises, the right implementation of a contingency plan should be prioritized.
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Diversify Investment Portfolio, Supply Chain, and Product or Service Offerings
The saying “never put all your eggs in one basket” still reverberates throughout the business world. Diversification of assets in gold, stock markets, bonds, and cryptocurrencies helps deviate the impact of inflation, fiat currencies, or a recession. Moreover, diversification of the supply chain, products, and service offerings must be taken into account. For example, when a company relies on a specific raw material to produce their goods and a fortuitous event happens to impact that specific raw material by limiting the supply which results in a price increase, the company would have no choice but to raise its prices. With that in mind, a company would lose out to its competitors and disappoint its customers at the same time.
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Cost-effective Solutions
Conducting daily business operations is a costly endeavor for business owners and start-ups. Having a cost-effective solution such as hiring a BPO partner to provide qualified and lower labor wages would help a business lower its operating costs. Thus, providing more resources to meet future uncertainties.
The Bottom Line
Ultimately, the future is full of opportunities and uncertainties. Being caught off-guard by what is happening around the world is a risky notion that inexperienced business owners would face. Moreover, unpreparedness for any events that may come would result in a disastrous situation for companies. In this day and age, the information available right at your fingertips will help you navigate your business to success.