Retain Staff And Expand: How Companies Can Prepare For The Coming Recession And Beyond
Worried about the threat of a global recession? We have some advice to help companies figure out their next course of action
The global economy is gradually recovering from the pandemic, but the threat of a recession looms around the corner. Several major indicators hint at an economic downturn, including rising inflation levels, with the price of goods increasing 8.6 percent in the US. China, the world’s second-largest economy, reported its gross domestic product grew a mere 0.4 percent in Q2, compared to its 7.9 percent growth the same time last year.
These factors have spurred central banks worldwide to aggressively hike their interest rates to slow the increase in prices. But the consequences of these interest rate increases are turbulent financial markets, rising unemployment and poorer countries with even more debt.
We speak with Mohammad Ridzuan Abdul Aziz, country director and head of ASEAN business of WorldRemit, on how companies can prepare for the coming recession. The seasoned business leader has also worked on the regulator side, and has experience in both fintech and venture capital.
According to him, the fourth quarter of 2022 will be challenging for many companies due to rising prices. However, there are ways to mitigate the damage caused by recessions. Here, Ridzuan shares four techniques businesses can employ.
Acknowledge there’s a recession and prepare in advance
The first step for businesses is to acknowledge a recession is indeed coming and make the necessary preparations to face it.
“How a business enters the first quarter of 2023 will depend on how they enter the recession this year,” says Ridzuan. “Consider assessing the type of assets you will need during the recession. I would suggest avoiding spending on large capital expenditure and go with those that provide quick returns on investments to protect your cash flow.”
Cut costs but don’t layoff your workers
“I suspect there will be many layoffs happening in the fourth quarter of this year as companies enter cost-cutting mode,” says Ridzuan. “I think companies should retain their staff and employ alternate strategies to save costs.”
Some sacrifices may be needed for companies to survive, such as scaling back the use of massive offices in expensive locations or cutting back perks or benefits to upper management. “Instead, the savings [from these measures] can be used to retain staff and facilitate expansion opportunities during the recovery.”
Consider entering new markets
As counterintuitive as it may seem, a recession can offer an opportunity to enter new markets. If you had plans in place to enter a market before the recession but conditions were not favourable, check back—you may find things have changed.
“The recession will be felt differently across different countries. If the conditions are favourable, like having a stronger currency or the domestic market is not as severely affected, it may be a good time to explore merger and acquisition opportunities in new markets,” says Ridzuan.
Look for opportunities beyond the recession
While the threat of the recession will weigh heavily on companies, Ridzuan says leaders should think about the strategies they can employ once the recession ends. “Companies need to be ready for a massive shift. Those caught unaware will struggle with the change and risk being left behind as others shift into high gear. Instead of scrambling to gather all your resources and rehire staff, have a game plan for when the economic recovery comes around,” Ridzuan advises.
It can be challenging to hold on to your best talents when times are tough, but it pays to be prudent with your talent and resource management. Companies will need those talents to capture new opportunities and attract more customers during the recovery phase.