It’s no secret that another recession may be on the horizon. Not only is the world still grappling with the effects of the ongoing COVID pandemic, but high interest rates and elevated inflation have many concerned that an economic downturn is coming. In fact a recent model run by Ned Davis Research revealed that the probability of a global recession is 98.1 percent.
Today’s business owners likely remember the effects of the last recession, which began in 2007 and lasted through 2009. While the recession that may be coming will be different in many ways, savvy leaders know that being aware of common recession trends is crucial to surviving and thriving during a downturn. Here are three trends from the last recession that you should expect to play out in 2022 and beyond.
Trend 1: Every business fails for the same reason.
Recessions impact a wide array of businesses. However, every organization that fails does so for the same primary reason: they run out of money. Recognizing that a recession may be coming, savvy organizations are acting now to protect their bottom line. For best results, companies should take steps to shore up cash forecasts and variables. The goal is to take control of decisions that affect capital months and even years before the cash runs out. Companies may also want to invest in cloud-based planning software to gain immediate visibility of their business at a glance.
Additionally, businesses should strive to minimize risk by adding runway and conservatism to their forecasts. Companies looking to guard against the coming recession may want to consider diversifying assets, rebalancing investments, and using a longer investment timeline. Doing this can ensure liquidity is available in the event of a stock market downturn.
Trend 2: Innovation emerges.
A recession is almost universally regarded as a negative event that affects society at all levels. However, not everything that comes out of a recession is bad. On the contrary, the challenges of a recession can inspire leaders to innovate and create. On the eve of a downturn, companies should take a closer look at their strengths and weaknesses, seeking out opportunities to become more efficient, improve operations, and explore new markets. The idea is to be proactive rather than reactive like other less thoughtful organizations. Additionally, businesses should ensure they have access to scenario planning software they can trust. The best products enable companies to test the impact of various scenarios and evaluate potential consequences of different business strategies.
Trend 3: Employees start to value your company again.
The COVID era resulted in a phenomenon known as the Great Resignation, in which companies saw their employees abandon them in droves to score pay increases from other organizations. Between that and the Quiet Quitting trend, where employees keep their jobs but do the bare minimum each day, it’s natural that businesses are feeling undervalued of late. While no one wants the country to slide into another recession, business leaders may discover that their employees become more loyal as the economy trends downward. After all, no one wants to be in a position where they have to search for a job in a time of uncertainty. The effect is that workers are once again willing to go above and beyond.
Companies can take advantage of this trend by reciprocating their employees’ goodwill and ensuring they feel valued. Start by thanking your dedicated teammates for their hard work and make an effort to reward them with appropriate financial compensation and other perks. By building a business culture that respects its employees, you increase the odds of workers sticking around no matter what the economy has in store.
Accurate forecasting is crucial to financial planning before, during, and after a recession. Fortunately, Planning Maestro has everything you need to put your organization on the path to success. A cutting-edge financial planning and analysis tool, Planning Maestro combines modern technologies with the latest advancements in cloud computing. Enjoy an array of benefits such as improved forecasting, data-driven insights, detailed reporting, and collaborative budgeting. The goal is to help companies take risks, test scenarios, and react to market changes faster than the competition.
Centage provides modern FP&A software solutions that empower Finance teams to lead the way to a stronger, more agile business. Our cloud platform, Planning Maestro, makes sophisticated budgeting, planning, and forecasting easy and accessible. Intuitive automation accelerates workflows and improves accuracy, enabling Finance leaders to deliver reliable information and meaningful insights at the speed of today’s business. For more information on how to modernize your FP&A process, view our product demonstration video, or call 800-366-5111.