No one can know for sure when there’s going to be an economic meltdown. However, the volatile market and financial uncertainty are making experts, which includes the International Monetary Fund, suggest that businesses should be able to get themselves ready for a recession that will affect companies across the globe.
David Lipton of the IMF agreed that businesses are indeed not ready for an unstable global economy. He gave a piece of timely advice when he said that the companies should “fix their roof while the sun is shining.” Lipton said that storm clouds are not that far and crisis prevention is still incomplete.
Innovation at a Time of Uncertainty
At a time when the economy is not very stable, what can businesses do to best prepare themselves? When the market is volatile, organizations act the same way that humans do: it’s either a fight or flight situation. Many companies lean towards locking their doors and cutting down costs.
However, it is still important to listen to experts – including analysts from McKinsey and Deloitte. These experts state that companies can emerge triumphantly from an economic instability when they continue to invest and innovate.
Companies should be able to prepare for times with rapid change. It is the vital period where investing and innovating are most needed. Studies state that investments in innovations are the primary areas that suffer during economic downturns.
Businesses are burdened by the challenges of cash flow and debt in which they become paralyzed by the increasing debt-servicing costs and interest rates. Because of this, companies become reactionary. What they do is that they cut the costs, looking only at the short-term view.
During post-recession, these same companies are the ones that grew slower because their competitors were more agile while still
It means that these companies had the capacity to measure their ratio of capital expenditure to that of depreciation. They have been preparing for the end of the economic storm by building for the company’s future.
5 Tips To Be Recession-Ready
- Business planning should be continuous and not just an annual event.
During any type of economic climate, companies should not wait for a year to pass if their products or services are going to be profitable. Planning should be in rapid and continuous cycles.
- Use agile structures and processes that can support rapid changes.
Business conditions are rapidly changing. It means that companies should have a flexible tool for their planning. Changes in plans mean changes in the organization’s processes and structures. The processes should be collaborative, time-sensitive, and simple.
- Train and recruit new skills.
Many companies found that a big portion of their most recent revenue has been directly linked to the skills areas that only five years ago, did not exist. Businesses need to update and upgrade their workforce’s skill set to keep up with the rapid changes.
- Empower employees when it comes to decision-making.
Traditional organizations have this
- Managing uncertainty using agile control.
The organization needs to be agile. Unlike what many would think, it won’t create chaos. What it will result in would be opportunities to immediately know if products or services are performing well. By knowing the situation quickly, leaders will be able to make fast decisions that will benefit the business.
Aviation Aftermath Due to COVID-19 Pandemic
The Covid-19 pandemic has changed a lot of what was considered ‘normal’ before. For example, gone are the days when you can have a fun night out with friends while drinking and partying. Another aspect that the pandemic changed is everyone’s ability to travel freely (as long as their passport, budget, and visas will allow).
With everyone expected to stay home, the airline industry strongly felt the pandemic’s effects as the majority of the flights got canceled due to travel restrictions in an attempt to contain the spread of the deadly virus. Because of this, the airline industry has been forced to lay off employees or, worst, declare bankruptcy.
Government regulations in countries such as the United States and Europe have reiterated that any canceled travel plans because of the Covid-19 pandemic should be refunded in whole to the ticket holders.
Despite this regulation, many airlines have failed to comply with as they have felt the financial brunt during the pandemic. Some airlines opted to provide travel vouchers (that can be claimed until 2022) instead. Still, government regulations were specific in their guideline to give back the refund.
Statistics show a decline of 10% in early March 2020 as the pandemic started to boom globally. By late March, statistics showed a 40% to 60% decline in the aviation industry, with more flights being canceled and fewer individuals attempting to travel, including the imposition of travel restrictions by multiple countries. By April 2020, there was an 80% decline, with flight movements restricted in all countries.
Because of the aftermath of the pandemic to the aviation industry, many airlines are cutting off employees, including flight attendants. US airlines have cut down flight attendants ranging from 30% to 60% because of the low demand for flights.
Because of these, flight attendants all over the world became creative in ways to earn more money now that their current jobs are unstable because of the pandemic. For example, Susannah Carr, a flight attendant from United Airlines, mentioned she rejoined AppWag to walk dogs through making extra money now that there is a lull in her flights.
Making Ends Meet
In an interview, she mentioned that her previous paycheck was just enough to cover her monthly rent, a place she co-rents with a fellow flight attendant. Since Carr has previous experience in freelance jobs such as online translations and wedding event planner, she is now busy applying for other freelance types of jobs to make ends meet.
She acknowledges that while it is not the dream job, she hoped for right off college, the sense of urgency to make a living so she can survive the pandemic remains to be a top priority.
On the other hand, another flight attendant, Joan Marie Santos, turned to bake cupcakes and pastries during the flight lull. Her passion truly lies with baking, a hobby she only got to do in-between flights. But with the ongoing pandemic and approximately one flight per month (as opposed to her usual 15 flights per month), she started baking and selling her pastries to nearby communities to make ends meet.
With the uncertainty of the pandemic, people, not just flight attendants, have to be flexible and adaptable to the changing times.
Thwarting Recession – Optimism Remains High for Small Businesses
For the past 18-month, optimism among small business owners is in an all-time high, as sentiment rose from 2.3 points in May 2018 to 10.47 in November 2019, based on the survey results from the National Federation of Independent Business (NFIB).
For owners that wish to expand their business or those that expect an improvement in their earnings, have fortunately had the second straight monthly gain for the index. These positive earnings are a far cry from the previous months of fear over the looming recession.
Economy & Job Opportunities Continue To Grow
With the additional 226,000 jobs last November, the survey results prove that the economy continues to have a steady growth.
According to William Dunkelberg, the chief economist at NFIB, believes that business owners have anticipated this growth. In a press release, the “historic run may defy expectations of many, but it comes as no surprise for small business owners” Dunkelberg said. He added that this might be attributed to the fact that small business owners “understand what a supportive tax and regulatory environment can do for their companies.”
In addition, legislation such as the Tax Cuts and Job Act of 2017 are giving small business owners a tax break which will help give them room to expand their businesses.
Based on the numbers, the Net 12% of all owners show higher nominal sales in the past three months- in fact, it has been the highest since May 2018. Moreover, 60% of business owners have claimed that they are making capital outlays since October. Debts are also going low as only 3% claim that they cannot meet their borrowing needs.
Looking into the employment sector, job creation has been the highest since May. The growing competition and demand in the job market had also pushed as much as 30% of small business owners to raise their compensation. Another 26% are also preparing to have an increase in the next few months. The increase in compensation has been the highest level since December 1989.
In addition, economists are also predicting that payroll will rise from 156,000 in October to 185,000 in November. This is positive news is a stark contrast to the concerns of a recession.
The positive earnings have also affected pricing. In fact, the decreased cost pressure, especially in labor and allowed business owners to retain their regular prices. Even the inflationary pressures have not been strong enough to create huge price hikes. Although the highest inflation goes to the retail trade and construction.
The changes in the employment and economic sector have also influenced how they think as “owners are aggressively moving forward with their business plans, proving that when they’re given relief from the government, they put their money where their mouth is, and they invest, hire and increase wages” Dunkelburg said.
All these good signs both in the economic and in labor have allowed small business owners to gain more profit. This also gives ordinary consumers a positive outlook on what the next year will bring.
Problems Continue As WeWork Downsizes Almost 20%
WeWork is expected to lay off about 2,400 out of its 12,500 employees, almost 20% of its workforce. The office-sharing company seeks to cut costs drastically after its former CEO, Adam Neumann, failed to run the company.
The expected downsizing of employees is the most significant move SoftBank Group Corp has made. The layoff provided a $9.5 billion lifeline, and will soon own about 80 percent of WeWorks shares to refocus the company on its core business.
After the company’s downfall under its former CEO, WeWork had become bloated as it had taken a path that branched out into all sorts of areas without no clear route of profitability.
A company spokeswoman said in a statement, “As part of our renewed focus on the core WeWork business, and as we have previously shared with employees, the company is making necessary layoffs to create a more efficient organization.”
WeWork claimed that the layoffs
A New York-based WeWork added, “This workforce reduction affects approximately 2,400 employees globally, who will receive severance, continued benefits, and other forms of assistance to aid in their career transition.”
According to an ex-employee, WeWork New York, offered six months severance pay to an employee who had been with the company for at least four years. Others who fall below only get four months of severance assistance.
WeWorks architecture unit belongs to the groups affected by this layoff. This unit has been notable in helping WeWork’s identity by curating distinctive modern designs for their shared office spaces. The company’s technology department (coding and software team) was also affected by this downsizing.
In this light, WeWorks claim that it is primarily a technology company, and not just a real estate firm, but is now challenged and merits a much higher evaluation due to the job losses in the technology department.
After WeWork’s announcement, their junk bond due in 2025 fell 1.125 cents on the dollar, sending its yield back to near a record high above 16%.
A Pile Of Problems
While the company still faces several issues, with the latest being an investigation by the New York State Attorney General, the company’s losses are continuing to pile up, swelling to $1.25 billion in the third quarter. The company is also burning cash since it has committed its reach of expansion to several areas.
In place of the restructuring, the company is open to selling or closing existing businesses, together with its private elementary school, after this year’s term.
Also, some WeWork employees who reside at WeLive (the company’s residential living business) will be evicted. A WeWork staff, talking on the condition of anonymity, said on Wednesday.
Making The Most Of The Situation
Apart from that, several WeWork workers have formed an alliance termed as the WeWorkers Coalition, which serves to call out severance pay and compensation for lost equity for laid-off employees.
A WeWork software engineer, who helped start the Coalition, described that the long-awaited layoffs which were highly publicized for weeks in the media were “draining” the staff morale.
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