A smart business must already be prepared to deal with the global recession. This principle applies to all types of business because the possibility of a recession is always there, and it will be better to prepare for the worst. In some ways, the recession is part of a different business cycle, where those who survive will grow faster than those who do not.
Here are a couple of things that a business can do to weather the incoming downturn:
The first step in planning how to survive the global recession is to invest wisely. Recognize the types of stocks with the biggest risk and those that tend to do well during a recession. The type of stock with the biggest risk is the one that has huge debt on its balance sheet, the cyclical stock that booms at certain times only, and the speculative stock that is mostly based on shareholder optimism.
On the other hand, the stocks that fare well during a recession are usually the ones with a strong balance sheet, such as those in utility companies, basic consumer goods, and defense stocks. There are also types of stock from recession-resistant industries such as grocery stores, cosmetics, funeral services, and customer staples.
Analyze the Asset
During a global recession, the first thing to do is to take a good look at the asset inventory and decide which assets they need to protect. Following that, the company can decide which assets can be reduced, as well as scale back on marketing, rule out certain types of investment, and everything else that is safe to cut.
Spend Money on Technology
Companies need to invest in the skills, capabilities, and technology that they are going to need for the next five to ten years. This is all about instilling efficiency in the business from the start and having the fortitude to weather the global recession. This kind of investment must be done right now without having to wait for the signs of a recession.
Practice Good Financial Habits
Practising good financial habits will serve any kind of business through any kind of economic phase, so when the global recession does happen, the business will be able to walk through it easily and find the best way to capitalize on the downturn.
Identify slow and busy periods by tracking the rates of change. Use this information to plan ahead on what to do during those periods; for example, during the slow period when commodity prices are low, they can focus more on buying more commodities and working on maintenance.
- Identify counter-cyclical markets that have the tendency to do well during a downturn. By identifying it early on, the company can shift their focus to those markets right away when the recession starts.
- Build cash capital and use it to invest in strategic items needed by the company, and make sure to get them all when everything is cheap.
- Talent management. In several countries, a workforce crisis has emerged, and laying off loyal and dependable employees may harm a company even more than the recession itself.
Diversify the Revenue Source
Diversification is a key to surviving a global recession. A company can diversify its product and service lines into several categories so that when one suffers a setback, the others can help the company stay afloat and recover once the setback is over.
Every global recession will eventually turn around in the long term. The most important part is to start preparing early. Checking the balance sheet, investing wisely, and diversifying are all strategies that every company should implement so that when the recession hits, they are prepared for the recovery.