WINDOWS OF OPPORTUNITY
Many of the world’s largest corporations and some of the most successful businesses in Sri Lanka were established in times of economic hardship, as well as under difficult and uncertain market conditions…
Today’s global market has been severely impacted by the COVID-19 pandemic and the consequent recession that’s being declared by many countries around the world. These are indeed challenging times; but they could also be a time of unprecedented opportunity. While many individuals as well as corporate entities are caught up in adversity, some business leaders are seeing viable opportunities in this phase of the economic cycle. Here are some examples.
INVESTMENT Equity investments (including acquisitions with valuations) and stock prices of many corporate establishments that are falling due to a recession could provide an opportunity for acquisitions at more attractive prices and terms.
This is in contrast to an economic boom where many equity stocks are considered overvalued and as such have a lesser likelihood of further price appreciation. Turning failing companies around is also a lucrative business.
POSITIONING Many individuals and organisations become complacent under stable market conditions. The steady organic growth of business and a fixed salary at the end of the month are often taken for granted.
This contrasts with the situation in a recession where businesses are forced to operate more efficiently and individuals need to invest much more effort while thinking out of the box to garner a fair share in a market with limited opportunities.
Though painful, these times bring out the best in organisations and individuals – both become more agile, efficient, effective and better positioned for the future.
INNOVATION A recession is a good time to leverage excess talent, and manage resources for innovation and new product development. Deploying talent to these areas would be better than leaving resources idle or underutilised. While immediate results are unlikely, gains can be reaped in the future.
For example, some software companies are investing time to develop new solutions. Though these solutions aren’t specific to client engagement, they will be leveraged over the longer term.
RECRUITMENT While many organisations have cut back on recruitment and scaled down on resourcing, some see a recession as a great time to invest in talent. There will be more talent available in the job market as a result of retrenchments, closures and tougher market conditions. There may also be an influx of returnees from overseas who bring with them international work experience. These factors give rise to good hiring opportunities for organisations that are focussed on the longer term.
ESSENTIALS Recession or not, some goods and services are essential. A typical individual would often compromise on certain purchases so that he or she is able to spend on another.
For instance, many households will continue to spend on basic education for their children for as long as possible. Though the situation mustn’t be exploited, it’s useful to note that some businesses may be more resilient to changes in the economic cycle.
GROWTH Even though many countries have recorded a considerable dip in economic output, some may record higher levels of comparative growth during these times.
These can be economies that had previously experienced difficult times but are now on the path to recovery, some emerging markets and those that are less dependent on the global context. These markets could be a source of exciting opportunities even during a recession.
IMPACT Interestingly, there are organisations that have an inverse correlation to the economic cycle. These enterprises would experience more activity in a recession than during an economic boom. For instance, a business that’s engaged in restructuring services would see a significant rise in activity at a time of a recession as more clients would require such services.
Though not directly attributed to economic cycles, the COVID-19 pandemic has resulted in an exponential surge in demand for personal protective equipment and manufacturers of these items have witnessed a phenomenal market performance.
A recession is usually followed by a boom, and organisations and individuals that can navigate the storm are often able to benefit when there are changes in an economic cycle. So it’s worth keeping in mind that good times aren’t permanent and neither are bad times since all environments are subject to change.
Some of us have heard comments such as ‘if only I had invested during the last recession…’ – and if in fact, there is a recession or one looms on the horizon, it would be worth looking beyond the adversity… because it could be that time of opportunity!
BY Rehan Fernando