THE GLOBAL CRISIS AND US

A month ago, I wrote a blog article entitled “Egypt, Bahrain, the Middle East and Our Businesses”. I could now write an article entitled “Japan, Libya, the World and our Businesses”. However, I think I can safely leave the name of any country or region of the world out of the title for it is very clear that what happens around the globe has an impact on us – our families, communities and at the places where we work.

Global crisis and events impact our businesses/organizations and we must ensure that our decision making processes are nimble and appropriately responsive to change. We cannot afford to ignore the world around us as being outside of our control.

Role of business planning and intervention

Businesses can cope with global disruptive change through a robust planning process:

  • Ensuring the organization’s vision encompasses the impact of the global environment;
  • Understanding the exposure of a firm’s current marketplace position to international events and activities;
  • Continuous assessment and monitoring of critical success drivers with regard to setting direction, working together and people;
  • Monitoring those key performance indicators that are most sensitive to global change;
  • Delegation of decision making authority so that appropriate actions are taken on a timely basis; and
  • Where overall disruption is significant an action driven intervention process may be required, with:
    • Leadership team engaged;
    • Contingent operational plans;
    • Budget review evaluation and possible amendments; and
    • Monitoring processes.

Here are five global related items that have been impacting us and getting our attention of late along with some thoughts on how we could respond to, or counter, the impact on us.

1 – Fuel and Energy

Last month, I noted how the price of crude oil rose in January due to the uncertainty in Egypt and the remote possibility of disruption of shipments through the Suez Canal. Look at the price of oil now following the Libyan conflagration. Your organization is paying more for transportation now and energy prices will be moving upwards as well.

The disaster at the Fukushima Daiichi nuclear plant has governments around the world reassessing their plans to maintain and build additional nuclear energy capacity which could increase reliance on fossil fuels with long term repercussions on both price and energy security here on Canada’s East Coast. What will be the impact of the disaster on the refurbishment costs and timing, to say nothing about the community acceptance, of the reinstatement of Point Lepreau into the energy grid in New Brunswick?

What to do?

Short term, we could consider implementing fuel surcharges on our existing contracts where meaningful and acceptable and, over the medium term, we should write contracts with surcharge provisions or other pricing mechanisms. Over the long term, we must be looking for alternate energy sources for our businesses either directly or by supporting such initiatives from energy providers.

2 – Global Supply Chains – logistics

There have been negative impacts on global supply chains. I spoke with a local manufacturer last week and this firm is experiencing significant delays in receiving electronic components. Another local company, Scanwood Canada Inc., is in the midst of bankruptcy protection but what recently caused a temporary shut-down was the fact that components were held up due to transportation logistics.

What to do?

Your customers expect prompt delivery of products and services and the failure of your supply chain to deliver product to you can have direct negative consequences. Planning for disruption requires relationship management so that your needs are met whenever possible. You should also built a robust, multiple supplier network ensuring security of supply in anticipation, however slight, of delivery failure from current vendors.

3 – Military Operations

To quote from my earlier blog “Continued unrest in the Middle East may well require support or response from Maritime Forces Atlantic that could well see the deployment of ships and personnel into the region.” Not only is the HMCS Charlottetown positioned off of the coast of Africa but the Canadian military now has six CF-18 Hornets and crew in Italy and these aircraft are currently being deployed in the skies over Libya.

What to do?

The populace of this region and, in particular, this city has been aligned with the military for centuries and I am proud to be a Nova Scotia Director for the Canadian Forces Liaison Council. Your organization should proactively support the Canadian Forces Reserves.

On March 30, 2011, the CFLC Nova Scotia Provincial Council is planning an awards ceremony to recognize ten Nova Scotia organizations that have provided excellent support to their reservist employees or students. Her Honour, the Honourable Mayann E. Francis, Lieutenant Governor of Nova Scotia, will preside over the ceremony and present these awards.

4 – Our Employees and Families

For a week in February, the local press followed the story of Glenn Sutherland and his family, from the time he was forced to flee from an oil rig site in Libya until he reached Malta and finally arrived safe and sound back in Nova Scotia. Glenn was working for Suncor Energy Inc, a Canadian company with operations in Libya.

My daughter and grandson live in a coastal community on the Big Island, Hawaii. On March 11, 2011 our daughter called advising us that they were under a tsunami alert and they had gone to higher ground and were waiting ….. Thankfully, they were fine as it was a non-event for them but now we worry about radiation and the recently resurgent Kilauea volcano that is only a few kilometers away.

What to do?

We must be empathetic as a community and as employers. We have family, friends and employees that have been touched by any one of a number of recent global events. Virtually every organization that I have worked with acknowledges that their employees are their vital assets. Now is the time to ensure that we support those employees who have family members impacted by global catastrophes including those who are serving with Canadian Forces abroad. Such support could be coverage/stories in internal communications, time off as required and counseling where appropriate

5 – Global Economic Recovery in Peril

The global turmoil is creating additional uncertainty in both domestic and international marketplaces and is undermining the rather fragile economic recovery that we have been experiencing in the past 12 months. We have seen a rise in protectionism as some countries try to shield their economies, and this is stifling market opportunity for Canadian exporters.

What to do?

A stall in the recovery does not have to translate into a stall in revenue streams with the right preparation and adoption of risk mitigation activities, such as:

  • Optimized pricing strategies that may require decreases or increases to meet marketplace requirements. Or what may be required is a realignment of how products and services are priced to best match value in customers’ eyes.
  • Multiple volume strategies:
    • Existing clients;
    • New clients same markets;
    • New market segments; and
    • Alternative international markets.

Is there an opportunity to cut costs – sure. The private sector has been doing this throughout the recession and governments are in the throes of trying to manage down horrendous deficits including cutting funding to the post-secondary education sector and all organizations that receive government support.

One cost lever that requires continuous monitoring and evaluation is managing the balance between fixed and variable costs, make or buy locally or import. The context changes constantly, as revenue and activity mix ebbs and flows and the critical mass required to support continued investment increases or decreases. For example:

  • Exporters – international direct sales force vs. channel; or
  • Currency hedging strategies including the matching of foreign purchases to sales.

Conclusion

Nimble and timely response to fast paced global change is a receipt for success. When the economic tsunami threatens our businesses can brace for it, scramble for higher ground or implement contingency plans at the earliest possible moment.

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