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I’ve talked a good bit about strategy, the need to keep it alive to react to changes in markets and competitors.

The Greek philosopher, Heraclitus, pointed out 2500 years ago that change is always with us and, of course, the biggest current change that we need to consider is the Russian invasion of Ukraine.

Regardless of your political views on this, it will affect the global economy in several ways and your strategy plans will need to be updated as a result.

Clearly, as the invasion is still less than 2 weeks old when this is posted, there will almost certainly be additional changes, but so far we need to prepare for:

  • Energy price increases – although this has been a pattern for several months, the invasion, leading to a cut in Russian oil and gas supplies, has accelerated price rises, with consequent effects on production, transport and the costs of running businesses and homes.
  • Interest rates – there will not only be a continued rise in interest rates in the main markets as central banks try to manage inflation but developing countries will likely see an even larger impact as uncertainty will push up the risk premiums associated with these countries. Of course, the banks might slow the rate of change to help counter some of the uncertainty, but it’s likely that the upward trend will continue for longer than previously anticipated.
  • Inflation – prior to the invasion there had been views that inflation was peaking. This has changed and we can expect inflation to increase and stay relatively high for longer due to energy and other cost increases, although a weaker growth rate might dampen the effects to some extent.
  • Slowing global economic growth – this was already under way following a strong uptick as the worst of the pandemic ended (in effect making up for some of the lost time). However, the effects of the invasion mean a knock in consumer confidence which, coupled with an increase in energy prices, inflation and interest rates, will slow buying around the world, although it seems unlikely this will lead to a global recession.
  • Currency rate changes – as usual whenever there is global uncertainty, emerging market currencies are adversely affected as markets ‘take cover’ in major currencies. This, of course, loops back into higher interest rates as central banks in these countries look to reduce the impact of currency devaluation by making the currency more attractive to investors.
  • Commodity price increases – of course, depending on your business it’s not all bad news. Prices of gold, platinum-group mentals, nickel, wheat, maize and sunflower oil are also rising strongly. Much of this is good for South Africa so the rand could well stay relatively steady compared with many other emerging market currencies, although it could lead to shortages of some commodities.

These, and any other emerging changes and trends will need to be discussed at your next board meeting and any adjustments to your strategy made as a result – hopefully, limiting any negative effects on your planned growth rate.

The rate of change might vary, but change is always with us – we live in a VUCA world, after all.

#BusinessFitness #Board #Business #Change #Disruption #Planning #Resilience #Strategy #VUCA #QOTW

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P.S. If you’d like to discuss business strategy, book a free, no obligation 30-minute call with me here to see whether I can help.