If 2011 was anything to go by we are in for a very interesting year. From The Arab Spring to hard hitting government austerity measures, the call for radical changes to banking practices and, closer to home, the long awaited debate on audit dominance – we witnessed a year of unprecedented headlines.
As business leaders, we have no control over these macro issues. Our role is to ensure our businesses are planning for change.
Looking at the global picture, and I am pleased to say there are positives out there. Just take a look at the surprise economic data rolling out from the US in the last few weeks – manufacturing is buoyant and unemployment is at a three-year low, with most jobs being created by the private sector. This indicates the plausibility of a sustainable, if mild recovery.
In China, the overheated property market is still causing concern, but inflation is easing, providing policy makers with more tools to ensure a softer landing for the economy as it slows.
Meanwhile in Europe, there remains no solution on the horizon, and the bad news keeps mounting as more and more EU members are downgraded. Angela Merkel’s desire that the “euro must not fail, and will not fail” appears increasingly wishful thinking rather than solid policy based on the combined political will of member states. In November David Bartlett, our Economic Advisor, wrote a paper on the potential fallout from the Eurozone problems. Interestingly, he noted that leading banks were already preparing for a breakup of the currency area.
In response, the FX industry is planning to best handle post-euro break-up trade and HSBC is planning how to trade the new local currencies, as reported by Reuters. In times of uncertainty, good planning is not about predicting what will happen in the future, but instead preparing your business to cope positively with change.
2012 is likely be a year in which businesses need to be pragmatic and react quickly by building strategies to mitigate risk in an incredibly dynamic political and economic environment. I cannot think of a testier issue to start a year with than the threatened collapse of one of the world’s leading currencies.
Too big to fail? No such thing – get planning.