Economy
New Advice on How Companies Should Ready for Recession
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Consulting and accounting firm Deloitte has gotten out in front of how a new recession will hit companies. Additionally, it has offered advice about what companies should do over the course of a downturn.
Much of the Deloitte advice is for consumer companies but applies to firms in most other sectors. Deloitte looked back at company performances in the 2001 and the 2008–2009 recessions.
First among the most prevalent factors in the past two recessions is a rise in online competition. This is not hard to explain. Most online businesses do not have the need for huge real estate facilities or the broad costs of sales operations. Second, Deloitte warns that most industries will face waves of discounting. If companies have inventory tied up from strong period ahead of a recession, they need to remove that burden. And discounting may be the only way to maintain market share, ironically, as entire sectors cut prices.
Companies need to build up capital reserves ahead of recessions. That, of course, means individual companies are doing well enough to set money aside. Next, Deloitte advises companies to set up partnerships and joint ventures to allow firms to share costs and boost expertise.
Another part of the Deloitte list of advice is that companies spend time adopting new technology. Presumably, this is because technology makes more operations more efficient.
Another bit of advice Deloitte offers is that companies avoid layoffs. The authors of the report wrote, “If you revisit the cost-cutting playbook of the past, you run the risk of retrenchment at the exact moment you need to be looking ahead.”
Finally, Deloitte turns to the “retail apocalypse” as a means to support its argument. Since many companies in this industry lack the means to follow Deloitte’s advice, they will be damaged more quickly in a recession than they are now.
In sum, Deloitte’s advice:
Your new recession playbook should focus on four factors critical to success:
Determine why you matter
Build a war chest to invest in growth
Embrace technology and automation to better leverage growth
Look outside your four walls to embrace partnerships
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