In this article, VoPay CEO Hamed Arbabi shares his thoughts on whether or not a recession is on the horizon and, if so, how businesses can navigate it.
Are we in a recession? Will inflation continue to level off? Could this all simply be a vibecession? It seems today that everyone has a stance. And while most have relevance, the likely truth is that only time will tell what the next few months or years have in store for us—fiscally and otherwise. As McKinsey states, something's coming—we just don't know what.
One could argue this potentially leaves the door open to chart the course. How we react and act today can significantly impact how the future unfolds.
For over two years, we have watched reactions become fast and furious. Some out of necessity (WFH), some out of uncertainty (toilet paper) and quite a bit out of speculation (GameStop, Bitcoin and the global housing market). And while there are so many things we still don't know, there are some things we can say with confidence that we do know.
First, the adoption of digital transformation. The pace of and uptake of digital technology is undisputable. For instance, according to a recent CEO and CFO survey, 46% and 45% say investments in talent and technology, respectively, are dead last on the chopping block to go.
As a Deloitte article succinctly notes, "In uncertain times, digital transformation becomes more, not less, important."
Secondly, big data has never been bigger, and cybersecurity has leaped ahead as one of the most significant challenges any business, big or small, will face. The statistics show that hackers are taking advantage of companies' vulnerabilities and gaps in security, and the C-suite is paying attention.
And lastly, the climate change conversation gets a seat at the table. Sustainability efforts are on the rise, and climate change's effects have become the forefront for many business leaders. While security, operational productivity and automation top the list for IT investments, businesses also feel the pressure to intensify their sustainability stance. Companies can no longer prioritize profit over the environment. The reality is that every business needs to do more to protect the environment.
The truth is everyone is just hedging their bets. Have we reached peak inflation? It's easy to say but hard to know. This debate continues among some of America's top economists and market strategists. In some ways, expert insights leave us with more questions than answers. Will 2023 be more bear than bull? I can't know for sure. But I can say with certainty that what lies ahead remains unknown; the past is not always our best indicator of how the future will unfold. We can, however, as leaders, extrapolate the lessons learned from the pandemic and put them into practice.
There is great potential ahead for organizations, no matter the industry.
For most organizations, the first reaction is often to grab the red pen in one hand and the balance sheet in the other and start cutting. In the past, this has worked. Cutting costs and slowing down spending have long been sold as the way to survive a recession. If the pandemic taught us anything, it's time to try a different approach. The key to surviving and thriving during these times will be a mix of technology, having strong financial controls and processes in place and being flexible and adaptable enough to take advantage of new opportunities in a fluid economic environment.
One of the best lessons learned from the pandemic was how companies pivoted. Whether they altered their product or service, changed their target market or went from in-person to online, the success stories speak for themselves.
Taking advantage of new revenue streams can help keep your business afloat in tough times. Companies looking to increase their revenue streams and income can look at their product lines and see how they can deliver additional "value adds." In fintech, we are witnessing companies embed finance within their operations. By offering financial services, such as lending or payment processing, into a consumer's everyday experience, a company can generate revenue from lending, payment fees and insurance fees.
It is no longer just about decreasing the headcount. Identifying inefficient business processes is essential to the health of your organization. Start tracking customer satisfaction levels, increased expenses and overworked staff members. Ask yourself where you can introduce technology and automation to enhance productivity, deliver a better customer experience and redirect workload. In the B2B payments space alone, there is a $950 billion revenue opportunity waiting to be automated. Technology that allows for payment optimization has become a significant way for businesses to cut costs from their bottom line.
Regardless of whether or not we are in a recession, the signals are clear if you are paying attention to the financial markets. Investment in sustainability will continue to pay off. More and more businesses that do not commit to sustainability goals will find it harder to get funding from lenders and investors. By incorporating sustainability across business operations, companies will likely significantly reduce expenditures.
Once businesses have investigated and implemented the four ways outlined above, the company may still need to look at how to trim a little more. But before you decide to downsize your staff, in today's talent market, you'd be best to exhaust all the other ways to reduce expenses before you decide it's time to let employees go. There is not much to go on in historical precedent for the economic conditions we are currently facing; we have never really seen a labour shortage collide with a recession before.
My advice: Hold on to your talent for as long as you can. Worker shortages wreaked havoc on several different industries, tarnishing many long-standing brands almost beyond repair.
As leaders, the initial reaction will be to pull from a past playbook, while in truth, the most profitable one will be to draw up a new one.
Are We In A Recession? Five Ways Businesses Can Come Out On Top was originally published on Forbes on September 27, 2022.