Global business too easily spooked by short-term economic uncertainty

• Finance chiefs say organisations must be more resilient and less susceptible to macro-economic volatility
• Less than a third think the US debt crisis will throw the global economy into recession

Global business is too easily knocked off course by short-term economic crises, such as the current US debt crisis, according to a global survey of finance and business leaders who hold the Chartered Global Management Accountant (CGMA) designation.

The Chartered Institute of Management Accountants (CIMA) and the American Institute of CPAs (AICPA) surveyed over 1,300 members for their perspectives on how economic crises affect long-term business planning.

Key findings

nOnly 31% of respondents believe the ongoing US debt crisis will ultimately push the global economy towards recession.

nDespite this more than half (53%) expect higher US interest rates and 70% anticipate a weaker dollar.

n60% of respondents said that business is too sensitive to economic crises

n57% agreed that their organisation must seek new ways to be resilient and less susceptible to macro-economic volatility.

CGMA business experts make up the world’s largest community of management accountants and guide business decisions across the globe, including at 95 of the world’s top 100 brands and 91 of the Fortune 100. They hold senior positions, including CEO, CFO, and Finance Director, and have a broad perspective on the long-term prospects of their organisations, their markets and their regions.

Charles Tilley FCMA, CGMA, Chief Executive, CIMA, said: “There will always be another US debt crisis, Arab Spring or Eurozone disaster just around the corner. This uncertainty simply cannot drive business strategy. These ‘grey swans’, as some business commentators have termed them, are prompting organisations to cut spending and investment at a time when innovation is absolutely vital to our economic health.

“Indeed the seizing of opportunities is key to long-term survival and so we must all plot a suitable course between risk and innovation, managing the approach and mitigations put in place to address these uncertainties.”

Barry Melancon CPA, CGMA, Chief Executive Officer, AICPA, said: “The repercussions of US debt ceiling and spending decisions will reverberate across the global economy and may touch many of the world’s businesses. Management accountants are bracing for short and long-term implications, even as they look for ways to make their businesses less vulnerable to the pulses of geo-political forces.”

Five top tips for business leaders to build resilience

It is vital for organisations to adjust their risk radar and anticipate the impact of such scenarios on investment and future growth without being diverted from creating a suitable long-term strategy. This will build resilience in the face of ongoing economic uncertainty.

nUnderstand your business model. What creates, and could potentially destroy, value in your business?

nHarness the power of transparency. Create a line of sight between capital sources and how it will be invested in the sustained success of the business, beyond the short-term.

nEnsure robust information flows. Build confidence in the right information that drives investment and risk mitigation decisions.

 nGo beyond defining a risk appetite. Have a risk attitude that empowers all in the business to take appropriate risks that drive growth and opportunity.

nBe clear on the skills and talents you need now for tomorrow. Identify and close potential skills gaps you may have when considering your future business model, markets and innovation agenda.