Preparing for the possible

As featured on BusinessMirror: Preparing for the possible

While all signs are pointing toward the risk of recession in most countries, small- and medium-sized businesses (SMBs) continue to be optimistic about the future and their ability to weather a recessionary storm.

The lessons of the past two disruptive years have not been forgotten. SMBs are putting their houses in order and getting ready for new growth opportunities that will open when the economy rebounds.

Two recent reports support this outlook. The insights from a global survey of 1,325 CEOs, captured in the KPMG 2022 CEO Outlook “Growth strategies in turbulent times” shows, for example, that CEOs globally have learned to navigate the unpredictable, are confident in their companies’ resilience, and are relatively optimistic about their growth prospects over the next three years.

The second indicator is a recent poll of SMBs in Canada where optimism is running high, and 83 percent of the respondents are feeling optimistic about their growth over the next few years. Most are expecting a recession, and they know that pain is coming, but they’re already taking steps to weather the storm by tightening their belts, implementing hiring freezes, and pausing any new technology investments.

Corporate resilience is not new in the context of the Philippines. As the country’s borders reopen following a series of lockdowns and restrictions brought about by the Covid-19 pandemic, the business industry has gradually returned to normal operations, in-office transactions and wider public mobility.

“However, there are changes that have already left permanent imprints on how businesses run, such as providing employees with flexible work schedules and integrating modern technology in various business methodologies,” he added. Garcia believes that these developments contribute to business leaders’ and decision-makers’ positive outlook despite the threat of a recession in the coming years.

While they’re optimistic about their company’s growth prospects over the next three years, they also recognize the need for getting the right balance between the current reality and their future prospects.

Short-term strategies are priority number one: boosting productivity, looking at operational efficiencies, managing costs, eliminating complexity, and keeping an eye on cash flow. The future outlook will be focused on high-quality, high-margin products, paying down high-interest debt, and keeping a sharp eye on emerging opportunities. Most are planning to increase their headcount in the next three years to drive their growth, though many agree that finding and recruiting skilled employees will likely be more of a challenge in the coming years.

With a glass-half-full view of the future, the majority of SMBs expect the recession to be relatively mild and short-lived. They are choosing to strengthen their business from the inside in the short term by finding ways to work smarter, be leaner, and make their operations more productive and efficient.

The pandemic forced many to “go digital” virtually overnight, but most companies in the survey expect to pause their digital transformation plans over the next few months—purely as a temporary decision due to concerns about losing their competitive edge.

Mary Jo Fedy, National Leader, KPMG Enterprise in Canada has suggested, “Pausing capital investments in digital can be a good strategy to wait out economic concerns, but this response shouldn’t apply to investing in the digital skills and acumen of your people.

“A slowdown provides an opportunity to better align talent and technology. And investing in training and upskilling your workforce on new technological advancements can achieve even greater efficiencies and better business solutions in the long term.”

The world is about to face another test of resiliency, but the struggle is nothing new. Taking cues from the pandemic, many SMBs are taking cues from their experiences during the pandemic, upskilling their teams, and preparing for the possible by laying the groundwork for longer-term growth.

There is no better time than now for companies to begin preparing for the future, and here are a few suggestions for getting started:

• Keep doing what works: Continue putting time, effort, and talent towards optimizing the changes and investments you’ve already been making, but don’t lose sight of strategies that generate growth.
• Learn from the past: Leverage the lessons learned about resilience. The pandemic imparted its share of insights when it comes to managing supply chain disruptions, realigning cost structures, and reducing expenses. Now is the opportunity to draw on them.
• Prioritize future-proofing: Staying competitive will require a workforce that is trained and adept in embracing the changes, challenges, and digital transformations. It will also require time and resources to develop a compelling ESG story, and be ready with the processes, talent, and technologies to evolve with your customers.
• Upskill your talent: Organic growth rests on people. Use this moment to build your team and/or upskill the people in your roster to extract full benefit from your business investments and strategies. Prepare your team to take advantage of new and emerging technologies and protect against a growing cyber threat landscape. At the end of the day, your people are your first line of defense.

What lies ahead is still unknown and remains a mystery. Hence, business leaders are required to take action right now. Having foresight or the ability to anticipate future phenomenon will enable corporate leaders to turn threats into possible opportunities.

_{The excerpt was taken from the KPMG Thought Leadership publication: https://home.kpmg/xx/en/blogs/home/posts/2022/11/future-growth.html}