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Businesses are playing dodgeball, not tennis

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The war in Ukraine is the latest unforeseen event which demonstrates the need to be dynamic, flexible and agile in our finance processes, writes Kevin Phillips.

29th Mar 2022
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A common theme in my writing for AccountingWEB, pre-dating the pandemic, has been the importance of building an accounting function that is resilient and flexible in the face of unprecedented change.

Arriving at this outlook – that the only constant is change – didn’t take much crystal ball gazing as the signs were clear to see. Constant change and the inability to predict the future seemed inevitable, and in my opinion, the best and most responsible thing we could do as business leaders and finance specialists was to accept this, and prepare our organisations to navigate this next normal.

Things were looking so good

This agility and flexibility were set to help us ride out the rest of this year as economies around the world started to stabilise and grow, inflation was brought under control, supply chains hardened, and we could start to feel optimistic again.

This optimism, in turn, would drive more activity and growth. Many countries around the world are, whether formally or de facto, starting to shift to treating Covid as an epidemic and something to be lived with.

Rules around mask mandates, tracking and isolation are being dropped to varying degrees. People are returning to the workplace, and to group socialising outside of their homes, and as they do so, they are spending money in their communities. Travel, whether for work or pleasure, is becoming unremarkable again. All of this is driving much needed spending that should bolster economies shaken by the pandemic.

Most of us have already accepted that 1) The world would not be picking up where we left off in 2019, and 2) We are always going to have to live with, and manage as best we can, a much larger degree of change and chaos in the future, even post-Covid.

But still, I think, there was a general sense of relief this year that we could start the next chapter of rebuilding our lives, communities and businesses. We were finally out of limbo.

Carpet pulled from beneath us again

And then, in late February, Russia began a military invasion of Ukraine. The invasion and reprisals instantly and profoundly shook an already pandemic-weakened global economy and supply chains.

Further, they drove home just how multi-layered and intertwined the uncertainty of the modern world is. Much has been written about the triple-whammy of the interruption of Russia’s supply of oil, food and commodities to the rest of the world. These are foundational economic items, and volatile and rising prices here will drive increased costs and prices all along the line. This, in turn, at best will dent our hoped-for global economic recovery, and, in the worst-case scenario, scupper it entirely and plunge us into a global recession.

The carpet has well and truly been pulled out from beneath us. Again.

But, as dramatic, extreme and incredibly tragic as this invasion is, as multi-faceted and complex its effects might be, and as fragile as the world is today, is this event any different from all the other potential unforeseen variables we’ve been preparing for?

Blows can come from any direction

Surely this is yet another change coming from left field that is going to impede your ability to plan accurately. It only reinforces my original argument that we need to be dynamic, flexible and agile in our finance processes.

If you’ve bought into this argument and are already dynamic in your planning process, hopefully your business is well-positioned to react to the economic impacts of the war.

You can consider each impact and determine how it will affect your core business drivers and assumptions. What does the rising cost of fuel and gas mean for you and your customer base? If essential commodities are about to get scarcer and more expensive, what does that mean for your supply chain and pricing? If your customers and employees are paying increasingly large proportions of their salary on feeding their families and heating their homes, what does that mean for future share of wallet and salary demands? And so on.

With enough built-in flexibility to adapt and respond, it doesn’t matter what the next thing is as there will always be a next thing. This is yet another reminder that today we are playing dodgeball, not tennis. The blows can come from any direction, at any time, and in parallel, compounding their impact.

Nevertheless, for a brief period I was enjoying a glimmer of optimism, cheered by the thought of gearing up for a year of building back again. Sadly, that was not to be.

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By Hugo Fair
29th Mar 2022 20:11

It might seem obvious, but the ability "to be dynamic, flexible and agile" is dependent on two factors ... a real knowledge/understanding of how your business operates (and by extension your clients' businesses) + the desire to welcome change on a regular (and uncertain) basis.

The 2nd of these is intrinsically a personality trait (which is why those who are without it are willing, sometimes, to pay for consultants) ... but the 1st aspect should be fundamental to any business (or indeed charity or other functional organisation).

I'm sure the author knows this - but it doesn't seem to be explicitly stated in the article and thereby reduces its potentially beneficial impact.

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