When things couldn’t get any more unpredictableby
The sudden surge in Omicron and the UK government's reaction is a lesson in forecasting and budgeting amidst uncertainty, writes Kevin Phillips.
Back in 2017 and again in early 2019 I wrote about the challenges and opportunities experienced when doing business in unpredictable and constantly changing environments. Both articles were prompted by events that had taken place locally for me, including political instability to water and energy crises in South Africa.
I concluded with a hopefully optimistic message for UK readers, especially in the run up to Brexit: focus on the capabilities you need to survive and take advantage of the opportunities that do exist in uncertainty and chaos.
Little did I know, right! These notions of resilience, entrepreneurial optimism, flexibility, leadership and collaboration in the face of chaos were about to become global survival strategies.
Fast forward to the end of 2021, after two years of the Covid-19 pandemic, many of us were cautiously breathing a sigh of relief, getting on planes again to visit international clients, and thinking that our new challenge for 2022 would be navigating the ‘next normal’ of the post pandemic world.
However, the UK government's Chicken Little reaction to South African scientists’ news of the Omicron variant when it banned travel to South Africa and neighbouring countries, flung us straight back into roller coaster days of the early pandemic.
The UK was followed by another 90 countries banning travel to South Africa, despite the evidence pointing to the travel bans having little effect on the spread of the variant. The ban didn’t make sense: just because South African epidemiologists identified the variant, it didn’t mean the variant had originated in the country. Indeed, the reaction may encourage politicians in many countries to suppress news of discoveries for fear of the economic impact of being the first to identify something new!
The knee jerk and illogical reaction action by governments, mostly in the Global North, was the perfect storm of overreaction. And it had very real consequences for South Africa's economy. The travel industry estimates it lost R 1bn (about £50m) in income and up to 205,000 jobs. And this in an industry that was only just beginning to recover from the first two years of the pandemic and looking forward to a first pandemic free holiday season since 2018/2019!
Flip flips and own goals
The travel ban was also an own goal for the UK. People traveling to South Africa and other countries affected by the ban for business and to see family were trapped away from home just before the holidays and had to foot the bill for costly quarantines on their eventual return to the UK.
Yet two months later the UK government, in an astonishing flip flop of approach, is set to remove many of its pandemic-related restrictions in attempt to shift into treating Covid-19 just like any other illness. Time will tell whether this is a sound approach (and not primarily motivated by the need for political distraction from other matters).
But this is unlikely to be the last of the Covid variant, and while Omicron was milder for many people, as South African scientists predicted from the get-go, future strains could be more or less severe. Further experts have warned that it is too early to treat Covid as an epidemic rather than a pandemic. So as a planet we're still in it together for the foreseeable future. And how individual governments react to new variants is going to have a have ripple effect on businesses and people around the world.
This means that my perennial question remains, how do you budget, forecast and report amidst this uncertainty? Do you need to start looking closely at your main markets and factor in the likelihood of a reactive and unpredictable response to new strains compared to a more measured, considered approach?
Another consideration is how to report your numbers against the backdrop of a series of short, sharp, ongoing crises like the UK closing and opening borders at short or no notice, compared to one big slam dunk crisis.
Interestingly I have not seen or read anything that suggests my original thoughts on doing business in uncertainty have been proven to be flawed. Indeed, if anything circumstances have reinforced the hypothesis: involve the coalface of your organisation to get those ground level insights and ensure your planning, budgeting and reporting processes are as fast, flexible and relevant as possible to roll with the punches.
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Kevin is the founder and CEO of idu Software. He has degrees in Commerce and Accounting, and started idu with partners James Smith and Wayne Claassen in 1998. Kevin is fast becoming a thought leader in his field, and makes regular comment in the media about current affairs affecting business...