All wish for a sustained global economy. Few would dispute that economic prosperity is the root driver of sustainability.
Economic sustainability is impossible without due care of the planet and people. The planet represents nature and the environment. Nature is critical in sustaining the global economy.
The economy cannot prosper without vibrant natural capital. Any disturbance to nature – such as climate change, pollution, and depleting resources – can paralyse the economy.
Of course, people – often referred to as talent capital – have always been a key economic asset. There is no way the world economy can thrive without the effective management of both the environment and the people.
A major player in the economy is, of course, business. Business creates consumption, attracts investment, and fuels trade.
Both volatility and uncertainty can negatively impact investment and consumption – and therefore the economy.
Volatility and uncertainty are two major enemies of global business. They disrupt planning, hinder investment, and destabilise operations.
The world is now heading in that direction as the US fools around with trade tariffs and other market-distorting executive orders. Sharp fluctuations in stock markets, oil prices, or exchange rates can erode profits without warning.
Companies cannot price their products or hedge their risks effectively. Normally, volatile global events like a pandemic or conflict can break the flow of goods and services, throwing off logistics, raw material access, and inventory management.
Executive orders are now having the same effect. When the market is volatile, businesses hold back on expansion plans, reduce research and development, or suspend hiring – fearing their investments will not yield the expected returns.
Global businesses today undeniably operate in an environment marked by rapid changes, unpredictable disruptions, and complex interdependencies.
The sudden sharp fluctuations in markets, prices, and demand – coupled with the lack of predictability due to ambiguous information – pose significant challenges. These factors disrupt supply chains, increase costs, reduce investor confidence, and complicate long-term planning.
Why are volatility and uncertainty so damaging?
One concern is supply chain disruption. Geopolitical tensions, natural disasters, and pandemics can halt production and logistics. Covid-19 caused shortages in semiconductors, disrupting the automotive and tech industries.
Financial instability is another. Currency fluctuations, inflation, and interest rate changes impact profitability. The 2022 Russia–Ukraine war led to energy price spikes, affecting manufacturing costs globally.
Then there is the issue of shifting consumer demand. Rapid changes in buyer preferences make forecasting difficult. The rise of remote work has reduced demand for office real estate but boosted demand for tech tools like Zoom.
Regulatory and political risks also exist. Sudden policy changes force businesses to adapt quickly. US–China trade restrictions forced companies to relocate supply chains.
Brexit created massive uncertainty for companies operating in both the UK and EU. The unclear trade rules, staffing issues, and regulatory changes froze investment for years.
Technological disruption is another factor. Artificial intelligence (AI), automation, and cybersecurity threats force constant adaptation. Companies slow to adopt AI risk losing competitiveness.
How can businesses overcome these challenges?
One approach is to build resilient supply chains by diversifying suppliers and reducing dependency on a single source.
Another is to adopt AI-driven demand forecasting to anticipate disruptions. Embracing agile business models also helps – shifting from rigid long-term plans to scenario planning and preparing for multiple outcomes.
Automakers, for instance, now invest in both electric vehicles (EVs) and traditional engines due to uncertain regulatory shifts.
Businesses should leverage data and AI for decision-making. Predictive analytics can help detect market trends early. Retailers like Amazon adjust pricing dynamically based on real-time demand.
Financial risk management is also crucial. Hedge against currency and commodity risks using financial instruments, and maintain strong cash reserves for downturns.
Enhancing political and regulatory intelligence is a must. Monitor global policy changes using AI-powered risk assessment tools. Companies like Tesla adjust production locations based on trade policies.
Next, invest in workforce flexibility. Upskill employees to adapt to new technologies. Use hybrid and remote work models to maintain productivity during crises.
Volatility and uncertainty are unavoidable in global business, but companies that embrace agility, technology, and risk diversification can turn challenges into opportunities. By building resilient supply chains, leveraging AI, and staying adaptable, businesses can navigate disruptions and maintain long-term growth.
Together, volatility and uncertainty undermine trust in the global systems of trade, finance and governance. They increase the cost of doing business, where firms must build buffers, over-insure, or diversify excessively.
The focus of business may shift from growth to survival – especially for small and mid-sized companies. This will push firms to become overly cautious, leading to missed opportunities.
Navigating such a storm calls for a VUCA mindset – volatile, uncertain, complex, ambiguous.
This involves agility through rapid-response systems and flexible supply chains, scenario planning to prepare for multiple futures rather than betting on one, and building resilient systems that can absorb shocks and continue functioning.
The views expressed here are the personal opinion of the writer and do not necessarily represent that of Twentytwo13.
