Three economic projections for the next 18 to 24 months to help with your recovery planning
Now is the time to thoughtfully consider the economic possibilities and to take decisive action aimed at laying the groundwork for a vigorous recovery. To help frame planning discussions Deloitte has crafted three economic cases - mild, harsh, and severe - that describe what could unfold over the next 18 to 24 months.
The Mild Economic Case
- Increased social cohesion emerges following periods of quarantine. Existing tech trends accelerate, and more businesses shift to online models. Respect grows for public institutions and local government as their efforts appear to slow the pandemic.
- Economic activity begins to rebound in late 2020. Real GDP growth for the United States and EU for 2020 is -5%, with substantial fiscal programs in both regions helping to limit the damage. Meanwhile, real 2020 GDP growth for China is 3%; for Japan, 0%. A slow recovery begins in the second half of 2021 as consumers regain confidence.
The Harsh Economic Case
- Economic recovery begins in late 2021, continues slowly in early 2022, and speeds up by the second half of 2022. Global demand declines severely, creating financial stress akin to that experienced in 2008. The Chinese economy is slow to rebound; real 2020 GDP growth for China is 1%; for Japan, -3%. A deep and prolonged recession in the West affects supply chains and consumer demand. Fiscal stimulus limits business failures but does not boost spending. Both the EU and the United States have real GDP growth for 2020 of -8%.
The Severe Economic Case
- Economic recovery is delayed until mid-2022 in this severe case. Cascading, resurging COVID-19 outbreaks globally post a significant risk and limit recovery. Financial systems break down despite central banks’ efforts. Fiscal stimulus programs are substantial but fail to boost spending. Widespread and enduring nationalization of industries takes hold.
- Real GDP for 2020 is -10% for both the EU and the United States, -6% for Japan, and -3% for China. Supply chain breakdowns cause a severe drop in output.
For full details of each scenarios assumptions and expected outcomes read here.
A guide to delivering a sense of purpose
McKinsey & Company
How do businesses deliver a sense of purpose across a wide range of environmental, social and governance (ESG) priorities without going too far beyond their core mandate or losing focus on bottom-line results? Fortunately, a “how to” playbook is starting to emerge as a growing number of companies lead.
This article distils some inspiring steps taken by forward-looking companies to place purpose at the core of their activities using the following steps:
- Get real: Create a baseline from your stakeholders’ perspectives
- Connect purpose with your company’s ‘superpower’
- Organize to keep purpose at the top of everyone’s mind, every day
The role of the Board Chair during a crisis
MIT Sloan Management Review
Experienced chairpersons know that their success depends on how they walk the tightrope of being too involved or too remote in the company’s strategy execution. Yet when a crisis such as COVID-19 hits and the CEO transforms into Chief Crisis Officer, the chairperson may become increasingly unsure how to strike this balance.
In light of these dynamics, the interactions between the chairperson and the CEO to establish decision rules, guidelines, expectations, agendas and communication strategies are an essential and often underestimated success factor for leading organisations through a crisis.
This article takes a close look at this relationship and explores how experienced chairpersons interpret their role during a crisis, and why success and recovery for companies depend on complementary roles, strategic alignment, and chemistry between the chair and CEO.
For full details read here.
How can we mitigate systemic risks?
London School of Economics
How can we mitigate systemic risks? By not building brittle systems that operate close to breaking point. One of the learning points from the 2020 pandemic will be: build resilient organisations. In systems terms this means:
- Lowering complexity i.e. making the system clear and reducing interdependence. Lower complexity will come from, for example, becoming more transparent, putting in place more controls and fail safes, process simplification, more modularity in designing systems, processes, products, software, and technology.
- Building slack into a system. ‘Slack’ may come in the form of more time, resources, lowering connectedness, reducing pressure on the system, and/or putting default mechanisms in place. As one example, it may well be that the pandemic experience of mass home and remote working utilising technology will encourage organisations to adopt such mechanisms to protect against likely future crises.
For more details read here.