Blog 2 of Business Strategy Series
Current Global Environment
You can’t start any conversation on the current global environment without talking about Covid 19.
It is useful to look at the global response to the current Covid 19 response. Here are a few perspectives on how we are doing so far.
In my lifetime, this is a completely unique situation. The whole world has been affected from both a health and economic perspective. There is a potential threat to each person’s life and livelihood. Even in the world wars, many countries were safe at the local level, especially in the Americas (excluding Pearl Harbour) and in large parts of Africa. That is not to say that they did not send people to help in the wars. The war on ISIS which involved over 70 allies to defeat ISIS did not have a short term personal threat to the public in most of the ally countries. So, this is a global war against an invisible enemy with huge consequences on the lives and health of many and with massive economic consequences. For the countries that can afford it, it looks like the cost to the governments will be about 15% of GDP from responses and programmes put in place today. Perhaps, there will be more to come!
Given this is a global war on this pandemic, how have we responded? Here is my take so far.
On an overall basis, not particularly impressive! Although, I would note that at the national level a number of countries (including South Korea, Germany, Vietnam), so far, have done well. The problem is that we need a global solution if we are going to revert back to a similar life of massive mobility of people across borders.
We should note that this ‘war’ has only just gone through its first phase. How many more waves will there be? Will we be able to defeat this virus, with a vaccine, or will we have to learn to live with it and effectively manage outbreaks? What will happen with mutations of Covid 19? Are there other potential viruses that could come along?
Perhaps, this isn’t a war; rather it is just a battle in what over time will be a war over lifetimes against pandemics. As an aside, we know that through the analysis of ice core samples, that with the melting of ice there could be a re-emergence of ancient bacteria and viruses that were not previously known to man. From what I have read, the risks of further pandemics are growing. This is unlikely to be a once in a century or once in a generation event.
There are still a lot of unknowns! It is very unclear how this will play out over the next two or more years. Almost certainly, geo-political tensions will rise unless there is a major shift in US policy after the coming elections. I would think that we have to expect further economic ripples as the true cost and implications of Covid 19 add up and become clearer.
While we are dealing with this, we do need to face up to the need for action against climate change. This Covid 19 report card also indicates there is a lot of work to do at all levels to have an effective response to climate change.
Back to Covid 19. For businesses, if you created a similar business relevant report card, how did you perform? Were you able to continue business or were you in the food lines to receive government aid to survive? Did you look after your employees? What further related economic ripples, or slow movement to a ‘new normal’, will cause you to take further drastic action or look for a bailout to survive?
With the level of government assistance to businesses globally, it is clear that businesses in general have failed this resilience test. The governments have had to step in as the lender, or funder, of last resort. Many companies, if not most, have no rainy day financial capacity, supply chains have failed, retail sales for many companies have ground to a halt and it has not been possible for many companies to do remote working.
So there are real resilience questions of leadership, financial capacity, preparedness for a disruption and speed and flexibility of response. Many companies will come out of this situation and realise resilience is a key component of strategic positioning, and if positioned properly out of crisis will come opportunities.
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