Navigating this troubled world

After a whirlwind, dreamlike journey around America for almost a month filled with the warmth and friendship of family reunions and fellowships, and visiting wondrous sights in the company of a loved one, it is very easy to forget the tumultuous conflicts raging in the world. More so because of the apparently premature pronouncement of a “now you see it, now you don’t” ceasefire of hostilities among the battling protagonists.

But alas, all good things must come to an end. Although thousands of miles from us, unfortunately, the conflict in the Middle East, which has now boiled over, casts a long shadow across the oceans and has inevitably reached our shores.

Iran and America are again exchanging threatening warnings of more missiles and more bombings. While the prospect of peace has been replaced by the likelihood of a prolonged conflict with its dim aftermath of soaring oil prices, the dreadful specter of an out-of-whack inflation, rapidly rising interest rates, plummeting peso exchange rate, a sinking stock market, business plans on hold. In short, a low to nil growth scenario for the Philippines.

Exacerbating this doomsday scenario is the likelihood of millions of our countrymen currently working in the Middle East returning to the country, which surely will mean higher unemployment rates and possible social unrest. So, what must we do then in the light of a looming, dreadful future should the Iran--America conflict persist?

For businesses, particularly the larger organizations, diversification from oil as the primary energy source is a no-brainer. Investments in solar, wind, and LNG would have to be seriously considered. Financial institutions must proactively support the financing needs of these investments.

The assistance of the government is a realistic possibility via sovereign credit guarantees issued to lending institutions by the Philippine Guarantee Corporation, which is under the Department of Finance, tasked with supporting financing requirements of the priority sectors that promote economic development.

For the mid-size businesses and SMEs, even small, modest steps such as work from home scheduling for employees, tight control over electricity consumption, shared logistics, pivoting sales and collections to E-commerce and digital platforms, using cloud-based management tools, pooling purchasing agreements, renegotiating supplier terms, installing solar rooftops and replacing oil energized transport fleets with hybrid or electric powered vehicles can cut operating costs and reduce financial risks.

Adroit risk management practices such as hedging against future price spikes with currency covers and long-term purchasing and fuel contracts should, broadly speaking, be a key financial management performance area for boards and management.

Specifically, some cost management ideas to consider are: digitizing operations; enhancing backroom processes with AI; postponing capital-intensive spending; streamlining supply chains and distribution channels; leaner organizational structures; repositioning consumer products into value-for-money offerings; using smaller packaging and offering more affordable fast-moving essential merchandise.

For individuals, some ideas on how to cut costs: cut back on unnecessary spending and focus only on the essentials; build up emergency funds by setting aside even modest savings every payday; reducing interest expenses by paying off credit card debt; using energy efficient household appliances, self-impose limited use of air conditioning; and conserving fuel expenditures through carpooling or P2P bus rides.

An important personal game plan for any employee is to hedge against possible future employment displacement, as the inevitable streamlining of organizations kicks in, would be to diversify one’s skills through retraining and even further studies focusing on new must-have skills, such as an AI-oriented technology or even an evening part-time MBA. Networking with old schoolmates, industry associations, and civic clubs like Rotary will be very useful to identify leads for jobs and possibly endorsements to prospective employers and customers.

And finally, what government support can perhaps be provided?

Credit guarantees, tax reliefs, tax holidays and concessional loans at lower than prevailing market rates will definitely help keep endangered but critical companies, such as SMEs, exporters, and agricultural firms, afloat, as well as large organizations investing in renewable, non-oil-based energy projects that will require large ticket investments.

For individuals, government assistance can come in the form of targeted cash subsidies, revival of oil price control regulations, adequate healthcare support, and livelihood and skills training programs geared towards providing and enhancing technology competencies.

Until next week… OBF!

For comments, email bing_matoto@yahoo.com