Michael Bechara forecasts the remainder of 2010!
Despite the trite calls of the end of the recession from the talking heads and pundits, business continues to be challenging.
If you were to go back one year and describe to someone today’s world, they would have called you nuts. Government takeovers of major firms, nationalized healthcare and increased taxes were all unthinkable just a short time ago.
We seemed to have hit a lull in the storm for the time being but, “Is the turbulence over?"
Not by a long shot.
Over the next 12-18 months, there are some significant changes coming at us that will render the business operating environment almost unrecognizable from what it is today.
Specifically, what will these changes be? Can anyone predict the future?
We all know the answer to those questions. Anyone who tells you they can predict the future is not being honest with you.
There are; however, some definite trends that we can see taking shape that smart businesspeople can recognize and begin to take the actions necessary to protect themselves and their companies.
In fact our Managing Director, Michael Bechara, has been quoted in Fox Business. The Wall Street Journal, CNBC and other major media outlets, detailing the trends that businesses need to watch out for. Let’s take a look at what Michael said:
2010 is likely to be another tumultuous year. In this hurricane of the Great Recession, we have recently been enjoying some calm as the eye of the storm passes above us, but by late 2010 we will enter the full fury of the other side,” said Bechara.
Among the trends to watch are:
1. Energy Price Volatility – As the price of oil creeps back towards $100 per barrel, long supply chains have once again come under strain. Will oil continue its advance or collapse again?
2. Brittle Credit Markets – This theme has received much attention in the media and many believe this phase is behind us. Not so. As the residential, and now commercial, real estate markets continue to deteriorate, banks will be faced with shrinking capital ratios and will likely tighten credit further.
3. Structural Changes – The rules of the economic game will change with more frequency and at a quicker pace. As the unsustainable patterns of behaviour (overpriced real estate, dependence on consumer spending, etc.) continue to unwind there will be calls to implement structures to maintain the unsustainable. A failure to confront new realities quickly by management will be a significant handicap.
4. Equity Market Pullback – With the stock market defying gravity many experienced traders are warning of a sharp pullback or even another collapse. Companies that are considering public offerings, or that depend on equity ratios for bank covenants, should be considering this in their calculations.
5. Process Degradation – The recent spate of restructurings and layoffs have taken their toll on company business processes. Staffs have already been cut and the only way to increase productivity and effectiveness is through process redesign and efficiency. Companies that risk process breakdowns may stumble during the most competitive part of the race.
Michael made these statements back in April. How would we score his thoughts today?
Well let’s see…..
Energy prices have been oscillating and the Gulf of Mexico oil disaster is sure to have a major impact on energy prices. Businesses know that credit continues to be scarce and despite the Fed’s zero interest rate policy, banks are generally unwilling to lend. The stock market is in a “slow crash” mode that will likely deepen over the next months, and finally Washington continues to talk big about making major changes to our economic structure.
A pretty good score card, wouldn’t you say?
For the remainder of 2010 and into 2011 Michael recommends the following strategies:
- Understand your company’s specific risks and align your processes accordingly
- Continue to focus on liquidity
- Consider strategic hedging to protect against price volatility
On the other hand if reading generalities doesn’t seem like enough for you to protect yourself and your business (it wouldn’t be enough for us) and if you want some specific and detailed actions you can take to make sure that these mega changes do not harm your business, you may want to speak with Michael about our risk and financial management services.
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