Resilience During a Recession

With a Global Downturn Looming, Companies Must Rethink ‘Ready’

Given recent data, a recession in the US seems increasingly likely. Three significant banks have failed, the Fed has raised interest rates 10 consecutive times, and companies across sectors have announced layoffs. Perhaps most ominous of all: the Treasury 2/10 yield curve–an accurate predictor of 22 of the last 28 recessions–has inverted.

For enterprise resilience and corporate security professionals, this makes a challenging environment even more complex. Companies are already facing frequent and severe weather events, persistent supply chain disruptions, pockets of social and political protests, and a variety of other risks. So how can an economic downturn alter the risk landscape?

First, companies should be prepared for a spike in cyber-crime. According to Regulatory Data Corp, in the two years following the peak of the 2008 recession, cyber-criminal activity jumped by 40%. Similarly, in 2020, when the pandemic struck and unemployment rose to 14.7%, the FBI Internet Crime Complaints Center reported a 69.4% increase in complaints.

During uncertain economic times, workplace incidents ranging from harassment and bullying to homicides also tend to rise. Employees feel anxious about losing their jobs during a recession, particularly when competition is high for the limited positions available. Many also feel pressure at home that can spill into the workplace. Now more than ever, employers must have effective screening and background checks for new employees, employee assistance and counseling programs, and a way for employees to report concerning behavior.

As a result of pandemic-related supply chain disruptions, companies have become more resilient by identifying alternate sourcing and, in some cases, bringing sourcing and expertise in-house. These efforts may soon pay dividends.

We may be about to see a sudden shift from high demand supported by low interest rates, robust employment, high savings rates, and stimulus programs to sharply lower demand. As prices and volumes drop and inventories rise, key vendors may experience financial difficulties. This can impact production and delivery times or, in a worst-case scenario, vendor insolvency.

Although there are steps an organization can take to mitigate each of these risks, we believe the same fundamental principles of enterprise resilience should apply in good economic times and bad. Organizations should put in place initiatives that break down silos and engage teams everywhere. These include:

Engage the entire enterprise. Given the threats to people, facilities, data, and financial stability, companies should adopt an organization-wide culture of enterprise resilience including crisis preparedness and response.

Consider downstream risks. No single incident should ever be viewed in isolation. As soon as one appears, enterprise resilience professionals must assess “long chain” impacts on customers, employees, vendors, partners, and shareholders.

Take a holistic view. Crisis managers are accustomed to juggling a variety of platforms and vendors. Fragmented programs with multiple vendors and platforms add costs, and a variety of administrative complications. We recommend that organizations implement integrated technology and a cross-functional mindset.

Have access to the right data at the right time. Accurate data is essential to any resilience program, but it is insufficient on its own. Senior leaders, crisis, security, HR, supply chain, facilities, and IT professionals all need information tailored to their roles and responsibilities. And the data they require changes as an incident unfolds. Crisis managers need to build in a “right data at the right time” mindset and infrastructure during planning and throughout an incident that minimizes unnecessary noise.

Refuse to trade enterprise resilience for efficiency. After years of spending in teams and technology, some companies have investment fatigue in resilience programs. During tight economic times, many are tempted to shift resources elsewhere, allow vacancies to remain unfilled, and defer necessary investments. Sometimes, these decisions are unavoidable. But executives should be aware that they come at a cost. Given the so-called skills gap in this area, finding experienced professionals in this field may be difficult. And an avoidable incident or a poor response can have consequences on a company long after the economy recovers.

But a recession isn’t inevitable. The job market remains strong. Inflation is off its highs and the Fed has signaled it may pause interest rate hikes. So, could all of this be unnecessary?

Actually, no. A resilient enterprise never misses an opportunity to test its programs and preparedness. In today’s world, there is no such thing as too ready.

ABOUT THE AUTHOR

Frank Shultz

Frank Shultz is the chairman and CEO of Infinite Blue.