Inflation: the word that has been on everyone’s minds and in every business’ sights in recent times. In a commercial environment already devastated by the COVID-19 pandemic, delivery delays and shortages of staff and materials, high inflation and the impact it is having on the soaring cost of living and rising interest rates is expected to add another log to the already catastrophic fire raging across the globe. So, what exactly does inflation mean for your business, and what can you do now to safeguard your business?
Inflation describes the scenario in which the price of goods or services increases, leading to a decrease in the purchasing power of a unit of currency. While inflation has been cited as a key driver of economic growth, high inflation can be detrimental to both household and business budgets and can dramatically increase the cost of living. The Reserve Bank of Australia has set a target of achieving an inflation rate of between 2-3%, while the current inflation rate has skyrocketed to 5.1%. Where inflation is expected to be too high for a prolonged period of time, the cash rate will generally be increased, reducing economic activity. With no end in sight for interest rate rises, and global supply shortages exacerbating affordability issues, there is no telling how this will end, and what impacts it could have in the long term on households and businesses.
High inflation rates don’t just reduce your business’ purchasing power, they also impact on your customers’ abilities to buy the same goods and services from you that they usually would. Cautious consumers, whether they be individuals or other businesses, will likely start to cut costs in certain areas to avoid overspending or increasing their debt levels. Raising the prices of your own goods and services to combat the supply costs you may be facing can have a negative flow on effect to your customers, and it may require you to consider changing suppliers, streamlining your offered products or reducing costs across the board. Planning for the impacts that inflation will have on business costs and consumer habits is pivotal, not only to coping with the current market, but also to ensuring that your business’ expectations and strategic plans are realistic and feasible.
Taking ahold of the issue now and planning for the worst could help prevent your business’ profits and longevity from being the latest victim of soaring costs. Assess your business’ vulnerability to the impacts of inflation, and consider how likely it is that your staff availability, materials costs and customer relationships will be impacted, either positively or negatively, by the moves you make next. Focus on maintaining good relationships with customers and suppliers, while expanding your network and reach as a business. Invest your money in quality resources and staff, while cutting necessary costs without cutting corners. Keeping updated with global events that may impact on supply chains while also listening out for any changes to cash rates and inflation is vital to ensuring that your business is one step ahead, should the possible consequences of those events be realized.
Worried about what the current economic climate could mean for your business? Business Continuity Planning is an essential tool that aims to safeguard your business from the impacts that disruptive events can have on operations and profitability. Having a detailed and structured plan consisting of integrated scenario planning can be the necessary crutch your business needs to overcome disruptions while maintaining operations, and minimising the impacts on profit and longevity.
You never know when the need for a Business Continuity Plan will arise, and if the last 2 years have shown us anything, it’s that you can never be too prepared for whatever the future may hold. Contact our friendly team at Resilient Services today to find out more about our unique approach to risk and resilience planning, and how we can help your business to become stronger, smarter and more secure.
