Rooted in Gain’s experience, this article explores how market volatility affects the strategic planning and financial health of companies.
Gain’s market analysts know from experience that the first few months of the year are often accompanied by an uptick in financial and operational business projects, and a lower volume of strategic planning and development projects.
Generally speaking, financial health projects encompass a wide range of initiatives that include optimizing logistics, strengthening the fundamentals of the business model and other actions with a direct impact on the company’s economic activity. In contrast, strategic planning addresses a range of factors more related to growth in all its dimensions, and are the ones we carry out more frequently during the rest of the year.
However, when reviewing the distribution of our work with former clients over the years, we observed an interesting trend regarding the types of services carried out for them:
During times of heightened uncertainty, strategic planning projects take a back seat to prioritize financial health processes.
The Impact of Uncertainty
Based on our analysts’ project reports, the most illustrative example of this correlation can be seen in May of 2020.
The pandemic led to widespread closures, workforce layoffs and high stock market volatility. We experienced a sudden shift in our clients’ priorities, whereby strategic planning projects were urgently set aside as companies concentrated their resources towards ensuring financial stability.
This was not an isolated case. With the outbreak of war in Ukraine in early 2022, a significant portion of European companies shifted towards prioritizing the improvement of their operational efficiency, a trend that was repeated again in the U.S. during the midterm elections in November of the same year, as well as in the prelude to several electoral processes in Latin American countries.
The correlation is clear at a global level: when uncertainty increases, leaders choose to prioritize their company’s financial stability over business development initiatives.
It makes sense. From a risk mitigation logic, investing in issues directly linked to a company’s financial health fosters efficiency, resilience and cost control. Conversely, strategy and transformation projects are long-term investments, which are often more efficient the more stable the economic context.
What Does This Mean for Your Company?
Both strategic planning and financial health are crucial to a company’s growth and resilience. From this we are able to draw two important conclusions:
- It is always a good time to invest in a company’s financial health. Ensuring this is an indispensable necessity, particularly in times of volatility.
- It can be beneficial to work with specialized external advisors to push forward both strategic and financial initiatives. Their flexibility is key to respond effectively to changing priorities caused by instability.
Our experience shows that Gain’s agile consulting model has been crucial to efficiently adapt to any market disruption. For both the planning and financial health of your company, we believe that the future of consulting lies in providing both adaptive and specialized approaches that deliver immediate informed responses in the face of instability.
