Proxima — See the change

Insight & opinion


Proactive protection amid uncertain times

Guy Strafford
Jan 31, 2013 5:23:00 AM

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There are nearly 4,000,000 economic statistics produced in the US every year, according to Nate Silver in his excellent book ‘The Signal and the Noise’. Choosing the one’s which give the most accurate or best insight is always a challenge.

Further to this arresting statistic, I have been reflecting on some compelling research which does merit closer inspection. The Deloitte CFO Survey suggests that senior finance directors view uncertainty on a macro-economic level, together with persistent sluggish growth, as the foremost impediment to progress.

The London School of Economics'’ growth commission drew a similar conclusion highlighting that the British political stalemate was a factor behind (impeding) businesses'’ investment decisions. 

Changing these conditions is difficult for companies to do on their own, but how can they overcome these obstacles in order to meet continuing demands for development and innovation from customers and shareholders?

It is a question of the fittest surviving. But key to winning this battle lies in ensuring that your organisation is "“match-fit"” for whatever challenges occur. Ultimately you cannot control what your customer or other external organisations do but you can control what your suppliers do for you, and how to mobilise them to get the best from them. I continue to be drawn back to our latest piece of research on the importance of suppliers to the cost base.

Given the sheer volume of revenue that is spent with suppliers (average for FTSE 350 was 68% in 2011, compared with 13% on personnel costs), there is considerable scope for organisations to eliminate waste and improve performance and profitability, just by tightening up their third party costs.

First, it provides a means of insulating and protecting a company’s financial performance from external forces, which helps to lead to stronger prospects over the longer term. Second, it demonstrates to shareholders, customers, partners and employees that the company is proactively working to deliver growth and maintain profitability, irrespective of the macroeconomic environment. 

Lastly, it is easier than almost every other course of action (in a large majority of sectors) to improve profits.

How long will these economic conditions last?

If there is one message to take from last week’s gathering in Davos, it is that the jury remains out, making that question harder to answer but it does not mean that we should all just wait and see.

Guy Strafford

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