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Managing your investments in uncertain times

Managing your investments when times are uncertain seems simple enough for business owners. Buy some insurance, transfer the risk and buy more insurance; there isn’t anything more. However, the solution may no longer be so simple due to recent global events.

The world has been hit by a series of events in the past two years; a global pandemic, the outbreak of war in Europe, inflation rates like never before, and the resurgence of the COVID-19 pandemic in China. The fifth horseman is the scarcity of resources that heralds a long-foreseen food crisis. All of these make for an environment that has high uncertainty. And with high tension comes a significant amount of risk.

All of these have direct consequences on our business—weakening supply chains, low investor confidence and a slowing economy–thus, it is time to calibrate our lives to manage the new reality we find ourselves in. Making wise investment decisions is no longer enough to ensure success; it has become necessary also to address the evolving risk and employ risk mitigation strategies to ensure that our investments are profitable and that our businesses survive.

Managing your investments

Before we talk about managing risk, let us briefly treat the risks your business might face during these trying times.

Inflation

The current environment sees several economies experiencing high inflation as more money is chasing the same goods and services. To keep the economy afloat, most governments injected money into their economies–Nigeria for instance via Ways and Means advances. The lowered production during the pandemic has struggled to catch up leading to some of the highest inflation figures recorded. Over 97% of small businesses are looking to increase their prices over the coming months to sustain their business operations.

COVID-19

The pandemic has not seen an end as there are rising incidents in China, the manufacturing capital of the world. The resurgence of the pandemic means that governments around the world will continue to change policies to battle its resurgence and that could create an uncomfortable environment for your business.

Cyber Attack

There has been a noticeable increase in malware attacks over the past two years. Our shift into a data-driven world has exposed several weaknesses in our data infrastructure and policies. Malicious attackers continue to be emboldened to steal data from companies which leads to severe losses.

Climate Change

The effects of global warming have had a devastating effect on the supply of food and resources. Several populations have been displaced in a world that is growing increasingly uncomfortable. Supply chains have been affected negatively as a result.

Human Resource shortages

Trends such as the great resignation and the gig economy have seen labour shortages persist through the last two years. 

Steps to managing your investments in uncertain times

Here are a few key considerations that assist business in managing their investments through tough times.
  1. Keep policies and procedures updated. Now is as good a time as any to review the policies involved in your business. Every department should have a standard operating procedure, vetted by a risk analyst if possible. Perform consistent checks on if these SOPs are updated.
  1. Identify areas in your business where risk can be managed and implement strategies that can mitigate the risk. This should be done across your departments and the several touchpoints of your business.
  1. Consider your interdependencies. If your business depends on several other third parties to function, ensure that they can be managed. Manage a vendor inventory and create a clear system of communication with the vendors. A clear line of communication allows one party to inform the other as soon as possible if they are having problems.
  2. Spread your assets. Don’t keep them in one place. Diversification never goes out of style. Whether it be investments, goods or data, separate them into parts if you can. Invest across securities, and store several copies of your data in several places to avoid losing everything in the case of an attack or risky market behaviour
  3. Supervise third-party custodians. Check in on your custodians to ensure they are keeping your standards.

Continue to review and upgrade the practical actions involved in your business. Risks should be minimized in every step of your business value chain; from the creation of the product to your investments in other businesses.

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