Surviving the upcoming big crisis

COVID is still provoking lockdowns, the war has accelerated escalating food and energy prices, inflation is hitting unseen highs, interest rates need to rise but would bring the real estate bubble to a sudden burst, political instability in several countries,... All signs of the COVID crisis just being the starter for a bigger crisis to follow. What will the upcoming big crisis look like and how to survive it?

What will the upcoming big crisis look like?

The sectors that will be hard hit are:

Real Estate - house and office prices will come crashing down. High inflation will provoke interest rates to go up. This will make borrowing costs expensive. At the same time people will delay the next purchase of their house to moments when they feel financially more secure. Businesses in decline will reduce office footprint, especially since remote working now has become a real option.

Financial Services - Stock markets are falling fast. Most investments have moved to passive index funds which are likely to substantially fall because index-linked funds are great when indexes go up for a decade but what if they go down for the next few years? Rising interest rates and high inflation will trigger higher default rates which will negatively impact the corporate bond market, mortgages, loans/credit, pension savings,... Most governments have spent the money they did not have on COVID for which governmental investment products will also have more volatility. Challenger banks and fintechs will create havoc in the retail and SME markets because they will be able to offer more for less. Decentralised Finance might disrupt complete product categories. ESG is at risk of becoming associated with corporate greenwashing.

Travel, transport and hospitality - with high energy costs and high inflation, lack of staff due to the previous COVID crisis, prices will go up and demand will go down [the first cost households with less money will cut]. A crisis for companies already in dire straits will be lethal to many. High costs will make products which need to be transported over long distances very expensive.

Pharma and healthcare - Staff shortages will drive up costs. COVID spending will reduce sharply. Governments will need to help fight inflation and will have to reduce healthcare spending again. Generic medicines and all-you-can-prescribe business models are likely going to erode the high margins on branded medicines. Remote consultations combined with smart devices [blood pressure, oxygen, …] could enable a remote healthcare revolution which would hit the established healthcare providers and pharma industry. The cost of creating genetically personalised medicines is coming down exponentially and could soon disrupt the high-end high-margin medicine market.

Automotive - You do not buy a new car when economics are though. Also many car manufacturers are struggling with finding labour as well as components which will drive up the price. The transition to electric vehicles will mean massive reductions in internal combustion engine related parts of the business. Tesla is ramping up production at unseen speed. New brands are trying to do the same. More competition from new companies who are better at creating a computer on wheels than traditional manufacturers who often outsourced software to suppliers.

Sectors that will see less impact:

(Alternative) Energy - High prices will provide both short-term profits for existing energy producers but also lots of demand for anybody in alternative energy production, e.g. wind farms, solar panels,... Batteries will also see high demand.

Farming - Having a large food producing country stop exports means that local food production will see more demand. Global food price indexes go up, allowing to sell products for more on local markets. Innovation around farming will also see a big boom.

Local Manufacturing (Solutions) - Made in China was great when prices were cheap to produce, supply was virtually infinite and transport from the other side of the world inexpensive. Global supply chains have shown to be very vulnerable to political, energy, health and other problems. Local manufacturing, often based on robotics and 3D printing, will see a boom. Key high-tech components like chips will be produced again in Europe and the US.?

Climate - No economic crisis will stop the climate crisis from worsening. Investment will need to continue.

Digital innovation - In moments of crisis, offering a better service that is faster and cheaper, will make people switch. When the economy goes great, few people care about reviewing their existing suppliers and finding cheaper and better alternatives. When money is tight, costs matter. Some of the best digital innovations were launched during the COVID crisis. It is time for many companies to rethink large call centres, email/paper based processes, … At the same time new innovations in blockchain, AI, IoT, cloud,... can change how businesses can offer products cheaper, faster and better to customers. Facebook was born in the aftermath of the dotcom bust.

How to survive the upcoming big crisis?

As somebody who had to change countries due to the 2008 crisis and started their own company during the COVID pandemic, I can tell you one important lesson: always be sure that your skills are valued by others. Your current employer might close down, have to reduce staff, you might not like a new cost-cutting strategy or whatever the reason, there is life beyond working for your current employer. However if you have neglected your personal brand, your knowledge and skills and you find yourself being made redundant together with tens if not hundreds of thousands who have similar or better skills and brands, then you will suffer. So work on that brand and skillset today. Perhaps start a new business as a side-job to have a plan B.

If you are in a sector which is going to be hit hard, being the last person standing might not be a strategy you control. Have you thought about a career change before things turn ugly? If you do not want to change now, then you might think about being part of the solution, not the problem. Top management does not tend to fire the people who proactively come to them with ideas on how to reduce costs and grow revenues easily. Sometimes a crisis can be the trigger to a promotion.?

Whatever you do, trying to have a financial cushion is always advised. Changing countries, careers or starting a business, do not come for free. Now is not the time to play the stock market but the time to be ready to invest in a better future. Good luck, we are all going to need it…