Prices are skyrocketing, costs and weakening demand challenge corporate profitability, and global unemployment rates are projected to rise by three million in 2023, a reversal from the decline experienced in recent years.
With these indicators and three of the world's biggest economies slowing down, economists are predicting a global recession is looming on the horizon. However, there is still time and ways to minimize its possible impact on your business.
During this time, economic output, employment, and consumer spending drop. Interest rates also decline as banks cut rates to support the economy, widening the government's budget deficit due to low tax revenues. A recession usually lasts a few months, with the COVID-19 recession of 2020 only lasting two. However, data shows that the economy might not recover to its former peak for several years.
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All recessions have different causes and effects, including financial, psychological, and economic factors. Economies experiencing growth are more likely to experience a slump as it is part of an economic cycle. Here are three factors that cause a recession:
However, there are several indicators businesses and investors look out for in determining if a recession is about to occur. These include the decline of equities markets and rising unemployment rates. Other key indicators of a recession are the following:
As of January 2023, the three biggest economies – the United States, China, and the European Union—are slowing simultaneously. These three economies account for roughly half of all global output. Their economic slowdowns are due to a variety of factors such as interest-rate hikes and tightening monetary policies. Such a simultaneous economic decline is unusual and indicates a global recession is looming on the horizon.
Long-term investment stocks have a higher yield than short-term investments. The reversal of this phenomenon is called an inverted yield curve, an indicator of a pending recession.
When short-term interest rates exceed long-term rates, market sentiment suggests that the long-term outlook is poor and that the yields offered by long-term fixed income will continue to fall. Such a negative outlook stems from the simultaneous decline of economies across the globe, psychologically affecting markets.
The International Monetary Fund expects global growth to slow from 3.4% in 2022 to 2.9% in 2023. Due to their vulnerability, small businesses are already experiencing the effects of an economic slump. The overall small-business optimism is at the lowest it has ever been since June 2022.
Additionally, business owners are already worrying about the looming recession this year, citing inflation, economic uncertainties, and difficulty in hiring the right people as the leading causes.
Outsourcing allows you to focus on scaling your business and ensures that experts handle non-critical functions, enabling you to direct your time and energy to your company's core functions. Additionally, this business strategy puts you in a better position to handle the demands of a recession.
Here are three ways outsourcing benefits your business in a recession:
Businesses need options to stay competitive and survive during a recession without blowing up their budget. With outsourcing, you can easily identify and manage resources as needed, allowing your business to continue taking on projects without worrying about adding as much overhead costs.
Additionally, outsourcing doesn't limit you to only a specific range of skills. You can also engage with outsourcing partners aligned to a particular project or support requirement timelines.
Outsourcing gives your company the leverage to reduce costs for duties requiring only a few experts instead of a whole team. In StraightArrow, we have different levels of support depending on your business needs, whether it's project-based, or an extension team. Project-based services are part-time arrangements performing specific tasks or working on completing one project. In contrast, an extension team or dedicated support services involve full-time individuals or teams working exclusively on your business needs. Only availing the scale of services necessary is cost-efficient because you're only spending what you need to.
These lower costs allow you to leverage your in-house workforce to focus on more strategic tasks while your outsourcing partner helps with the execution. Having your employees work only on duties essential to your business instead of crowding their to-do list improves their morale, satisfaction, and work output.
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During a recession, companies often lay off employees to save money. This means that the remaining employees—including leaders—must take on more responsibility. This can lead to burnout and errors creeping into their work, adding costs and negating the original benefit of staff reduction.
Relying on an outsourcer's talent pool protects your company from these harmful side effects and ensures that work quality remains at its peak using best practices and internal standards. At StraightArrow, we follow what we refer to as the Ops Trifecta. This is the standard our team members work hard to meet in every task and project.
The Ops Trifecta includes metrics for turnaround time (TAT), quality assurance (QA), and productivity. These metrics ensure we deliver consistent, high-quality work that meets our client's timelines and fulfills their business goals and expectations.
It will be challenging to adjust and remain competitive in a recession, but doing so is not impossible. With the right business strategy and intelligent decision-making, your business can continue to grow and thrive despite the global economic slump.
Leverage strategies, such as business outsourcing services which give you access to a large pool of experts for your business needs and let you manage these resources as necessary. As a result, you save on costs without compromising workflow, quality, and employee satisfaction, which are difficult to maintain during an economic crisis.
Learn more about outsourcing and how it can help you.