In the middle of a stretch of historically high inflation metrics, ongoing global market turmoil resulting from the Russia/Ukraine conflict, and record lows in consumer confidence, it’s an understatement to say that the economic outlook is somewhat shaky. While recently released July numbers are more encouraging (a slowdown in the rise of inflation and a strong jobs report) and would seem to indicate that the economic turbulence might not tumble into a full-on recession, economic uncertainty remains a significant challenge for business decision-makers.
Inflation, rising labor costs, and staff shortages
A challenging labor market complicates the matter for companies, many of which are having difficulty filling critical roles and are dealing with a tricky combination of a shallow labor pool and qualified candidates making higher salary requests in response to rising costs. The inflation issue is particularly difficult to reckon with, simply because it has been 40 years since we’ve seen this level of inflation. From a security standpoint, the fact that real wages have fallen dramatically increases the risk of crimes of opportunity, which tend to rise during times of financial strain. Diesel theft has also been in the news lately, and we are seeing telecom companies making news for plunging stock prices because so many of their customers simply aren’t paying their phone bills.
Pessimistic inflation expectations are potentially even trickier to manage because of their impact on consumer behavior. Skyrocketing inflation and economic belt-tightening isn’t just a snapshot in time but an ongoing phenomenon. People behave differently today based on their expectations of what will happen in the future. And, whether it’s demanding more money in anticipation of future price increases or not accepting initial offers because they expect inflation to continue to increase in the future, those changes have an impact.
Any industry where discretionary spending drives the market is particularly vulnerable to inflationary pressures and economic uncertainty. Manufacturing companies — and others that operate with long lead times and are unavoidably locked into prices where inflation can cut deeply into their margins — are also vulnerable.
The headline here is economic and consequently, societal uncertainty. Uncertainty is destabilizing. Uncertainty is stressful. And uncertainty is also really just another word for risk.
How businesses can minimize inflation risks
What should companies be doing in this environment to adjust their plans, minimize risk, and prepare for what lies ahead?
Allocate
Prioritizing spending is more important than ever. It’s particularly important to be smarter about how and where to allocate scarce resources with respect to mitigating risk, optimizing security, and minimizing exposure. Prioritize security spending to address vulnerable areas where inflation-related issues are most likely to impact your business. Anytime the economic landscape changes this significantly, contours on the risk landscape shift, as well.
Evaluate
To inform smarter spending, do your homework. Look critically at how inflation affects your industry and your business model, paying special attention to areas of newly emerging or newly elevated risk. Adjust your security policies or operational priorities accordingly.
The best way to make that happen is to partner with an experienced security partner with the tools to help with everything from hiring to risk mitigation. The best security providers can help bring into focus not just the big picture in terms of inflation but specific details about how that translates to increased risk for your people, your facilities, and your assets. They can use highly specialized tools that enable them to drill down into certain areas (both geographically and within the business) where crime might be more of an issue in a high inflation environment. It’s an important way to maximize scarce resources in security and risk mitigation and allocate precious resources to wherever the most acute problems (or potential problems) might be.
Communicate
Clear and consistent communication is critical during times of economic uncertainty. Too many companies fail to appreciate the full extent of the angst and doubt their people are experiencing. Transparent and open communication that shows empathy, concern, and understanding is one of the best ways for organizations to mitigate that concern and uncertainty. If an employee understands how the company is managing this moment, they will generally be more confident and secure and less likely to do something dramatic. Top-down communication doesn’t have to be super specific — simply acknowledging the problem and affirming that you understand the impact on your team (beyond just the company bottom line) goes a long way.
Adjusting risk expectations
Between inflation, inflationary expectations, and a decline in real wages, companies are struggling with economic headwinds they haven’t grappled with (at least not on this scale) in a very long time. It’s an incredibly complex, fluid, and unpredictable situation, with things changing not just weekly or even daily, but sometimes hourly. Thriving in this environment requires flexibility, agility and the ability to make big strategic and tactical decisions virtually in real time. That’s never easy, especially for big companies. It’s incumbent upon business leaders and decision-makers to recognize that degree of uncertainty and make smart investments in mitigating its impact on their business — and on the mindset and behaviors of consumers, employees, and professional partners.
Dan Farrell is a Pinkerton Managing Director with more than 20 years in security and risk management. Throughout his career, he has developed winning, risk consulting solutions for clients across a wide range of services. He earned a BA in economics from Marquette University and an MBA in International Business from University of Utah.
