Weathering the Storm

Just like the global financial crisis in 2008, the year 2022 will most likely become another important financial landmark. From a historical perspective, we see considerable developments in financial markets in terms of inflation, interest rates, FX, energy and commodity prices. In addition, we are in the midst of a transition to a new world order.

The current situation shows various similarities with the Great Inflation of about 50 years ago. What we have learned from that period is that we need strong leaders. Former FED chairman Paul Volcker was challenged for years because of the monetary steps he had to take to break the back of inflation. Volcker responded to double-digit inflation during the 1970s with a series of interest increases. While being criticized on his bold actions, he remained resolute, doing what he knew was best for the economy in the long run.

Against this background there is an important role for CFOs and CROs to set the agenda and priorities for the coming years. Managing risks and uncertainty are predominantly focused on the adverse impact on profit margins and cash flows. However, at the same time, making the ‘right’ strategic choices and adopting scenario thinking can also offer opportunities for optimizing risk and adding more resilience to the business.

When looking at treasury and risk, emerging technologies such as cryptos and distributed ledgers have an impact on the future function of financial markets. These developments remind me of Joseph Schumpeter's theory of creative destruction. Schumpeter characterized creative destruction as innovations that increase productivity and revolutionize the economic structure from within, while destroying the old structure and creating a new one. In the situation of creative destruction some companies may disappear that could have continued if they had been able to weather a particular storm.

To conclude, I believe that in the coming years companies should focus on opportunities and define actions to optimize risks and to conceptualize new products or processes for weathering the storm.

Laurens Tijdhof

CEO and Managing Partner of Zanders

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