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In this COVID-19 World, Be realistic, But Optimistic.

optimistic

In this COVID-19 World, Be realistic, But Optimistic.

As business leaders, our goal is always to lead our teams to success. During these challenging COVID-19 times, it’s critical to strike the right adaptive mindset and not over- or under-react. We need to find a way not to be pessimistic, but also balance realism with optimism. As William Arthur Warn said: The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails. The balance of optimism with realism during these challenging times is the way business leaders can win.

James Stockdale, the United States Navy Vice Admiral and aviator was awarded the Medal of Honor in the Vietnam War, during which he was a prisoner of war for over seven years and survived when so many others did not. Stockdale explained his significant insight as the following: “You must never confuse faith that you will prevail in the end—which you can never afford to lose—with the discipline to confront the most brutal facts of your current reality, whatever they might be.”

This is indeed a paradox. Although we’re not prisoners of war, we relate to Admiral Stockdale in not knowing how long we’ll be wrestling with the challenges brought on by the COVID-19 Pandemic.  As business leaders, if we ignore the challenges on our teams, the leader will be naïve and out of touch. If the leader mires in the challenges, they risk creating a culture of pessimism that will demoralize and demotivate the team and undermine its effectiveness.

To promote Stockdale’s prevailing mindset as leaders of a team there are two helpful strategies.

The disruptive nature of working remotely 100% of the time while balancing personal and family challenges during COVID-19 requires a team to learn how to ruthlessly prioritize with more structure and pace without slowing the team down.

Rally team members around short-term goals to ensure “quick wins” and build morale.

Realistic business leaders will excel by keeping emotion out of the equation in business decision making. Adding optimism to realism allows leaders to see the brighter side of things demonstrating to team members that things will get better day by day. As Edwin Bliss stated: “Success doesn’t mean the absence of failures; it means the attainment of ultimate objectives. It means winning the war, not every battle”.  

Winning leaders and teams make things happen, plan, and prepare instead of hunkering down and waiting. Winning leaders see potential were the less successful dwell on the past. Winning business leaders might not know “how” they will excel and achieve their goals, but they always believe that they will figure it out. They know that effort is the great equalizer. If they do not already know what to do, they will learn it and perfect it. Successful leaders during this COVID-19 pandemic understand that worry, fear, action, and gratitude are all choices you get to make and that apathy is the enemy of achieving something great. Use the difficult times to realize as a leader of a business, this is the second chance your team has always been asking for. It’s critical to make decisions quickly during this difficult time. However, a business decision that is easy or guaranteed is bound not to be highly successful in the long run.

Overly optimistic business leaders believe in their soul that nothing — absolutely nothing — is impossible. However, unrealistic optimism and accepting that you are more likely to experience pleasant events, and less likely than others to experience negative ones can lead to disengagement of a team and hamper trust. A team that is blinded by optimism will not be able to change course when trouble is encountered. Therefore, it’s critical to ensure realism keeps optimism in check.

Pessimist business leaders tend to believe that bad situations are the fault of others or the internal team, and that good business outcomes are not caused by anything they or others have done, and most likely cannot be repeated.

So, when it comes to optimism or pessimism, “hope for the best, prepare for the worst” is an ideal motto. To achieve that, you must be honest with yourself about your approach and outlook.

Whether you believe the world is conspiring against us, or if you believe that the world is conspiring in our favor, it doesn’t make it any more or less realistic.

A business leader can be optimistic or pessimistic, but there is a also third state of mind called, Being A Realistic Optimist. This means that in general and for most business situations, a leader is an optimistic thinker. However, in particularly challenging conditions (e.g., before and during very complicated negotiations with many unknown and unfavorable variables) a leader might apply a more conservative style.

Optimism balanced by realism shines when faced with extreme challenge. Optimists choose to look for positivity in the situation, and most importantly, they always take action towards a better outcome, regardless of the problem.

Let’s take a moment to define optimism:

A tendency to look on the more favorable side of events or conditions and expect the most favorable outcome.” -Courtesy of Dictionary.com

What’s so unrealistic (or unhealthy) about that? Optimistic leaders believe that things will work out because in their minds believing in the alternative makes absolutely no sense. No matter what a leader’s goal, they have no control over the future. There is no one reading these words which can predict the future. And because of that, we have a genuine choice that we need to make about our expectations.

Since none of us know what will happen next, wouldn’t it make sense to always focus our expectations on what we want to happen in our lives instead of what we do not want to happen?

The word “Optimism “is originally derived from the Latin optimum, meaning “best.” Being optimistic, in the typical sense of the word, ultimately means one expects the best possible outcome from any given situation.

There are only two ways to live your life. One is as though nothing is a miracle. The other is as though everything is a miracle (Albert Einstein).

Research has found that positive, i.e., optimistic thinking can aid in coping with stress, in becoming more resilient, in being more courageous, and plays a significant role in improving one’s health and well-being.

According to Martin Seligmann, people with a so-called optimistic explanatory style tend to give themselves credit when good things happen and typically blame outside forces for bad outcomes. They also look at adverse events as temporary and atypical.

Albert Bandura, one of the founding fathers of modern psychology, argued decades ago that optimism is the basis for creating and maintaining motivation to reach goals. And that an individual’s success is mostly based on the fact of whether they believe they will succeed. The results of his findings have yet to be proven wrong.

Unrealistic optimists (I also refer to them as naive realists), on the one hand, are convinced that success will happen to them almost automatically and that they will succeed effortlessly. Some of them even think (and hope) that only by sending out positive thoughts, the universe might reward them by transforming all of their wishes and aspirations into reality.

Realistic optimists are vigorously optimistic, too. They firmly believe that they make things happen and that they will succeed. They do not doubt it. Saying that, on the other hand, they perfectly know that in order of being successful, they have to plan well, to access all necessary resources, to stay focused and persistent, to evaluate different options, and to execute in excellence.

Being both optimistic and realistic, i.e., combining the two into one behavioral style of realistic optimism, creates a special breed of very successful people. Natural optimists stay positive and upbeat about the future, even – and especially – if and when they recognize the challenges ahead. As such, realism and optimism are not diametrically opposed. The contrary is true: They compellingly complement each other!

In case of doubt – and mostly if you want to achieve something very unique and impactful – the optimist in you should outwit your realist. Why? The realist might be too prone to anxiety. The optimist, however, if stimulated and guided well, will activate your fantasy, imagination, and boldness.

But there is an important caveat: to be successful, you need to understand the vital difference between believing you will succeed and believing you will succeed easily. Put another way, it’s the difference between being a realistic optimist and an unrealistic optimist.

Realistic optimists believe they will succeed, but also believe they have to make success happen — through things like effort, careful planning, persistence, and choosing the right strategies. They recognize the need for giving serious thought to how they will deal with obstacles. This preparation only increases their confidence in their ability to get things done.

Unrealistic optimists, on the other hand, believe that success will happen to them — that the universe will reward them for all their positive thinking, or that somehow they will be transformed overnight into the kind of person for whom obstacles cease to exist. (Forgetting that even Superman had Kryptonite. And a secret identity that took a lot of trouble to maintain and relationship issues.)

Believing that the road to success will be rocky leads to tremendous success because it forces you to take action. People who are confident that they will succeed, and equally confident that success won’t come easily, put in more effort, plan how they’ll deal with problems before they arise, and persist longer in the face of difficulty like the COVID-19 Pandemic.

Unrealistic optimists are only too happy to tell you that you are “being negative” when you dare to express concerns, harbor reservations, or dwell too long on obstacles that stand in the way of your goal. In truth, this kind of thinking is a necessary step in any successful endeavor, and it’s not at all antithetical to confident optimism. Focusing only on what we want, to the exclusion of everything else, is just the naïve and reckless thinking that has landed industry leaders (and at times, entire industries) in hot water during this difficult period.

Cultivate your realistic optimism by combining a positive attitude with an honest assessment of the challenges that await you. Don’t visualize success — visualize the steps you will take to make success happen.

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If you have any questions or would like help in the area of Compliance and Controls please do not hesitate to contact Frank at frank@ationadvisory.com or visit my website at www.ationadvisory.comAtion Advisory Group has expert financial and operational experience in development, manufacturing, distribution, and sales spanning 55 countries and, six continents, delivering individualized, proven methods to build out and implement highly successful and sustainable country-specific goals.  All executed with 100% FCPA (Foreign Corrupt Practices Act) compliance.

An Economic Recovery From COVID-19 in 2021 Is Possible – But Massive Uncertainty Remains

COVID-19 has had a devastating effect on human life. But it has also caused widespread economic upheaval for both advanced and emerging market economies as countries shut down to try to stop the spread of the virus. The U.S. for instance is set to see the most severe economic downturn since GDP was first tracked in the 1940s.

This means deep hardship for many businesses of all sizes and across all industries. Shutdowns caused many firms to entirely cease operations for a time. Now, they are grappling with plummeting demand as a result of rising unemployment and uncertainty, on top of supply chain difficulties and uncertainty as to financing resources.

Bad Timing for a Global Crisis

Although there is no “good” time for a pandemic to strike, business conditions in 2020 were already a little shaky prior to the outbreak. At the beginning of the year, the global economy had just finished its weakest year since the Great Recession, global trade was turning sour, trade finance had become more restricted and continued uncertainty from the U.S.-China trade war weighed on businesses everywhere.

If the outlook was stormy at the beginning of the year, it’s now outright bleak. Atradius economists are now forecasting that global trade will decrease approximately 15 percent in 2020, while global GDP will decline about 5 percent. The U.S. will perform below average, with a 6.1 percent decrease in GDP – largely due to its lag in controlling the virus and subsequent record high in number of COVID-19 cases, in addition to soaring unemployment as well as pressure on incomes, leading to a drop in consumption.

Will Government Intervention Be Enough?

Governments and central banks the world over have enacted measures to counteract the pandemic’s economic devastation. Early in the crisis, for instance, the European Central Bank put in place a Long Term Refinancing Operations III program, while the U.S. Federal Reserve increased quantitative easing.

Countries have also put together aid packages, such as the U.S. CARES Act and a number of packages from individual EU economies and the UK. Similarly, China is providing tax relief, state-backed credit guaranteed, and delayed loan and interest payments. Altogether, global government stimulus measures amount to approximately 9 percent of global GDP, or around $7.8 trillion.

But will this be enough? Atradius economists suggest not – not unless countries also enact vigorous policies to revitalize the economy at every level. The EU Pandemic Fund provides a good example: the $750 billion initiative will bestow loans and grants to the areas and sectors hardest hit by the pandemic, allowing for a more even recovery rate across the entire EU.

Although stimulus measures are necessary, soaring government debt levels are also cause for concern – even before the outbreak, many countries had worryingly high debt levels. The most recent baseline scenario from Atradius economists has the U.S. federal budget deficit, as a proportion of GDP, increasing by more than 10 percentage points this year. The UK will fare even worse, seeing a 13 percentage point increase in deficit growth rate. China and India are the only major economies likely to maintain moderate debt ratios through the pandemic.

All that said, low interest rates will likely stick around through the end of 2021 at least – this should help offset some of the concerns over high government debt levels. Moreover, central banks like the Fed and ECB will continue purchasing government bonds, suppressing any financial market stress.

What’s Next?

While the global economy is under undue strain at the moment, Atradius economists predict a recovery could begin as early as this year, continuing into 2021. Our baseline scenario has global GDP rebounding by 5.7 percent in 2021, with the U.S. coming in just under that, with GDP growth of 4.2 percent.

This scenario, however, is shrouded in uncertainty and hinges on a few key assumptions:

-That researchers are able to develop a successful vaccine in the near-term

-That lockdowns will be limited throughout the remainder of the outbreak

-That oil prices will remain low

-That the U.S.-China trade war will remain at a standstill

-That the rise in financing cost for firms, if any, remains limited

Should these assumptions not play out, the global economic recession could be much worse than anticipated – contraction rates could be twice as damaging as those currently predicted, with global GDP contracting 12.2 percent in 2020 and U.S. GDP seeing a 7.9 percent drop. Recovering from a contraction of this size would be a slow, painful process, although we would expect 2021 to see similar growth rates.

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John Lorié is chief economist with Atradius Economic Research. He is also affiliated with the University of Amsterdam as a researcher. Previously, he was Senior Vice President at ABN AMRO, where he worked for more than 20 years in a variety of roles in commercial and investment banking. He started his career at the Dutch Ministry of Foreign Affairs. John holds a PHD in international economics, master’s degrees in economics and tax economics as well as a bachelor’s degree in marketing. 

Theo Smid is an economist with Atradius Economic Research. His work focuses on business cycle analysis, insolvency predictions, thematic research and country risk analysis for the Commonwealth of Independent States. Before joining Atradius, he worked for five years in the macro-economic research team of Rabobank, focusing on business cycle analysis of the Dutch economy. He holds a master’s degree in economics from Tilburg University.  

jobs

Job Market Trends and Their Effects on Companies

The ongoing COVID-19 pandemic has touched just about every part of the economy, and the jobs market as a whole has gone into alarming freefall, despite the government’s job retention measures.

Where are the jobs going?

The sectors which have struggled most are, by and large, the ones you might expect. Aviation, hospitality, and retail have had to contend with unprecedented slumps in demand, and many businesses have responded by slashing their payrolls.

Even household names like HSBC have announced thousands of redundancies, albeit spread across the globe.

What is the economic outlook like?

According to the Guardian’s redundancy counter, more than 150,000 people have been made redundant, and more than nine million remain furloughed as of the 28th of July. Moreover, the number of employees on company payrolls tumbled during the lockdown period by around 649,000.

Though economic forecasts are not widely lauded for their reliability, the ones that are being focussed on by the mainstream media remain consistently bleak. According to the Office for Budget Responsibility, the body set up to advise the treasury, unemployment levels could skyrocket by the end of the year to levels not seen since the 1980s.

With that said, certain areas of the economy are now enjoying a surge in pent-up demand. Car dealerships are making sales faster than they can restock their forecourts; estate agents find themselves inundated with inquiries. Whether this can be sustained to the end of the year remains

The best-case scenario is a ‘v’-shaped recession – a sharp decline followed by an equally sharp uptick. This is a wildly different recession to the one experienced in 2008. The financial fundamentals which underpin the modern economy remain sound, and thus there’s some reason for cautious optimism – as articulated by the Bank of England’s Andy Haldane in June.

What can be done?

What does all this mean for businesses looking to navigate the post-COVID landscape?

Among the more popular shifts has been toward e-commerce. Retailers have tried to cope with sparse footfall by making the transition to trading online. E-commerce has, in fact, been in rude health through the pandemic, and it’s likely that this shift will outlast the pandemic itself.

Businesses may also wish to anticipate a fall in demand by being more cautious with their investments. Risk assessments and strategizing are set to be more crucial than ever, as is seeking out alternative forms of commercial finance from specialized online lenders.

sustainable

How To Make Your Business More Financially Sustainable after COVID-19

The coronavirus outbreak in December 2019 came at a time when the global economy was trying to get its act together after being slowed down for a while by trade tensions, especially between China and the US. The much-needed transition towards sustainable manufacturing and clean energy has also played a part in slowing down the global economy, but for a good reason.

When the virus checked into town, all the gains we have experienced over the last decade were turned upside down. Businesses now have to address the health, social, and economic impacts of the coronavirus on top of the already existing geopolitical (e.g. Brexit) issues that impact the business.

Supply chains all over the world have been disrupted by the pandemic, millions of working citizens infected, hundreds of thousands dead, and billions of potential customers rendered jobless. To compound these miseries, most markets are under lockdown, and no one knows for sure when life will get back to normal. The big question now remains: How will business people make their businesses more financially sustainable after COVID-19? Here are 5 measures you can take as a business leader to counter the financial impact of the coronavirus:

1. Leverage employment organizations when expanding internationally

If your intentions were to expand to international markets, or if you had already opened shop overseas, you can collaborate with professional employment organizations to source for and compensate employees. You can, for example, count on a Japan employer of record to help you to establish presence and support personnel in Japan cost-effectively and efficiently. They will help you hire new talents, manage existing staff, and navigate the legal requirements and obligations that come with business ownership in Japan. When you don’t have to worry about managing employee payrolls and compliance issues, or to hire an HR department for that matter, you are able to save on overhead costs until your business recovers fully from the coronavirus shock.

2. Re-evaluate your supply chains

The coronavirus has grossly exposed the vulnerabilities of global supply chains. Companies that depended entirely on Chinese manufacturers or raw materials have been forced to close down temporarily with some closing shop completely. Businesses that will survive this pandemic have to look beyond first- and second-tier suppliers, especially for their key products’ raw materials, and expand their supply lines to bring in more players. Businesses also have to expand their markets. Having a contingency “plan B” will not be enough. You will need to diversify in all aspects of your business so that if one line closes or is unable to recover fast from the pandemic, you will always have alternatives.

3. Reach out to customers

Do everything that you can to retain your main customers. If they owe you, don’t be quick to pressurize them to pay because they are also struggling to get back on their feet. You can loosen repayment terms a bit to accommodate the new normal- this is one of the small prices you may have to pay in order to keep your business afloat. Your lenders are probably doing the same for you. The most important thing here is to maintain open communication lines with your debtors, creditors, and other clients and being honest with one another in case of any payment difficulties. In the long run, when you are all back on your feet, you will still have your customers, and cash will start flowing in as it used to.

Reaching out to customers also means reaching out to new markets, or offering more products to your existing market. If your existing market isn’t recovering as fast as other markets, it is okay to move your business elsewhere. If one of your competitors has closed shop, this is your chance to move in for their customers. Be courageous to fill in every gap that the virus could have created within your market, and to explore other options that could bring in additional cash provided they won’t compromise your brand identity.

4. Update your terms and conditions

There are some terms and conditions that you have held on for too long, some of which have left your business vulnerable during the ongoing pandemic. This is the time to scrap them all and create better terms that protect you from future crises. In fact, you would rather pull out of a contract now and pay the cancellation fee, rather than push on with it and incur losses in the end.

Going forward, you need to take a proactive approach in revenue, employee, clients, and commercial risks management. Crisis management is a process; not just an event. You will need all the teamwork and support that you can get if you are to pull this off. Flex your network and get rid of any dead weight.

global supply

THE PANDEMIC DISRUPTED GLOBAL SUPPLY CHAINS BUT WERE THEY ALREADY MORPHING?

COVID-19 is disrupting the operation of global supply chains, causing many businesses (and countries) to rethink where they source their products. Is the pandemic accelerating trends already underway? Were trade policies – both liberalizing and protectionist – inducing some degree of “nearshoring” to avoid tariffs or to focus on regional trade made easier and less costly through free trade agreements?

In the case of the United States at least, the answer may be yes.

How Global Supply Chains Stretched

Supply chains encompass all the people, technology and resources that go into producing a final product or service. Supply “chain” is an oversimplified term as they are not linear; they are more like interconnected networks.

Historically, supply chains were extremely short – you, or maybe your village, were the entire chain. As economies grew more complex, so did supply chains, enabling more firms to specialize. Companies are now able to source from a wide variety of suppliers to reduce costs and improve efficiency.

Advances in communication technologies and transportation made it both inexpensive for products to cross national borders multiple times and easier to coordinate complex activities at a distance. Resources, labor and technological expertise in multiple countries are leveraged as value is added throughout global supply chains. International production strengthened many companies’ competitiveness. Many multinational companies also invested in production overseas as part of their supply chain strategies.

Stretched and Strained

As supply chains stretched, imports became increasingly important in the U.S. American manufacturers rely heavily on imports for the inputs into their American-made goods whether those goods are consumed domestically or ultimately exported.

For many years China has been the go-to for much of this intermediary production, with companies attracted to its large supply of low-wage workers and China’s specialization in certain manufacturing. The concentration of manufacturing in China has led to mounting concern over whether China is competing unfairly through subsidization, market access restrictions, technology transfer and localization requirements. These and other policies have attracted more manufacturing to China and away from both advanced economies like the United States and other low-cost producers in Asia, a trend that may be now reversing.

The COVID-19 pandemic brought this concern into sharp relief, sparking policy discussions over whether U.S. innovators and producers have become over-reliant on China for resources, inputs and final production. But even before the pandemic, the subtext of the U.S.-China trade war was U.S. pressure on companies to reexamine and “rebalance” the structure of their supply and production networks as incentivized by mounting tariffs.

And even before the tariff war heated up, businesses were seeking ways to shorten their global supply chains to reduce their vulnerability to external disruptions such as changes to trade rules, natural disasters, or other crises, according to a 2017 report by The Economist Intelligence Unit and Standard Chartered.

Has Global Value Chain Participation Peaked?

So now that COVID-19 has caused severe disruption to supply chains, the question on everyone’s minds is: will it cause a retreat in participation in global value chains? Or, was participation in global value chains already peaking before the pandemic and if so, will the pandemic hasten the decline?

We can calculate trends in global value chain (GVC) participation using the UNCTAD-Eora Global Value Chain (GVC) Database. Though supply chains and value chains are not exactly analogous, both show the spread of supply networks across countries. A country’s global value chain participation index can be calculated by summing the foreign value added (FVA) and the indirect value added (DVX) content of its exports, and dividing this by its gross exports.

The chart below shows participation in GVCs generally flattened out from around 2010-2012 after dipping in 2008. It does not show a retreat from global supply chain involvement (though India shows a slight decline). COVID-19 renders the future trajectory unpredictable.

Another measure of trends in global value chains is global foreign direct investment (FDI). In this respect, the trends are far clearer. The data show a significant and sharp decrease in FDI since 2008. This may be a reflection of the decreasing rate of return on FDI, as the initial returns to scale for large multinational corporations start to diminish and new local competitors come online.

The expansion of the digital economy is also likely a big factor in shifts away from FDI commitments, as improvements and diffusion of technology allows businesses to provide services without foreign direct investment in a location. A reduction in FDI may therefore show a complete removal of international involvement, or may just represent a shift in the distance and nature of involvement and investments in foreign markets.

Diversification and Regionalization, Not De-globalization

The expansion of global value chains does appear to have slowed from the heady pre-recession era, and direct on-the-ground investment has plummeted. But, just as with globalization in general, it is too early to say whether supply chains as a whole are shrinking, shifting or something else. Companies could be mitigating risk by diversifying supplier relationships and regionalizing supply chains in response to a proliferation of regional trade agreements that removed barriers.

Looking at the United States specifically, there is evidence of both shifts.

As seen in the chart below, the share of total U.S. imports from China have sharply declined. As we might expect, 2017 marks the beginning of a downturn in the share of imports coming from China. The particularly sharp drop after 2018 shows the effects of the U.S.-China trade war, reflecting the increased costs imposed by tariffs. The sustained political risk combined with trade policies prompted businesses to reduce reliance on exports from China in favor of sourcing elsewhere in the world.

Over the same time period, low-cost Asian producers such as Thailand and Vietnam saw an uptick in share of U.S. imports. U.S. companies may be diversifying production relationships away from China and toward other countries in the region, or at least taking advantage of excess production capacity in facilities elsewhere. The increases are significant but not massive in real monetary terms for a single country, suggesting a “don’t put all your eggs in one basket” mentality.

Even the United States’ largest tech companies like Apple, Microsoft and Google have been reportedly exploring similar moves. In their recent re-shoring report, Kearney found evidence that low-cost producers in Asia have been the beneficiaries over the last five years of efforts from U.S. companies to diversify their supplier networks.

There is also evidence that companies are doubling down on natural geographic trading partners through regionalization of supply networks. Mexico’s share of U.S. imports has increased steadily over the last few years, with a particularly sharp increase in 2019 in tandem with the U.S.-China tariff war.

Regional economic integration is not a new policy strategy. Many of the earliest free trade agreements were regional in nature. Under NAFTA, U.S. firms leveraged the complementary assets of our neighbors to the north and south to strengthen the global competitiveness of regionally-made products. As the Bush Institute Global Competitiveness Scorecard shows, the United States, Canada and Mexico are more competitive as a North American region than any other region in the world. The implementation of the U.S.-Mexico-Canada Agreement will provide incentive to reinforce these relationships as U.S. companies think about “rebalancing” their supply networks.

What to Look For

It is still too early to see the real effects of the COVID-19 pandemic or even the US-China trade war in the data on imports and global value chains, predictions notwithstanding.

Global value chains may be expected to remain complex, but could shift to cross borders that are closer geographically as trade increases among regional partners within Europe, North America and Pacific Rim countries. A key indicator for this will be changes in shipping trends. Expert Martin Stopford predicts a decrease in demand for large container ships and an uptick in demand for smaller shipping vessels that are more economical for shorter routes.

Before the pandemic, global supply chain expansion was not increasing at the speed it once was, but reports of its demise are premature. Instead, companies are thinking about diversification for improved resilience without sacrificing the benefits of a global and interconnected system of international trade.

Meanwhile, hopes for American reshoring may be equally overblown. The United States has obstacles to overcome, including a shortage of skilled labor and high production costs. Nonetheless, companies will have to assess whether a cost-above-all-else approach to manufacturing and sourcing is sustainable in a post-pandemic global economy.

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Alice Calder received her MA in Applied Economics at GMU. Originally from the UK, where she received her BA in Philosophy and Political Economy from the University of Exeter, living and working internationally sparked her interest in trade issues as well as the intersection of economics and culture.

This article originally appeared on TradeVistas.org. Republished with permission.
pandemic

Pandemic Thinking: How to Keep your Head in the (Long) Game

The COVID-19 pandemic is crippling and toppling many U.S. small businesses. Often called “the backbone of the economy,” small businesses that are managing to survive face an uncertain future.

As states start to reopen, consumer spending is in steep decline while unemployment skyrockets and many people remain hesitant to venture out. But RJon Robins, founder/CEO of How To Manage A Small Law Firm (www.howtomanageasmalllawfirm.com), says some entrepreneurs find their businesses in trouble because they had the wrong mindset toward customers all along.

“Small business owners everywhere are infected by pandemic thinking,” Robins says. “But they were infected with this thinking before the pandemic. It’s only now the strategic weakness of short-term, fear-based, transactional thinking in all different kinds of businesses is becoming more obvious. Pandemic thinkers ask the wrong question, ‘What can you do for me today?’ Rather than, ‘How can we work together to build a long-term mutually-profitable relationship?’

“Business owners who built long-term relationships with customers and clients can weather this storm. Those who didn’t think this way before can adopt elements of this kind of thinking and they’ll start seeing the benefits almost right away.”

Robins offers small business owners three tips on how to develop long-term relationships that benefit both customers and businesses:

When first meeting, look ahead at the relationship 10 years from now. “The scale of a person’s thinking has a lot to do with whether they win the game,” Robins says. “Look for all opportunities to be of service, even in some small way, to earn the right to call the person a client. Every deal doesn’t have to be a grand-slam. Just get on base. Just get into the game. That way you can discover opportunities to be of greater service and have a client for life.”

Show you care.  “A lot of people don’t know how to show that they care. Ask yourself when is the last time you called to check on a former client to find out what’s happened in their life or business since the last time you did business together?” Robins says, “What are their plans for the future? What can you take off their plate and help them with today even if what they need is just someone to help them think things through? Good relationships built over time are especially evident during the pandemic. Ironically, though, a pandemic is a perfect time to begin a marketing campaign like this and besides, you probably have a lot of free time on your hands anyway.”

Have a long-term business plan. “A business being run without a 12-month, forward-looking budget is like a car being driven with a windshield covered in mud, and on an unfamiliar road with no particular place to go,” Robins says. “A business that is being run without weekly cash-flow projections is like a person stumbling around in the dark in an unfamiliar house. To take an active, consistent interest in your clients and develop programs encouraging them to keep coming back, it helps to have a long-term written plan for your own business.”

“Businesses generate revenue by solving problems for their clients and customers,” Robins says. “And right now there’s an abundance of problems, which is another way to say there’s an abundance of opportunities. Whether you already have or decide to begin developing great long-term relationships with clients, it’s an investment that will pay long-term dividends.”

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RJon Robins is founder and CEO of How To Manage A Small Law Firm (www.howtomanageasmalllawfirm.com), the leading provider of management services  for the solo and small law firm market. In 2019, How To Manage a Small Law Firm was named by Inc. as one of the 5,000 fastest-growing privately-held companies in the country for the fifth consecutive year. A graduate of American University and Nova Southeastern College of Law, Robins is a member of The Florida Bar and The Association of Certified Fraud Examiners.

e-learning

The Acceleration of the e-Learning Industry in Crisis

Well before our world was turned upside down by the Coronavirus, e-Learning was on the rise.

Technology is helping to break the barriers of student-professor and peer to peer interaction. Thus, while online learning was once looked upon as but a potential alternative compared to its brick and mortar counterpart, MBAs and other degrees obtained online from accredited universities now hold just as much weight in the court of public opinion as degrees acquired in the traditional manner. In times of pandemic, the virtualization of education has become vital.

With school closures due to COVID-19 (coronavirus) having impacted 97% of America’s 56.6 million students and 94% of the 132,000 private and public schools in the U.S, institutions shuttered across the nation, educators, tutors, and nonprofits working in the sector needed to find alternatives to salvage the remainder of the academic year.

Yes, the pivot to virtual learning had to and indeed must remain to be expedited. Yet the infuriating truth is that the majority of schools and communities across the country lack the necessary assets, be it access to modern hardware and software or the connectivity to ensure everyone gets online. In my view, it’s commendable that organizations such as Study.com acted pragmatically in this environment, donating 100,000 licenses to their online education-driven programs to schools across the country right at the beginning of state shutdowns. Their extensive online curriculums are capable of many different sites and platforms and no doubt it was imperative that little time was wasted in getting these programs into the hands of those that need it most.

In addition to bringing online or e-Learning to prominence, the Coronavirus crisis will most likely alter the way students are taught in the future. Teachers may use digital resources to maximize the minimal amount of contact time they have with their students. Education can be personalized to befit the student, rather than a rather antiquated ‘one size fits all’ approach seen in years past. Perhaps lectures can be recorded and assigned for homework so that more class time can be dedicated to analysis or insightful discussion. A ‘hybrid’ style of teaching may emerge, in which digital learning is interwoven into the everyday fabric of formal education.

Ultimately, digital learning should be viewed as a tool that can democratize education in the US (rural, urban) and globally, perhaps quelling the brain drain drawing away emerging market nations’ brightest and best. e-Learning platforms can also fill the void often left by school systems that have had to abandon essential subject departments because they lack adequate funding.

Additionally, a strong e-Learning platform with quality teachers at the helm means that anyone with access can absorb high-caliber instruction, no matter the standard of teaching, curriculum, or the reputation of the school district. Indeed the same knowledge can be attained by students from low per capita areas as those attending the nation’s most prestigious (and most expensive) schools.

There are no doubt challenges associated with e-Learning. First and foremost, it’s about making sure that every student in need has a device from which they can gain entry to their lessons. Then it’s about connectivity, especially tough during a time when paying for the internet may understandably not be a high priority. Finally, what mechanisms do we put in place to make sure our kids ‘show up’ to their computers and hold themselves accountable?

Despite these challenges, there is a real opportunity for schools and families to take advantage of the many online learning tools today readily at their disposal.

This revolution was slowly happening; Covid-19 kicked it into warp speed. Those who adjust will see benefits lasting well into the future; those who don’t adapt will be left well behind.

Either way, the train has left the station and is picking up considerable speed. It’s time to log on.

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Marc Serber is a former broadcaster and an alumnus from the Johns Hopkins School of Advanced International Studies (SAIS). Serber is currently a freelance writer on international policy.

bear

The Bear is Back: A Global Pandemic

The U.S. stock market fell into a bear market on March 12, 2020, ending the bull market that began in 2009. The bull market had begun on March 9, 2009, and peaked on February 19, 2020. The S&P 500 rose 400% between 2009 and 2020, the Dow Jones Industrials rose 351% between 2009 and 2020 and the NASDAQ Composite rose 674% between 2009 and 2020. However, since February 19, 2020, we have seen dramatic declines in all three.

Figure 1. S&P 500, 2009 to 2020

The GFD US-100 Index provides coverage beginning in 1792. By our calculation, there have been twenty-four bull and bear markets since 1792 with four occurring in the 1800s, seventeen in the 1900s, and three in the 2000s. The worst bear market was in 1929-1932, led by an 89% decline in the Dow Jones Industrials. Two prior bear markets in this century both had declines of 50% in 2000-2002 and 2007-2009. By comparison, previous bear markets, such as those occurring in 1987 and 1990, only lasted a few months before a bounce-back.

What is interesting about this current bear is how quickly and how sharply it hit markets throughout the world in response to the spread of the Coronavirus. This was a quick, simultaneous financial pandemic in every nation of the world. In many countries, the 2020 bear market is simply a continuation of the bear market that began in 2018.

The extent of the bear market in 22 countries and for global indices is provided in Table 1 which uses data from the GFDatabase. The table shows the date of the market top, the value the index hit on that date, the change from the previous market low, the current value of the market, and how much each market has fallen since the top in 2018 or 2020. The only major market in the world which has not fallen into a bear market this year is the Chinese market, the country where the coronavirus originated. However, the Chinese market had already been in a state of decline since 2015.

Figure 2. Shanghai Stock Exchange “A” Shares Index, 2010 to 2020

So far, global markets have fallen by around 30-40%. The question is, how much more are the markets likely to fall?  Will this be a short-lived bear market as occurred in 1987 and 1990 or a more extended bear market as occurred in 2000-2002 and 2007-2009?

Figure 3. United States 10-year Bond Yield, 2010 to 2020

It should be noted that fixed-income markets have already hit their bottom in the United States. This occurred on March 9 when the 10-year bond fell below 0.5% as we had previously predicted in the blog “230 Years of Data Show Rates Will Soon Hit 0.50%.” Yields have slightly risen since then. Moreover, the Shanghai Index bottomed out on February 3, 2020, when the stock market reopened after the Chinese New Year and has not participated in the worldwide sell-off. Both of these indicate that this bear market will not continue for an extended period of time. We will update Table 1 on a regular basis so our readers can follow the changes in this COVID bear market.

Table 1.  COVID Bear Market Statistics for 22 Countries and 4 Regions

 

Country

Index

Market Top

Value

Change

Market  Low

Value

Change

Asia
Australia All-Ordinaries 2/20/2020 7255.2 133.16 3/23/2020 4564.1 -37.09
China Shanghai A Shares 6/12/2015 5410.86 165.15 12/27/2018 2600.05 -51.95
Hong Kong Hang Seng 1/26/2018 33154.12 80.98 3/23/2020 21696.13 -32.76
India BSE Sensex 1/14/2020 41952.63 82.79 3/23/2020 25981.24 -38.07
Japan TOPIX 1/23/2018 1911.31 59.77 3/16/2020 1236.34 -35.31
Singapore FTSE ST All-Share 1/24/2018 877.87 40.38 3/23/2020 540.6 -38.42
South Korea Korea SE Price Index 1/29/2018 2598.19 57.21 3/19/2020 1457.64 -43.90
Taiwan Taiwan Weighted 1/14/2020 12179.81 56.41 3/19/2020 8681.34 -28.72
Europe and Africa
Belgium All-Share 4/13/2015 13859.94 104.31 3/18/2020 7202.21 -48.04
France CAC All-Tradable 2/12/2020 4732.14 56.27 3/18/2020 2888.89 -38.95
Germany CDAX Composite 1/23/2018 625.19 50.07 3/18/2020 363.83 -41.80
Italy FTSE Italia All-Share 2/19/2020 27675.06 39.43 3/12/2020 16286.37 -41.15
Netherlands All-Share Index 2/12/2020 904.31 54.15 3/18/2020 574.88 -36.43
Norway OBX Price 9/25/2018 523.06 70.44 3/16/2020 329.67 -36.92
South Africa FTSE All-Share 1/25/2018 61684.8 246.26 3/19/2020 37963 -38.46
Spain Madrid General 4/13/2015 1203.82 99.78 3/16/2020 608.26 -49.47
Sweden OMX All-Share Price 2/19/2020 732.67 68.35 3/23/2020 478.95 -34.63
Switzerland SPI Price Index 2/19/2020 731.04 140.71 3/16/2020 548.52 -24.97
United Kingdom FTSE-100 5/22/2018 7534.4 99.27 3/23/2020 4993.89 -33.72
Americas
Brazil Bovespa 1/23/2020 119528 217.51 3/23/2020 63451.55 -46.91
Canada TSE-300 2/20/2020 17944.1 51.52 3/23/2020 11228.49 -37.43
Mexico Mexico IPC 7/25/2017 51713.38 206.16 3/23/2020 32936.6 -36.31
United States DJIA 2/12/2020 29551.42 351.37 3/23/2020 18576.04 -37.14
United States S&P 500 2/19/2020 3386.15 400.52 3/23/2020 2236.7 -33.95
United States NASDAQ 2/19/2020 9817.18 58.52 3/23/2020 6860.67 -30.12
Global
Emerging Markets MSCI Emerging Free 1/29/2018 1278.53 85.69 3/23/2020 758.204 -40.7
Europe MSCI Europe 1/25/2018 1926.57 47.52 3/23/2020 1152.698 -40.16
World MSCI World 2/12/2020 2434.95 35.63 3/23/2020 1602.105 -34.2
World MSCI EAFE 1/25/2018 2186.65 46.52 3/23/2020 1354.3 -38.07

 

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Dr. Bryan Taylor is President and Chief Economist for Global Financial Data. He received his Ph.D. from Claremont Graduate University in Economics writing about the economics of the arts. He has taught both economics and finance at numerous universities in southern California and in Switzerland. He began putting together the Global Financial Database in 1990, collecting and transcribing financial and economic data from historical archives around the world. Dr. Taylor has published numerous articles and blogs based upon the Global Financial Database, the US Stocks and the GFD Indices. Dr. Taylor’s research has uncovered previously unknown aspects of financial history. He has written two books on financial history.

Special Report: How to Keep Shipments Moving Forward During a Global Health Emergency

Delayed start to the new year
The coronavirus outbreak has prompted an official global health emergency that is severely affecting business operations not only in China but also around the globe. With any kind of widespread health outbreak, global importers and exporters are dealing with unpredictable logistics concerns that require a proactive approach to keep business running as usual.

It’s important to note that any cargo from the Wuhan, Hubei Province (the origin of the outbreak), and other quarantine zones, are restricted from leaving the province, which includes full container loads (FCL), less than container loads (LCL), as well as air freight. There will also be delays in factories re-opening, and a reduction of exports from China due to Wuhan residents not returning to work until February 17th, 2020 and other municipalities extending Chinese New Year until February 9th, 2020, including:

-Shanghai Municipality

-Chongqing Municipality

-Jiangsu Province

-Zhejiang Province

-Guangdong Province

-Fujian Province

The latest in air and ocean travel

In general, there has been an increased reduction in travel in and out of China. In areas where travel is permitted, strict health checks are causing significant delays at main air and ocean terminals, to ensure the safety of all travelers and workers. While the Wuhan port is closed, the other ports continue to operate. We also continue to see several airlines canceling flights in and out of China which can have an impact on cargo capacity.

Below are important considerations that will help keep your supply chain moving and better navigate any shipping challenges associated with the latest travel restrictions and schedule shifts.

Assessment of inventory levels

Having an accurate assessment of your inventory is expected, but it’s important to understand how restrictions on imports from China will impact your current inventory and regular shipping cadence. Look ahead to determine if the demand for your product may change in the next few weeks and if you have a need for expedited shipping. Starting those conversations now and establishing a plan are important as air capacity falls due to canceled passenger flights and higher demand.

Planning ahead in production

There are numerous variables to consider when planning for production. Working through these with a supply chain expert will help you be prepared and proactive as the uncertainty around the virus continues.

-What will production look like and has there been any discussion with the vendors and factories?

-How are existing inventories compared to sales projections?

-What plans are in place in case there is a shortage of workers in China or the demands are not being met within a specific window of time?

-Has there been a discussion about how the backlog will be addressed?

Backup sourcing options

When there is any kind of delayed start to production, keeping up with the workload poses a challenge, and so you may need to consider backup sources. Backup sourcing options are not always easy to find and keeping up with the sheer demand and quality controls can be a challenge. Connecting with a global supply chain expert to vet reliable options is important to ensure success.

While we may not know how long this global health emergency will last, C.H. Robinson’s global network of experts are dedicated to helping you get your shipments where they need to be. We continue to closely monitor the situation and provide updates through our client advisories as needed.