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Uncertainty is always there. The degree of uncertainty can rise and fall.
Leaders, being human, also have difficulty coping with uncertainty. When they receive confusing information, they tend to react in predictable ways that are not always constructive. They also use judgment shortcuts to make decisions.
During periods of heightened uncertainty, leaders reflexively reduce investment, stop hiring, slash marketing, refrain from entering new markets, or stop making decisions.
Although understandable, acting in a pro-cyclical manner can be counterproductive. It can leave companies poorly positioned to benefit from the next stage of the cycle.
Organizations should be inclined toward action. As a baseline, companies must strive to be fit for growth. This can be done by aligning costs with priorities and strategy, investing in varied capabilities, and using traditional and digital levers to execute.
They must regularly engage in scenario planning with an array of options. They must build the capacity to be agile. They must learn to become more resilient to withstand strong external forces and quickly recover from setbacks.
When the environment is highly uncertain, a strategy has to be:
In times of uncertainty, if companies reduce headcount and leave positions open, they can miss out on filling critical needs and areas.
Uncertainty tends to paralyze deal-making or push companies into transactions that are defensive and reactive.
In evaluating deal opportunities, companies that are reasonably agile to execute transactions when they have to will find that deals present occasions to boost growth and pull ahead of rivals. Companies that invest now, regardless of economic conditions, may be best suited to ride the next technological wave.
Many organizations have found that volatile shifts in tax and regulation impact their industry, their specific markets and the general environment for business.
Finance has its own heuristics in a time of uncertainty.
Companies should use data and information technologies to regularly run scenarios to review and challenge economic, business, and sales projections.
If organizations can stop being so defensive and assume a more aggressive stance, they have a better chance of maintaining their balance and shaping their future.
It will take a lot of courage, but companies should consciously lean into changes and counterintuitive activities when it is least comfortable, or when forces of inertia are pushing them toward a predictable outcome.
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