How International Conditions Can Affect Your Small Business

Most business owners read their local newspaper and keep up, at least to some extent, with national and international affairs through magazines, radio, television and the Internet. They see military battles, random violence, floods, fires, heat waves, political instability, climate change, species extinctions, regulation and deregulation, the increasing pace of automation − and then shrug their shoulders: nothing to see here folks. There isn’t anything they can do, and most of these things won’t affect them anyway.

Wrong answer.

Change is happening faster than ever, and while nobody can predict the future with much confidence, there are definitely some things you can do to protect your business from many of the bad things out there.

The Risks are Real and They Are Growing

The US stock market has been going up for over ten years now. We are still enjoying one of the longest stock market rallies in U.S. history. Unemployment has been dropping and is now at historic lows, and median wages are finally starting to move upward, at least a bit. If you focus exclusively on top-level economic indicators such as these, it is easy to lull yourself into a false sense of security. But dig a little deeper and you’ll quickly realize that there are huge risks that these measures ignore. Even Warren Buffet, “The Oracle of Omaha” believes the stock market is getting a bit frothy. He has been gradually building up cash reserves in the event of a major stock market downturn.

Climate Change

Climate change is obviously a real and present danger to everyone on the planet. Until recently, most climate scientists thought the effects of climate change were at least decades away, which gave us plenty of time to change our land use, energy, transportation, construction and agricultural policies to reduce and/or mitigate the effects. But the recent rise of superstorms, massive floods, droughts, wildfires, heat waves, along with the rapid loss of wildlife species, have made it clear that we have to act much faster than almost anyone ever thought before. Rising seas and increased ocean acidity are two other major concerns. While sea level rise is just millimeters per year in the northeast, recent data shows that the spreading saltwater is now killing forests at an unprecedented rate

How climate change will affect business:

• Supply chain disruptions
• Input shortages
• Logistical challenges
• Infrastructure damage
• Facility damage dependent upon location
• Electrical supply shortages or disruptions
• Rapid changes across industries, with many winners and many losers

Political Instability

The United States has long been considered a stable bulwark for democracy around the world, but historians, sociologists and others have been raising the alarms about rising autocracy, restrictions on privacy, voting rights violations, and many other issues for the past decade. Fascism and intolerance seem to be rising around the world — in countries such as Turkey, Egypt, the Philippines, Italy, Russia, and elsewhere. The United States House of Representatives opened formal impeachment hearings in September 2019, and President Trump was formally acquitted by the Senate on February 5, 2020. No one knows where all of this will end, but it seems likely that political fighting will continue throughout most of 2020, and probably long after that.

The United States is far from the only country with rising political instability. Africa, the Middle East and much of South Asia have all suffered from political instabilities for decades. They will likely experience growing food and water shortages (due to climate change and environmental degradation) over the next 30 years, leading to large waves of human migrations and more political instability.

How political instability will affect businesses:

• Price increases due to tariffs/supply restrictions
• Reduced ability to plan more than a year or two out due to uncertainty
• Increasing threats to employee safety, especially outside of the United States
• Supply chain disruptions

Pandemics and Panics

Influenza kills tens of thousands of people each year. Severe Acute Respiratory Syndrome (SARS) caused worldwide panic in 2003 and killed over 800 people worldwide. More recently, Corona virus, which started in a food market in Wuhan, China, has been spreading rapidly, and caused stock market gyrations and supply chain disruptions around the world. The odds are high that these sorts of outbreaks will become more common, and could spread more quickly, as the world population increases and people travel more freely.

How pandemics and panics will affect businesses:

  • Travel restrictions
  • Supply chain disruptions
  • Increased revenue volatility

With Risk Comes Opportunity

The risks are frightening, but most of these risks also bring opportunities, both for existing businesses and for future businesses. The most obvious opportunities relate to climate change – we need to move away from fossil fuels at an almost unbelievable pace (scientists conservatively say we need to cut back on fossil fuel emissions by at least 50% by 2050). But that change means incredible opportunity: widespread adoption of solar, wind, biofuels, recycling, energy efficient buildings, new transportation systems, new packaging and production methods, smarter more sustainable agriculture and food production, and much, much more.

What You Can Do

The worst thing anyone can do is simply tune it all out, shut down, and pretend change isn’t going to happen. Don’t just read what you want to hear; expand your horizons by reading and listening more broadly. There are only a few major news channels, and major newspapers have consolidated over the past several decades, but there are literally hundreds of small and independent news and reporting organizations operating around the world, and most of them provide free reports to the public.

Another important step you can take is to raise your voice through letters, town halls, neighborhood organizations, and yes, social media. Write to your newspaper, your congressional representatives, mayor, governor, alderman or town council. March in the streets, Join indivisible.

Build redundancies into your supply chain. Make sure you have options available in case a critical part or ingredient is cut off or becomes more expensive due to some condition or incident far away. If it just isn’t possible to build in supply chain redundancies, then consider storing a modest supply of inventory so you can survive at least a few weeks of disruption.

If possible, diversify your business by incorporating additional revenue streams and expanding to other markets so you are not so dependent on one or two customer segments or supply areas. For example, if you manufacture widgets in the United States and sell them mostly to Britain, consider adding other countries as markets, such as Germany or France.

What businesses can do:

  • Stay on top of world events, especially in areas where you do business
  • Ensure there are multiple options for sourcing inputs (ingredients, packaging, etc.)
  • Expand to additional geographic locations if possible
  • Increase stocks of non-perishable inputs
  • Contact your local, state and national representatives expressing your concerns
  • Add additional revenue streams
  • Build cash reserves in case of emergencies

About Andrew Clarke

Andrew Clarke is President of Ground Floor Partners. Over the past twenty years he has advised hundreds of small businesses on strategy, marketing, real estate and finance. He is passionate about small business, social and environmental justice, and is a proud member of the American Sustainable Business Council, Food and Water Watch, Green America, Food Consultants Group, and the American Planning Association.

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