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Managing Negativity: Opportunities on the Horizon

May 1, 2020

COVID-19, oil prices, and more - it's hard to see the positives waiting on the other side of all the recent negativity. This week, ITR Director of Speaking Services Alex Chausovsky discusses the opportunities to follow these black swan events.

 

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Transcript by Rev

Alex Chausovsky:
Hello everyone. My name is Alex Chausovsky. I'm the director of speaking services at ITR Economics, and welcome to another edition of TrendsTalk with ITR.

There's a lot of negativity in the world today and it's certainly warranted. We've had two major Black Swan events in the COVID-19 pandemic and the conflict between Saudi Arabia and Russia, which originally caused oil prices to collapse. And now we've got this major disconnect between supply and demand fundamentals that are keeping oil prices suppressed at very, very low levels and we're likely continued to keep oil prices suppress for quite some time.

So it's easy to get caught up in the negativity, but I think it's also important to understand that despite our downward revised outlook for the industrial economy, both here in the US and abroad, despite the fact that many of you out there are feeling a lot of pain in your business right now, whether you're manufacturing companies, or construction firms, or you're distributors, or really any type of activity that is exposed and feeling the pain from either one of those Black Swan events, it's very difficult to look past that and understand that there will be another day. There will be a period of time when the economy aligns with the normal business cycle trend, which pointed to originally some nice upside momentum in the second half of this year.

Now, of course that has been delayed. We're now expecting that the business cycle, both here in the US and around the world, is likely to continue to see decline into early 2021 before we see that new rising trend emerge, especially in the latter half of next year. But in the meantime, I wanted to encourage all of you and really highlight the fact that despite the negativity, there will be some opportunities out there. Whether those opportunities are related to companies retooling in order to shift their production capacity to meet the demands of the medical community and the healthcare sector in terms of shifting from making cars to ventilators, or perhaps from clothing to personal protective equipment for healthcare workers, or those companies that are looking to perhaps leverage the trend of risk de-leveraging.

What I mean by that is there are lots of companies that are looking at their supply chains, they're understanding that there's a great deal of vulnerability in having product and components sourced from far off places like China and Eastern Europe or South America, and part of that is a decision on many manufacturers part's to actually accelerate the trend that started back in 2018 with the trade war, and that is to develop alternative sourcing methods and really focus on this new sourcing trend. Whether that means developing local production facilities, or finding new partners here in the US, or perhaps in Canada or Mexico, that will allow for some of that supply chain risk to be taken off the table. And that really is a good opportunity as we look over the next six, 12, 18 months.

Even though your traditional markets might be down, and we're expecting that to be consistent fairly across the board with a few positive exceptions, you can understand that there will still be opportunities to find existing clients that are now opening up local facilities or looking for new sources of supply. Even new business opportunities are going to emerge out of this. Companies that are going to address needs for the marketplace by realizing that there is no local supply of a particular product or component, and they're going to establish operations here in North America in order to fill that gap.

So it really is important for you to look for those opportunities as we head over the next year, year-and-a-half, there will be really increasing opportunities for that type of growth to emerge. And it really feeds into this understanding that the 2020's will be the decade of North America from a manufacturing and from a supply chain perspective. We're really going to see a lot of benefit, in our opinion, from this trend of minimizing risks, developing alternative sourcing methods, and really finding those near sourcing related opportunities.

So I understand that right now you're knee deep in dealing with the difficulties that your business is facing. I hope that you have plenty of cash on hand. It's really all about that cashflow, that liquidity, right now. Do you have the available assets to pay your people in the months to come as your revenues might be seeing substantial decline? Do you have business continuity plans in place? But, besides only focusing on addressing the headwinds and the challenges that you're facing right now, it's really important to not lose sight of the medium and longterm gain. Meaning the next rising trend that we're expecting in the US economy to emerge in 2021, specifically in the second half of next year, and finding and acting on those opportunities that are going to be presenting themselves.

What it's going to require on your part is not business as usual. You really have to devote time, resources, energy and people, to thinking creatively, to looking for those opportunities, to pursuing them, and this is a really great time to encourage those employees of your businesses that are on the front lines to come up with new and creative ideas for how else they can save the business. Whether that's cost-cutting measures or identifying potential new sources of revenue.

All of this is really boiling down to one thing. You can certainly hang your head and say, I'm just resigned to follow the overall economy down into the depths of the recession, or you can be determined. You can be hopeful. You can be resilient and say, my job as a business leader, as a decision maker, is to overcome the negativity, it's to outperform the rest of the markets, to find opportunities to gain market share, to find really chances to excel in what we do based on the value proposition that my business and our products bring to the table.

So I hope that you can take away some encouragement, I would say, from this notion that the sun will rise again. That, yes, we're dealing with a lot of great negativity right now, but there is a brighter tomorrow ahead of us and it is up to you really to take matters into your hands to identify those opportunities and to act with them. So I hope you will over the coming months and certainly into next year, and I wish you the best of luck.

Thanks so much for your time today. This is TrendsTalk with ITR Economics. My name is Alex Chausovsky and I hope you join us again soon. Take care.

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Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.