Decision-making – current global events

My previous articles looked at the importance of information and the impact on making decisions.

As managers, we can get caught in the trap of focusing on the trees and not look at the wider forest.

In small businesses, we get caught up in the daily operational aspect of running the business, staff issues, customer needs etc. This focus can mean that we lose sight of the real impacts of external forces on our business. These forces will include government decisions, global economic and security events, natural disasters, changes in customer requirements and supply constraints to name a few.

We have control over our internal operations to some extent; however, we have no control over these external events, and they will have the biggest impact on our business survival.

News papers such as the Australian, the Financial Review and magazines such as The Economist provide a range of opinions and news articles providing insight on potential economic impacts on our small businesses. As small business owners, we quite often do not have the time nor the necessary analytical skills to provide insight of the impact on the business. To assist with this information gathering, engage a specialist who has an interest in providing analytics to business on market drivers.

So, let’s explore the current world order, a recent event in the middle east is a market disrupter, consider this:

1. The middle east conflict had an immediate impact on oil prices.
2. This price rise is an inflation driver, and the flow on impacts Australia include:
   1. Higher fuel prices
      1. Increase in the personal transport costs
      1. Increase in the cost of living through embedded food and goods transport prices
      1. Increased cost in power generation
      1. This forces inflation upwards that impact on interest rates (while government state and federal have control of a range of expenditure to reduce the cash in the economy, neither levels are doing anything to reduce this expenditure, relying on the RBA to manage inflation through interest rate hikes)
   1. The resulting impact on inflation is that with interest rate hikes, home borrowers have less discretionary spending, resulting in:
      1. Less going out for meals
      1. Less home improvement spending
      1. Less travel
   1. This impact on small businesses who rely on this spending to generate revenue and thus profits. This impact on:
      1. Community sponsorships
      1. Business taxes
      1. Future employment

As you can see a single event overseas has significant ramifications to us as a community and our economy.

As a data analyst, I look at a range of revenue and profit drivers for small business focusing on where the business is exposed to potential risk through economic modelling and therefore assisting business to develop a mitigation strategy.

This is what I talk about regarding information gathering. There are a range of tools available for businesses to access that will assist in making informed decision. Let me know if you are interested in having a discussion, my contact details are john@ctocsolutions.com.au

Happy reading and good luck