GulfNews Business

Business decision making sure got simpler post-COVID-19

Analysis|: There is a somewhat controversial, but influential, doctrine that has ruled the corporate world for a long time. Economist Milton Friedman proposed that the only social responsibility of a business is to increase profits and maximise returns to its shareholders. Not every CEO and business owner will agree with this approach, but it is impossible to deny its significance to business decision making. But that was before the pandemic. The outbreak proved an inflection point in the way we do business. Suddenly companies had to grapple with dwindling customers; they had to shave their workforces down to skeleton crews; and they had to sustain themselves in spite of supply chain disruptions and battered economies. This triggered a shift from a shareholder-centric model for decision making to a richer, good-governance model — one that puts the health and resilience of a business at its centre. In a post-COVID era, businesses should be geared for sustainability and for continuity. The framework for executive decision-making should be updated too, it should take into account future proofing and incorporate agility, decentralisation and data-driven insights. Improve responsiveness The COVID-19 crisis forced every executive to make quick decisions, often under pressure and with tremendous impact. These were mediated entirely by technology. This was the most important lesson, one that has permanently altered the decision-making process. So, organisations have now removed boundaries and broken down silos to streamline the decision-making process. Major business decisions are taken in single meetings, with minimal participants. In a post-COVID world, afflicted with flux, business decision making needs to be faster and more responsive. Bottlenecks If you want agility, you can’t micro-manage — and this applies to business decision making as well. Businesses have rightly traded in cumbersome bureaucracies for leaner, flatter organisational structures, peopled with empowered frontline leaders. Ideally, the company structure must be repurposed from a hierarchy to a dynamic network of teams. This will allow the system as a whole to respond lot faster to challenges as well as opportunities. Delegation and decentralisation is the key to post-pandemic decision making. Leverage data Organisations need to investigate the effects of the pandemic on their specific business, their specific industry. Decision making must take on a fact-based approach. Data-driven decisions can make an organisation more resilient — that’s how some businesses were able to maintain their dominant positions in the market during the pandemic while so many went into freefall. These organisations are also more likely to excel when the market recovers. Businesses should embed data, its analysis and reasoning into the everyday decision-making. Business decision making has changed more in the last year than it has in several decades. Just because these are unprecedented times doesn’t mean businesses have to rely on intuition or fortune to make good decisions… Nitesh Gupta null The writer is Managing Director, Metworld DMCC.

GulfNews Business

Economic shocks from 2nd Covid wave will be less severe on India, says Moody's

Business|India|: New Delhi: Moody's Investors Service estimates that the overall hit to India's economy to be softer than during the first wave last year. However, the pace of recovery will be determined by (1) access to and delivery of vaccines, and (2) the strength of the recovery in private consumption, which could be hampered by the deterioration of balance sheets of low and middle-income households from job, income and wealth losses. The second wave of COVID-19 and the subsequent lockdowns came as India had been on a steady path toward economic recovery and double-digit growth. The virus resurgence adds uncertainty to India's growth forecast for 2021; however, it is likely that the economic damage will remain restricted to the April-June quarter. We currently expect India's real GDP to grow at 9.6 per cent in 2021 and 7.0 per cent in 2022, it said. The second wave was a shock to aggregate demand. "We expect the current lockdowns to have less of an adverse impact on economic activity than the nationwide lockdown in April 2020 because the latest restrictions have been more targeted, localized and less stringent. Also, consumers and businesses have adapted", it said. Demand side impact The second wave has mainly affected aggregate demand, in contrast to last year when the national lockdown also constrained supply. Stringent lockdowns in economically significant states will mar April-June economic activity. The 10 states that have been hardest hit by the second wave collectively account for more than 60 per cent of the pre-pandemic level of India's GDP. Four states - Maharashtra, Tamil Nadu, Uttar Pradesh and Karnataka - contributed the largest shares among all states in financial year 2019-20. Faster vaccination progress will be paramount in restricting economic losses to the current quarter. As of the third week in June, only about 16 per cent of the population had received one vaccine dose; of those, only about 3.6 per cent had been fully vaccinated. Mobility and economic activity will likely accelerate in the second half of the year as the pace of vaccinations pick up. The government recently announced a strategy to centralize vaccine procurement in order to boost vaccinations, which if successful, will support the economic recovery, it added.

GulfNews Business

US and allies have catching up to do on China’s ‘Belt and Road’ Initiative

Analysis|: The meetings of the world’s seven largest economies are of critical importance not just to the participants but countries of all shapes and sizes outside of the grouping given the US dominance of the global economy. At their recent meeting in Cornwall, the G7 countries took a number of decisions with vast implications, not least being the resolution on a Global Infrastructure Initiative to rival China’s ‘Belt and Road’ project. It was expected that the Western alliance would not stand still over China's attempts to dominate international trade routes through Belt and Road. China has already come a long way on its project through the establishment of a road network and development of ports and airports in many countries, particularly at the intersection of global trade routes stretching across Africa, Asia, Europe and the Americas. It allows China to dominate international trade infrastructure. China’s new high-speed rail service has transported $200 billion worth of goods between China and European countries since March 2020. When China launched Belt and Road, many countries announced their support for and participation, including some EU countries such as Italy. However, during the latest G7 Summit, Italian Prime Minister Mario Draghi said the country will “reassess its participation in China's Silk Road infrastructure network", adding that China does not adhere to multinational rules. It constitutes a reversal of Italy's previous commitments. In the same direction, India has announced that it will study the US President's Global Infrastructure Initiative, as an alternative to the Belt and Road. India also said that it might cooperate with the initiative at a later stage. Hardened opposition These are only two examples pointing to the intensification of the coming conflict between China’s initiative, which has already on, and the American plan, which is still in the crystallization process. In fact, both have strengths and weaknesses that will deepen the conflict and put the rest of the world in complex positions to determine their stance towards the two most powerful economies. This means that each country or bloc needs to examine the extent to which they can benefit from the initiatives, knowing that all of them will be subject to pressure. As was the case with Italy at the G7 summit, a position that was apparent from its announcement to reconsider its participation. The strength of the Chinese project lies in the centrality of decision-making and the allocation of part of the $2 trillion allocated for its implementation. Some of the Chinese initiative’s projects have begun to see the light, and it is difficult to revert from these projects, particularly as some countries have begun to reap the fruit, like Africa. The strength of the US project lies in the pressure that Washington has to attract countries to its project, as well as its absolute dominance over international financial transactions and the multiplicity of its allies. Also, the US is dominating global financial institutions, such as the International Monetary Fund (IMF) and the World Bank (WB), which are expected to play role in the implementation of the project’s financing. Dollar’s influence Much of the Chinese project depends on unstable countries that suffer from corruption, such as most of the African countries, Iran and Central Asia. The US project will suffer from the contradiction of decision-making between the US, the European Union, Japan, Australia, Canada and, possibly, India. Their positions on many issues, particularly funding, will vary, with the US President proposing hundreds of billions of dollars to counter Chinese influence. This project will also face the sensitivity of some developing countries due to the past colonial legacies, which may hinder their cooperation. Arab countries, including the GCC nations, will be at the core of the two projects’ attention, due to their geographical location at the center of the world. This requires them to examine both thoroughly to take advantage of development opportunities and harness them to serve their own interests. This is a given as infrastructure is one of the most important foundations of development. The writer is a specialist in energy and Gulf economic affairs.