As Pakistan continues to go through increasing inflation and economic instability due to the political situation and the Rupee's inability to hold on to the coat tails of the US Dollar, local and multinational companies and SMEs face an unenviable situation: balancing cost and profit ratios by trying to predict how the economy will respond in the coming months. Meanwhile, oil prices continue to be all over the place, and the costs of oil related commodities continue to rise, thus effecting planning and profit forecasting and causing a perpetual headache to those who have to predict where to efficiently and effectively buy from.
Good enough to for best laid plans to go awry.
So in this uncertain scenario, how do the CIO and the strategic decision makers behind a company operate? What is the mindset and how do they go about trying to bring a semblance of sanity to the table?
The Sky is Falling
It may be a bit exaggerated to claim that the sky is falling, after all, we have all been here before, but there is no doubt that disappointing economic indicators, both nationally as well as internationally, are taking their toll on the country's trade and payment position. This in turn is affecting various industries doing business by putting the cat amongst the pigeons in the marketplace.
To make matters worse, rising imports, amidst comparatively slower growth in exports has moved to decrease trade deficit in the first seven months of 2008. This adds to the pressure on the rupee/dollar parity. To try to remedy the situation, the State Bank of Pakistan announced a tight monetary policy in February for the following six months in an effort to try to combat rising inflation and deteriorating trade deficit. The central bank also raised its discount rates and asked the government to restrict heavy borrowings from the bank, to try to stabilize the increasing fiscal deficit.
What does all this do for people who want to make money through their businesses? Quite simply, the economic environment is increasingly dictating the policies and strategies that a company puts in place to steer itself to a place of relative safety. In many cases, there is a need to be increasingly tactical to survive and possibly build during the instability, and to plan conservatively without undermining the founding principles of any enterprise, that is profitability.
There are many fronts through which the impacts of the said issues can strike at the core of businesses: from purchase price variances of raw materials, to global profitability declarations and targets for MNCs; from security risks to the indefinite postponement of many a sought after project.
So depending on how you look at it, the sky is certainly cracking, if not falling.
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