Companies are not prepared, and many will go bankrupt in the next 24 months
Crisis-mode ON: cost reduction is more important than market share
Budapest, 2022. October 26. – Operational costs are surging globally for all companies. This has become part of our everyday lives. Driving those increases are skyrocketing prices, including energy, gas, aluminum and raw materials, the baseline for manufacturing and services. The soaring prices of certain cost categories have a domino effect on other ones. For example, the change in logistical costs will sooner or later influence the entire supply chain, even waste management.
Companies generally are trying to combat the increases in different ways – the most common measures are layoffs and trimming the marketing budget. According to a recent study by international consulting firm Expense Reduction Analysts, the corporate world has learnt its lesson from the global financial crisis in 2008, however, it is not taking the necessary steps towards resilience: 80% of the studied companies regret that they didn’t prepare for the crisis before it was too late. Despite regret, most of the companies are again not prepared: 81% say cost optimization will be the most critical action when it comes to operational resilience in the upcoming 24 months.
According to Hungarian Partner of Expense Reduction Analysts, Vass Anikó:
“Financial priorities of the companies have changed significantly recently. I would say three words only: costs, costs, costs. The reviewing of corporate costs is taking over all previous priorities, even in the life of less price-sensitive firms. Economic forecasts predict stagflation for 2023, further shrinking the economy along with a producer price index (PPI) rise. All this will generate even higher inflation. Rising costs will not disappear from our everyday life in the short or medium-term. Many sectors can still pass the current increases along the line to the consumer, but this will not go on infinitely because the day will come when there will be no demand any more. Halting investment and development projects have already begun. The next step is reviewing supplier contracts.”
Vass Anikó draws attention to proactivity. Companies who now intelligently manage their costs while maximizing their operational efficiency and keeping their employees will survive and enjoy a competitive advantage.
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Background info: Expense Reduction Analysts is an international consulting firm focusing on cost optimization, operational efficiency and supplier management. The network of specialists works with clients from corporate, educational, healthcare, and non-profit sectors, including Libri, Cofidis, IKEA, the University of Hull and Bethesda Group.
Vass Anikó is a Partner of Expense Reduction Analysts. With more than a decade of experience in big, small, state-owned, private, start-up and holding structures, she has been working in the fields of business process re-engineering, project management, supply chain, logistics and social partnerships. She focuses on sustainable business solutions.
