I tried and could not find any comment that contradicted the occurrence of recession in 2023! I did find differences in gradation: for some it will be severe, for others mild... For some it is possible, others more pessimistic think it is likely, but all consider it plausible!

The causes are all coincident: geopolitical tensions, instability in the energy market, persistent high inflation, rising interest rates, tightening labor markets, shortages of some key raw materials, an only partial recovery of supply chains, the global economy as well as European economy. In other words, all the conditions are in place to make it unlikely to avoid a recession even for those who are sometimes annoying optimists!

Perhaps the issue of inflation is, nowadays, the one that most occupies the media and is, therefore, the most debated, mainly due to the fact that central banks are fighting it as expected by increasing the reference interest rates, i.e., by tightening the monetary policy. Economists recognize, however, that there is a time lag between this tightening and the impacts on the real economy, so it is plausible that the recession will only occur in the second half of 2023... And this is good news! Why is this good news? Because, if you have not prepared yet, you are in time to take a set of actions that will strengthen you before its arrival, focusing on strategic decision-making on the following axes:



Any organization that does not focus on and gives the royal throne to cash-flow will deeply resent it in any circumstance, but most of all in recession, whether it is mild or severe. Keeping cash flows healthy and flowing is a key determinant of performance; failing to turn EBITDA into cash is a major concern for any manager or entrepreneur. While it is necessary to have strong business economics, it is worthless if the cash that should generate such business is tied up in an increase in working capital. So, be careful with the management of average payment and receipt terms, as well as with the accumulation of stocks that tie the margin to the warehouse! And be careful with the customer portfolio or with the presence in some markets whose profitability is clearly detrimental to the flow of cash.



I know of only one entity that pays salaries: the good customers! When that doesn't happen, the mornings easily turn into a nightmare. Talk to the good customers, focus on the quality and uniqueness of products and services as well as on providing excellent service. And, with the same determination, find new avenues of growth by scaling the business and expanding into new markets. In pre-recession periods it is normal, as I said above, for opportunities to conquer market positions to arise from the "cleaning out" of customer portfolios or opportunities to be present in markets that are not very attractive.



It is plausible that a reduction in business margins will occur, so there is still time to start reviewing processes in order to increase the organization's productivity, reducing production, distribution, and sales times and costs, as well as administrative costs. Maintaining a permanent innovation challenge in organizations, leading to the redesign of processes that remove cost overruns is the way to compensate in business margins the competitive aggressiveness, which is natural to find in the most difficult moments of economic cycles.



Financing will be more difficult to obtain and more costly. Pay off the most expensive debt you have on the balance sheet or improve the weighted average cost of permanent capital, renegotiating while you can, going into debt judiciously, and finding sources of financing for debt and/or equity whose cost does not prevent the realization of the investment plan.



While it is true that "no good can last forever", don't forget that "no evil can never end" either! There are three key areas for you to be able to emerge resilient and robust from the period ahead:

- strategic management for talent acquisition and retention, because the shortage of talented workers for the challenges of business development will continue, and those who know how to manage the talent they need in a balanced way will be winners;

- step-by-step management of the end-to-end digitalization of the business, since nobody can stop the future, but it is in your hands whether you want to be part of it or not;

- deepening corporate and social responsibility for the environmental sustainability of the business, because my experience shows that the best way to create shareholder value and, at the same time, shared value with society is to be genuinely sustainable.

Finally, the risks that will have to be faced in 2023 and 2024 are real and inevitable. I will end my contribution by reminding everyone of a phrase that has been with me for many years in the business world, and which I adapted from another attributed to Demetrius, the Cynic:

"Luck is what happens when opportunity meets preparation."

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