As consumers batten down the hatches and the global economy slows, senior
executives confront a more profoundly uncertain business environment than most
of them have ever faced. Uncertainty surrounds not only the downturn’s depth and
duration—though these are decidedly big unknowns—but also the very future of a
global economic order until recently characterized by free-flowing capital and
trade and ever-deepening economic ties.
The task of business leaders must be to overcome the paralysis that dooms any organization and to begin shaping the future. One starting point is to take stock of what they do know about their industries and the surrounding economic environment; such an understanding will probably suggest needed changes in strategy. Even then, enormous uncertainty will remain, particularly about how governments will behave and the global real economy and financial system will interact. All these factors, taken together, will determine whether we face just a few declining quarters, a severe global recession, or something in between.
Uncertainty of this magnitude will leave some leaders lost in the fog. To avoid impulsive, uncoordinated, and ultimately ineffective responses, companies must evaluate an unusually broad set of macroeconomic outcomes and strategic responses and then act to make themselves more flexible, aware, and resilient.
Building
these organizational muscles will allow companies not only to survive but also
to seize the extraordinary opportunities that arise during periods of vast
uncertainty. Read more on the McKinsey Quarterly site
Debt and Deleveraging: The global credit bubble and its economic consequences The recent bursting of the great global credit bubble has left a large burden of debt weighing on many households, businesses and governments around the world, as well as on the broader prospects for economic recovery in countries around the world. Read more
Will U.S. consumer debt reduction cripple the recovery? U.S. consumers are spending less and saving more. Unless incomes grow faster, each percentage point increase in the saving rate would reduce spending by more than $100 billion—a serious drag on any recovery. Read more
Mapping global capital markets: Fifth annual report The world’s financial assets rose to $196 trillion in 2007, slightly below the pace of 2006 but still faster than the historical trend—likely marking the recent peak for equity and private debt markets.
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