Senior business executives believe a global recession is likely to happen within the next 12 months according to McKinney Rogers’ recently published international research report Economic Recession – perceived risks and rewards.

With recent media attention focusing on the impact of sub-prime lending and the possibility of the current economic downturn turning into a full-blown recession, the survey, which encompassed Europe, Africa, Asia Pacific and the US, was designed to gauge awareness, perceptions and trends on the issue and what can be done to minimise the risk of a recession’s impact on global business.

The majority of respondents (62%) also said it was quite likely or very likely that their region would experience a recession within the next year, with 52% saying this would occur in the next six months.

The majority of respondents (67%) agree that their region is experiencing an economic slowdown already. Despite this, only 23% say their company has been badly affected by this. Four out of five (81%) think economic slowdown, and even recession, provide an opportunity for organisations to become more competitive, while three quarters (76%) believe it spurs organisations to become leaner and fitter. When asked about the importance for businesses to have plans in place to reduce their exposure to the risk of recession, a staggering nine in 10 business leaders agreed that this is now very important.

Focusing on tactical actions that can be undertaken to reduce an organisation’s exposure to the risk of recession, an overwhelming 78% cite the development of their workforce as the key tool for this, while 79% agree that moving into emerging markets that are unlikely to be affected by recession is also important. Diversifying the business offering was classed as significant for 37% of those surveyed. Conversely, reducing the number of employees (34%) and reducing marketing spend (23%) were classed as the least important tactics to pursue in safeguarding against recession.

Even though business leaders see it is important to have plans in place and highlight the best actions to reduce the risk of exposure, a relatively low number (32%) have advanced plans in place, indicating many companies might be caught short in the event of a recession.

The research also saw business leaders calling on governments to take action to lessen the risk of slipping into a recession by reducing inflation (81%) and cutting interest rates (69%). Tax cuts (64%) and improving liquidity by pumping cash into the economy (53%) are also considered key initiatives.

Those questioned saw the financial community as having a vital role to play in taking action to limit the risk of recession as well. Nine in ten respondents cite reduction of interest rates in line with central banks as an important move. Two thirds think the financial community should increase self regulation while more than half call for improved compliance with existing regulations. Furthermore, over half of respondents think the financial community should take smaller lending risks.

It is clear from these results that the majority of business leaders across the globe believe the current economic downturn will result in a full-blown global recession. It is encouraging, however, to see such an entrepreneurial spirit being displayed by the global business community. An astute leader will look at a recession as a perfect chance to gain a competitive advantage.
 
The results highlight a real understanding across the business community of the value of forward planning in limiting the damage of a potential recession, as well as the tactical actions that need to be taken to achieve this – investing in the development and skills of its workforce and diversification. It is worrying, however, that such a low number of business leaders and organisations have these advanced plans in place. At any time, whether a recession is imminent or not, businesses need to be prepared for economic downturn – whether nationally or indeed globally.

In addition to this, there seems to be a real need for government and financial leadership during times of economic uncertainty. While business leaders can do their own part by putting plans in place to limit the damage of a potential recession, they need the support of government and financiers to help companies remain competitive and survive the current economic slump.

For a copy of the full report, 'Economic Recession - perceived risks and rewards', click here