The US Economy to Enter a Recession in 2023: How to Thrive in a Downturn

Stocks and borrowing costs have succumbed in the past few years with the US inflation at a four-decade high. Prices for goods and services climbed by 8.6% in May last year, a notable increase since 1981. While some experts believe the headline numbers to be overstated, undertaking such uncertainties remains a top priority for companies, not just in the US but globally.

In a recent survey, 70% of Americans already expect an economic downturn is on its way, with the majority not too optimistic about avoiding it. This has become a major point of discussion primarily due to the rising interest rates and signs of a cooling economy. Economists at Goldman Sachs warned that recession risks are “higher and more front-loaded” seeing a 30% probability of entering a downturn.

Is the country already in a recession?

For businesses and consumers facing decades-high inflation, a recession is already at the door. The Covid-19 pandemic and Russia’s invasion of Ukraine are just two of the several factors that caused decades-high inflation and boosted living costs at high levels — thus, disrupting the economy of the US and other countries worldwide.

In a recent forecast by the Conference Board, experts expect the US economy is likely to see negative GDP growth in the first quarter of 2023. Experts at First Ratings, on the other hand, believe that the country will face a genuine recession territory in the second quarter of 2023.

Though there are concerns over a national, even a global, downturn, there is still no official declaration regarding a recession. However, an announcement is not actually what defines a recession, but an evident decline in economic activity that lasts for several months.

Experts assume that if the National Bureau of Economic Research (NBER) will officially declare a recession, it will consider other aspects such as personal and employment income — and not just rising interest rates or energy prices.

What are people doing to prepare for a downturn?

Analysts imposed that a recession is not inevitable. Some believe, however, that the incoming recession could be customer-led. Shopping is undeniably a major driver of the economy. But customers seemed to have drawn back from it following a year-long of rising expenses and wages not keeping up. EY Parthenon Chief Economist Gregory Daco said, “The hardship caused by inflation means that consumers are dipping into their savings to finance their outlays,”

This could be called forth by consumers increasing their precautionary savings and paring down their spending as they worry about the probability of an economic recession on their finances. As consumers cut their spending, businesses often have no choice but to cut prices and costs and delay their new investments to make up for the drop in sales.

Some companies in the US are tightening their belts, such as Apple shredding plans to increase iPhone 14 production, due to the slowdown. As such demand goes below expectations, many are convinced this is already a sign of a looming global recession.

In a recent research published by JPMorgan Chase, 65% or nearly two-thirds of US business leaders anticipate a recession in 2023, while 75% of small and midsize businesses still deal with inflation. This leads to businesses increasing their prices to survive in tight markets.

Thrive in an Economic Downturn: Best Practices to Follow

The darkening economic picture is clearly not a good sign for businesses and marketers, not just in the US but most likely, for other parts of the world as well. While analysts describe the potential downturn to be moderate, a recession as it is can still be torturous. This means that hundreds of thousands could still end up losing their jobs.

For businesses and their boards, the looming downturn calls for some extensive measures — to ensure their company will get through the toughest of times. Putting stakeholders or the customers’ needs and adjusting tactics have become more imperative than ever.

Reevaluate long-term strategies

Companies recognize the importance of a robust strategy. In a recessionary period, existing business strategies are subject to change, may it be in focus, emphasis, or timing. It is the job of a board to guide its firm to the right strategies that can help the business thrive afterward. The CEO, on the other hand, must know how to leverage everything the board and its committee bring to the table.

In-depth discussions and analysis are basics in obtaining a clearer view as to how to change strategies to deal with the impact of the impending downturn. A few aspects companies and boards should plan their new strategies around include:

• The external factors affect the current ability of the business to compete
• The long-term position the company wants to attain in case of a potential recession
• Old or new markets the business should compete through the recessionary period
• The values and resources of the company that could support its activities involved in the identified markets

Maintain transparency

Transparency is an essential tool for business success, and that includes the company’s board members and all stakeholders. It also promotes accountability within the firm and its executive teams, which is a key ingredient to building good board governance.

Bringing all ideas with transparency can make it easier for boards to turn those into practical actions that align with the company’s goals and policies. False information can only drive problems and poor decisions to the board.

Transparency holds importance when the company faces a crisis, like a recession. Company leaders must be honest about such crises in order for their employees and stakeholders to understand any decisions or plans made. Being transparent about the situation is also beneficial for coming up with a realistic solution and better-informed decisions.

Cut down travel costs

With the probability of a recession, many businesses are forced to cut costs aggressively. Most of these cuts compromised the ability and productivity of the companies and their employees to perform efficiently. If your company thinks a recession is coming and does not want to make instant deep cuts like layoffs, cutting travel costs is a helpful alternative.

In the past few years, reports show that business trip expenses have increased, with an average US business trip costing up to $1293. Costs will still depend on whether it is international or domestic travel.

Instead of spending thousands of dollars on traveling for business events, instituting virtual meetings is one way to shrink the expenses. There are now highly capable board management software like Convene that can facilitate interactive virtual board meetings and management without the big price tag.

Unlike applications solely for video conferencing, board management software such as Convene offers way more — from document management to live in-meeting voting and minute taking. No more expensive airfare, hotel, and car rentals for your board members and employees.

After all, not everyone loves business travel, and offering a convenience like virtual meetings is the key. Look beyond layoffs and try to make more operational improvements that will not impair productivity.

Look into the organizational structure

How the company will perform in a downturn will tremendously depend on the decisions it makes and who makes them. In a looming recession, it is recommended to examine the company’s existing organizational structure and its ability to navigate downturns.

Researchers suggest that decentralized firms are likely to have better performance than centralized counterparts during macro shocks because the value of local information increases. Centralization, however, is deemed to be favorable during “the need to make tough decisions”. In fact, countries with more decentralized entities like the US perform better during the 2008-2009 Great Recession.

Making quick changes in the organizational structure is not easy. But looking at the brighter side, experts suggest that if the firm decides not to decentralize, an increased effort in gathering input from the board or committees can work when making key decisions.

Tackle the Recession with Improved Resilience

As signs of recession pile up, boards and corporate leaders should be able to make decisions that will prepare their firms for downturns. May it be rethinking strategies for better recession navigation or improving board effectiveness while cutting travel costs by investing in tools like Convene. These are critical steps in building corporate resilience, and it takes the entire organization’s effort to make them happen.

Building resilience can help firms navigate the impacts of an economic downturn, and maintain a positive reputation in their industries. The need to prepare for a recession should remain a top priority regardless of whether or not there’s an official declaration of recession — especially if the signs of economic uncertainty are already felt by your company.

Make it easier for your organization to improve resilience with a trusted governance software like Convene.