How can a business be made recession-proof? Recessions occur regularly. Despite that, many companies survive, and several die too.

The post-pandemic world of today is facing the specter of recession in many parts of the world. The Central Banks of Europe and North America pumped massive amounts of money into the hands of affected people. It led to a spike in demand. Even before the global supply chains disrupted because of the pandemic could be repaired, geopolitical events in Europe have led to a spike in the prices of oil and natural gas.  Sanctions on Russia by America and Europe severely disrupted the oil and gas supply market leading to a spike in oil and gas prices.

Post-pandemic euphoria has fuelled consumption and massive amounts of money supply in the market, leading to persistent inflation worldwide. Central Banks are responding with huge hikes in interest rates. This central bank action is deliberately creating recessionary conditions. Recessionary conditions have also begun to emerge in Europe, and expectations are that the US will dip into a mild recession.

Businesses and individuals both are bound to be affected. Let us look at the last downturn that shook the world in the wake of the US financial crisis and a global recession, in which almost the entire financial sector collapsed. It was a period in which Lehman and Bear Sterns went down. To prevent the total collapse of the financial system, the Federal Reserve handed out massive bailouts to shore up the balance sheets of the leading banks and major auto companies. The effort was to prevent the collapse of the US economy, which was the engine of the world.

The mortgage industry and, with it, the housing market collapsed. Properties were foreclosed in their thousands. There were no buyers left, and despair swept through the country. The purchasing power of the population was collapsing.

How did the companies survive and become recession-proof in this period? They did it by:

  1. Shoring up balance sheets.
  2. Undertaking a massive across-the-board cost-cutting.

The tech sector is right-sizing its workforce, an indicator of recession. The sector is taking steps to make it recession-proof. The cryptocurrency market has collapsed, with investors losing vast amounts of their wealth.  Bankruptcy in the cryptocurrency sector is seen.

In addition to downsizing, companies seek to become recession-proof by automating their business processes to the extent possible. This helps companies to save on recurring staff costs and improve operational efficiency.

Companies also cut down on investments and start conserving cash. This is another measure to make themselves recession-proof. But no company, country, or individual is recession-proof. Those who have managed their businesses well in good times accumulated a war chest and kept debt down to within limits to survive. Stick to business fundamentals, and you will be fine.



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