The step from geopolitical to business risk is smaller than ever. Recent developments around the Strait of Hormuz have shown how fragile the global system is. This important trade route for oil and gas acts as a kind of economic tap. As soon as it falters, energy prices rise almost immediately. And that impacts transport, production and ultimately companies' margins. The Netherlands has an open economy and a strong international trading position. As a result, external shocks come in faster and harder. Disruptions in supply chains, fluctuating raw material prices and changing customer payment behaviour are no longer exceptions, but recurring patterns.
Strategic buffer
Currently, there is a sum of factors that reinforce each other. Energy prices remain volatile, logistics costs are rising and financing is becoming more expensive and less readily available. At the same time, high budget deficits mean central banks have less room to intervene. The result is an environment with structurally higher financing costs and less flexibility for companies. For many organisations, this means that liquidity takes centre stage again. It is not only needed to keep day-to-day operations running, but also acts as a strategic buffer in uncertain times. Investments will be weighed more critically and the cost of capital will again play a leading role in decision-making.
Vulnerable position
Pressure is first seen in energy-intensive sectors, transport and consumer-oriented markets. Margins get squeezed fastest here. At the same time, credit insurers see signs that payment delays are increasing and risks are shifting faster between sectors. Companies that have not fully recovered their financial position after previous crises are therefore in a vulnerable position. The expectation that the number of bankruptcies will rise again worldwide underlines that this is not a temporary dip, but a structural development. Although Europe is in better shape than during the 2022 energy crisis, partly due to a wider spread of energy sources, this does not guarantee stability. In a mild scenario, the economy moves towards stagnation, while in a more severe scenario a recession lurks. For companies, this means that procrastination is no longer an option and that agility and resilience will determine their competitiveness.
Reactive or proactive?
CFOs will have to look ahead in this new reality and dare to calculate different scenarios. Think about actively managing liquidity, constantly tightening risk management and building robust supply chains. Efficiency alone is no longer enough. Flexibility and alternatives make the difference when disruptions occur. Companies that want to remain successful will have to adjust their financial strategy accordingly. Not by merely reacting to developments, but rather by thinking ahead and building in buffers. Properly designed credit insurance and smart working capital financing offer added value. They are instruments that not only offer protection. They also create room to continue doing business, especially when the environment is uncertain.