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      Sunday 15 September 2019

      The rewards and challenges of a booming economy

      While the cost of debt is at a historic low and investment opportunities abound, businesses must be sure to manage the risks of rapid growth.

      investment booming economy sea cityA booming economy can reward the bold, but opportunities often exceed capacity. With low-cost credit easily available and economic conditions in many parts of the world conducive to new investment opportunities, many companies will be contemplating their growth plans. Yet competition is also likely to intensify during a boom period so it is important to be aware of the inherent risks when managing growth.

      With some economies at or near full employment, the acquisition of talent is generally more challenging, costlier and more complex. Companies need to work much harder on their talent retention strategies. Higher recruitment and labour costs can start to have a negative impact on competitiveness.

      In a small market, the combination of a readily available supply of finance and a wide range of potential investors easily brings about an inflationary spiral, which sows the seeds for an eventual tapering off of the economic cycle. In a larger market, easy availability of finance and a pool of enthusiastic investors Global Insight April 2018 | 16 converts a recovery into a boom, until the monetary system starts to raise the cost of credit to prevent overheating.

      The current reality in most of the world markets is that liquidity is improving, many multinationals are cash-rich, yet investment opportunities do not appear to be a limiting factor. Is increasing regulation mitigating entrepreneurial spirit, or is liquidity being accumulated rather than invested? If so, will share buybacks become more of a norm in the coming years?

      Be ready for change

      It is important for business leaders to remember that economic conditions move in cycles. No boom lasts forever, so organisations should constantly be prepared for more challenging conditions in the future. In particular, they should take stock during the boom times, focus on their strategies for both the short and for the long-term, and recognise the need to take possibly more adverse future conditions into accountin their planning scenarios.

      From an advisory perspective, the onset of stronger economic conditions invites the need for more focus on strategic consulting, change and innovation management, and stronger treasury support.

      For more information, contact:
      Mark Bamber
      Nexia BT, Malta
      T: +356 2163 7778
      E: mark.bamber@nexiabt.com
      W: www.nexiabt.com

      While the cost of debt is at a historic low and investment opportunities abound, businesses must be sure to manage the risks of rapid growth.
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