We are waiting for autumn and painful revelations – we bring THREE SCENARIOS of what to expect

Consciously or unconsciously, most entrepreneurs, craftsmen, and corporate managers, are preparing their businesses for autumn that brings uncertainty. It is not only economic activities that must adapt to the corona crisis; the situation is very complicated at the core of the state – the belt is tightening at the family level as well. Investments are being postponed, new business opportunities, new customers, and clients are being sought. Families are giving up on buying real estate, new vehicles, and distant travels.

We are waiting for autumn and painful revelations – how deep are we really in trouble and will we get out and how. While we wait, the consulting firm Deloitte has prepared three scenarios with fatalistic names Storm, Tornado and Tsunami which offer outlines to help companies both in Croatia and globally. —

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– The first scenario, which is practically already outdated, Storm, spoke of a short-term passage of the virus until summer and a quick recovery to the old ways – said Zlatko Bazianec, head of Deloitte’s Croatian office and partner in the Business Consulting Department. According to this scenario, businesses would need to assess the impact of the corona on operations over a period of three to six months, reduce the need for temporary labor, cut salaries, and reduce variable costs.

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— The second moderately bad scenario from Deloitte is Tornado and according to Bazianec, we are currently in it. According to this scenario, after the first passage of the virus, we enter an additional disruption, the virus does not recede, and we transition into a deep economic crisis. In the tornado scenario, an assessment of the impact of the corona on business over the next 12 months should be made, important capital investment projects should be halted, readiness for extremely negative medium-term cash flow should be established, some businesses should be closed, and ultimately, workers should be laid off.

– No official sources currently have an estimate of our GDP falling by over 10 percent, but such a level is unfortunately becoming increasingly realistic as the recovery of our economy is not instantaneous, and most companies are still operating in a slowed-down model and market illiquidity is increasing. What is the best response today? Focus on business sustainability; everything that is not ideal needs to be re-evaluated and restructured, and that is now the most important thing for all companies. Additionally, as we emphasized the opportunity, aggressive seeking of new sales and growth opportunities outside established customers is possible, trying to step into some „Chinese shoes“. Who knows when such an opportunity will come again, maybe in 10 years or longer – Bazianec wondered. —

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The worst scenario for autumn according to Deloitte is Tsunami, a prolonged health threat lasting over 18 months, a long-lasting and painful global economic crisis, and severe economic depression. This most fatalistic scenario requires an assessment of the impact on businesses over one to three years, extremely negative long-term cash flow, and includes a possible need for asset liquidation and financial restructuring. Additionally, in this scenario, it will have to be accepted that parts of the business must be suspended or that the business must be turned around.

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