First there was the pandemic and associated supply chain chaos. Then this year has seen the rise of ‘Putinflation’ as Russia’s invasion of Ukraine creates a growing risk of energy, food and financial crises.

“We are facing the biggest crisis the post-war Federal Republic has ever had. We have to be honest and say: First of all, we will lose the prosperity that we have had for years.”

German Employers Association President, Rainer Dulger, 13 July

“We can no longer rely exclusively on the (inflation) projections provided by our models – they have repeatedly had to be revised upwards over these past two years. There are things that the models don’t capture. Sometimes the unexpected happens. So we have to pay attention to traditional indicators while also monitoring empirical data and what we expect to happen in terms of geopolitics, energy price developments and demographics.”

European Central Bank President, Christine Lagarde, 25 August

Risk management is key to survival, and future success

Scenario planning, based on a wide range of potential outcomes, will be key to success given today’s levels of volatility. We can no longer simply tweak a base case to reflect whether we are feeling marginally more optimistic or pessimistic.

Recession till 2025.  We need to be realistic about the outlook and not assume the current recession will be over by Christmas. The issues we face are more likely to take years to resolve as they involve deep-seated problems

China is changing. It has bankrolled global growth since 2009, but now its model is shifting to self-sufficiency, alongside a major move into recycling to meet Net Zero targets. Its real estate market has been ‘subprime on steroids’ and its bursting will have far-reaching consequences for the global economy

Food shortages. As Sri Lanka’s suffering has shown, social unrest is rising around the world as food shortages increase along with prices for other essential goods. In turn, this will inevitably destroy the myth that demand growth in developing countries can somehow balance the downturn in developed markets

Invest for the future.  Recession will accelerate the transition to a Net Zero economy. The invasion is already reducing fossil fuel demand. And demand patterns are changing very quickly as people refocus on ‘needs’ rather than ‘wants’.