Introduction
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A significant resurfacing economic factor for members
Not seen in this form for over 40 years in North America and Europe
Causing a severe buffeting on business models globally
Being influenced by several post-pandemic factors and aftereffects
Will be a factor both positive and negative for the medium term
Business needs to incorporate inflation dynamic or lens into their:
Business model value equation
Strategy
Financial planning and analysis
Costing/pricing
Scenario planning/modelling/forecasting
Mindset
Appreciation of the wider macro perspective
Risk register/resilience planning
Process mapping
Consumer/customer focus
Employees/staff
Efficiency/productivity drives
With inflationary pressures across an economy, businesses need view how this will drive macroeconomic factors either negatively or positively. Here we attempt to focus finance business partnering on a limited collection of factors. Our lens is not designed to be comprehensive. Rather it is designed to enable rethinking how inflation affects different aspects of your business model, strategy, and operations.
Understand the relationship between interest rates, inflation, and currency exchange rates.
Understand the drivers in this space.
Scan the horizon with your finance business partner to realise how inflation, either rising or falling, will impact purchasing power and behaviours.
Use this understanding to consider the wider effects of inflation:
On your cost base
On your stakeholders
On the drivers of behaviour in your marketplace
Understand the impact on business operations:• Agility practice• Talent management
- Retention
- Recruitment
- Training
Transformation practices
Digital transformation practice
Digital transformation investments
Use our Cost Transformation Tool to engineer your teams’ rethinking on costs and inflation.
Consider its complexity.
Understand the multiple variables in assessing how inflation impacts finance and business.
Consider the variables list here.
Develop an inflationary risk lens on key elements of your business model framework.
Consider supply chain risk due to inflation.
Appraise consumer demand.
List the variables as they relate to your business:
Interest rates
Currency exchange rates
Future assets prices
Impact on nominal assets (cash, bonds, etc.)
Supply chains
Procurement and purchasing power
Capital investments
Future investments
Consumer confidence levels
Wages/salaries
Business debts
Contract terms (renegotiate/extend payment credit)
How will inflation impact the definition of value that is important to your customers, investors, and other stakeholders?
How will inflation impact how you create value — using key resources and relationships to create products, services, and experiences that stakeholders want?
How will inflation impact the delivery of value and its ‘favourable’ outcomes: revenue, security, satisfaction, loyalty. Do you need to reassess your stakeholder equation, your customer segmentation, and the delivery channels, and understand your customers better?
How will inflation impact how value is captured:
Impact on costs
Impact on revenue
Impact on supply chains
Impact on key suppliers
Impact on debt
Impact on investment
Impact on customers’ finances and new behaviours
Impact on new or recent suppliers
Impact on delivery of value over costs of delivery
Impact on partners who help us create and deliver value
Impact on staff — new joiners and salaries
New ways/models of delivering value
