VUCA event for World!
VUCA event for World!!!
VUCA stands for
Volatility
Uncertainty
Complexity
Ambiguity
It’s true that understanding the world economies and Investment outlook carries VUCA element. Debate will be whether it is higher or lower at a given point.
My sense is the perfect example of VUCA is now. Sub-prime crisis of 2008 did had heightened VUCA but this time it’s highest since then.
Sub Prime crisis of 2008 wasn’t a heightened VUCA as compared with Covid 19 crisis, for below reasons.
1) The crisis was specific to US Banking and financial services system. Of course it had ripple effect in world but was largely limited to western world.
2) It was limited to financial services sector and real estate sector. Other industries were up and running as usual.
3) There was no lockdown in any part of the world. Not even for a single day.
4) There were Pay cuts in Banking and Financial Services Industry (BFSI) across the world. There were major Job losses in BFSI sector only. Some in Real estate. Majorly in developed markets.
5) Recessionary conditions were less than current Covid 19.
6) Business confidence in world wasn’t too bad.
7) That was financial crisis and this one is health crisis manifested into economic, geopolitical crisis as well.
8) Very small part of world population was impacted.
9) Sub Prime crisis had followed after robust global growth. People and governments in world had decent savings and lesser leverages.
Covid 19 crisis is far from over. USA has seen second wave of infection. The daily numbers had dropped from 33-35k per day to 20-25k. Now since few days, numbers are rising past 45k per day. India too has started to report numbers in excess of 18k per day. Not sure if we are into community transmission stage yet. If community transmission and 2nd wave should start in India, we would surpass USA also.
Despite all the above points, stock market revival after Sub Prime crisis took more than a year whereas this one seems to be over in matter of months😊
Let’s examine each element of VUCA in current context.
1) Volatility: Stock markets and economic activities collapsed in world. Stock markets fell off the cliff in March and recaptured major lost grounds. NASDAQ is at historic high. Nifty50 and Sensex (excl financials) are kissing all-time high. Such a massive fall and rise is also historic for India surely. I guess volatility will be higher in times to come!!
2) Uncertainty: Uncertainties, currently, are at multiple fronts👍. Uncertainty of bad debts, demand revival, business outlook, lifting of lockdown, 2nd phase of Covid, Job security, availability of medical assistance if infected, Government policies, Indo- China relationship, Trade war, Medical breakthrough etc.
3) Complexity: Complexity of world order, supply chain, International relations, which industry will survive, thrive or extinct. Which skillsets will determine employability, business and trade structures post Covid era (as they are likely to get disrupted and new models will evolve)
4) Ambiguity: All the above points leaves situation ambiguous and ever evolving. Currently every citizen in world is making Guess-timates about the future but is unaware of the possible outcome. Government policies announcement, interpretation and implementation. Salaried is unaware if the pay cut is final or it can cut even further or might have to loose the job😢. Business owner not sure of the possible turnover, recovery of creditors, Bad debts, loan availability and labour supply.
Hope my attempt to articulate the VUCA gave you some insight into the subject and current situation.
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