Tectonic Shifts

I don’t think it will be difficult for me to get a consensus that doing business has become very challenging, not just nationally but more so internationally across borders. The world today is a hyper-connected ecosystem with significant interdependent, interconnected diverse parameters causing unpredictability.

In India alone mobile users went up from fewer than 6 million in 2001 to about 850 million in 2010. On a global basis in the same period mobile connectivity increased from about 13% of the world’s population to 75% and Internet users from 6% to 25%.

Simple things have become complicated and complicated things have become complex. A lot of complexities, leading to volatility, have largely come because of information technology, which allows an almost instantaneous transfer of information from one part of the world to the other. Irrespective of the eventual effect of this news, this super fast dissipation of information is removing the traditional cushion of “information digestion and reflection” before emotional “reaction.” Thus, volatility has become the new phase of business where people are caught in the web of information.

To be successful these days, you need to have super specialisation in any chosen line of work. I believe scrap trading companies are well placed to manage and contain the uncertainties, with rapid decisive informed choices and actions. We are probably able to do this because we have not had analysts or the stock market breathing down our necks. Rather, we have a small and very understanding and supportive shareholder base and an equally competent management team.

I believe regulatory mechanisms need to rise to face the new challenges posed by this superhighway of information transfer—mechanisms that can contain/control/limit senseless distortive participation by people or companies on the exchanges, whether they be currencies, commodities or stocks.

In the business environment that I interact with (metals and auto industry alloy manufacturers) there is extreme caution both in India and in China. Factories are squeezed with profit margins and uncertainties. A lot of these companies are small-to-medium enterprises (SMEs), who are proficient in running their factories but not so much in understanding the global economy, which rapidly affects their local economy. Many of these businesses are ready to “shut shop” if there is any additional cost increment due to inflation, interest rates or labour costs. It is thus not an appetizing step to raise interest rates to control inflation, as has been a traditional economic principal.

Today’s corporate complexities are not just related to the traditional issues of buyer, supplier and product capability and risk assessment but are now peppered with exchange rate volatility, commodity price volatility, geo-political volatility and even the growing menace of cybercrime.

An exporter may think he is receiving a premium by exporting directly to a consumer only to have multiple stumbling blocks or hidden costs taking a toll on the bottom line. One almost feels the need to have a global awareness with a controlled, well-informed local response. The business is no more manageable if left to an agent. Rather, the need is there for a collaborator with whom to partner and who has a stake in making sure that any decision taken is a well thought-out one.

The author is CEO of London-based Sunberg Ltd. and can be reached at diwakar@sunberglimited.com.