A recession can be harsh for many people. Job cuts, companies shutting down or downsizing, countries in turmoil and many projects coming to a halt are just some of the devasting effects of a recession.
During the Asian Financial crisis, US$9.7 billion of GDP was lost in the ASEAN region and thousands of jobs were lost as countries were battling the recession. Similarly, during the recession of 2008, the solvency of over-leveraged banks and financial institutions caused the collapse and bailout of many major financial institutions resulting in the IMF bailing out countries and thousands of jobs cut.
But not all is doom and gloom. A recession can be a time for reflection, rebuilding and reframing the conversation to better position yourself or your company when the market picks up.
Reflections for a better ecosystem
Often recession is a byproduct of a flaw or abuse within an ecosystem, and a trigger event will collapse the system. The 2008 recession started with the subprime mortgage crisis in 2006 and spiralled into a recession when the subprime borrowers started defaulting while the housing bubble burst as the Fed raised rates. This resulted in the recession in 2008, where banks and financial institutions required a government bailout.
With the experience of the recession in 2008, the Basel Committee on Banking Supervision came up with Basel III to improve the banks’ ability to handle shocks from financial stress and to strengthen their transparency and disclosure. This reflection from the financial community to identify and close the gaps will help to build a better ecosystem to handle future situations.
Reshuffling of leaders
With each recession, there are bound to be industry leaders who will bite the dust, and new leaders will emerge among those who survived the recession. While it can devastate the affected players, it could also be good for the industry with an injection of new blood and vision for the upcoming stars.
Also Read: How small companies can prepare for recession
During the recession in 2008, it forced giant automobile makers such as General Motors and Chrysler to go under or get a bailout by the Government. A reshuffle within the automobile industry leader board gave the industry a new lease of blood and moved to better innovation, process and even the rise of EV cars.
Sometimes the impact doesn’t just affect companies but the whole industry as well. After the 2008 crisis, financial institutions have become more prudent in their loans and lending, especially with the implementation of Basel III.
More stringent background and credit checks are implemented to ensure that loans are given out with proper due diligence and this, in turn, helps to strengthen the whole ecosystem to handle similar stress in the future.
Reexamine priorities in life
On a personal and career level, a recession can be an opportune time to reexamine one’s priorities, career aspirations and life goals. Often during the bull markets, we are filled with endless meetings, projects, and sales pitches that we lose track of the why or things that matter to us.
When a recession hits, it forces us to slow down our pace (whether voluntarily or forced) and, in turn, gives us time to reflect and reexamine our life priorities and career paths.
In Singapore, during the COVID-19 pandemic, where several industries such as aviation and hospitality were severely affected, it forced many to switch careers in other sectors such as transportation or finance. During the same period, many reexamined their life priorities, and now conversations with companies have been reframing into how they can strike a balance between work-life culture.
Reframing the conversation
With the recent crypto winter, it’s prime time to reframe the conversion around crypto from speculative gains to intrinsic value. Singapore is leading the way with MAS Chief Fintech Officer Sopnendu Mohanty asking how crypto projects drive value.
Many companies have proven crypto can be used to solve real-life problems.
For example, Digital Treasures Centre (DTC), a licenced payment company based in Singapore, embraces crypto as an alternative form of payment to help reduce settlement time and foreign transaction fees.
Zilliqa aims to solve blockchain platforms’ scalability problems by using sharing technology. STEPN is a walk-to-earn project that promotes movement and healthier lifestyles.
Coming out stronger
A recession can devastate countries, companies and individuals, but it is not the end of the road. With each recession, lessons will be learnt, priorities will be rearranged, and paths will be reconsidered.
But no doubt, if one keeps a positive mindset to grind it through after each recession, you will often find yourself coming out of recession stronger and better.
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