Volatility Is Good

Market volatility never really goes away. The trick is learning to adapt to it.

By Nader Museitif

This year has seen a good share of volatility, on both global and regional levels. The price of oil has dipped since the middle of 2014, bringing with it lots of negative speculation within oil-dependent economies. Softer growth in China and Europe caused a serious slowdown in emerging markets and commodity exporters in Africa and Australia. Compound these with a strong dollar and falling currencies in Europe, Asia, and Africa and you find quite a complex global scene. Divergence is ever more evident; post financial recession we saw China and Asia balancing the crisis in the United States and Europe and driving demand from emerging markets. Fast forward a few years later and we see a slow but steady US recovery and mediocre prospects everywhere else.

Volatility is synonymous with markets. If anything, we had too little of it in post-recession times. Looking ahead, more volatility is expected in the coming few months. Oil prices have been gaining ground since their low point. A lot of speculation is taking place over the US Fed move to potentially hike up interest rates this month. Our region is no less volatile with all the conflict, geopolitical uncertainty, and investment sentiment. So brace yourselves.

It’s never easy to navigate a business in complex and volatile contexts. But unless you’re the CEO of a Fortune 100 company, or an investment bank with trading floors in every major time zone, you don’t really have to worry about every aspect of the global economy.

One cannot control the macro forces, which is why micro economics are so important. Demand shifts and changes, but it’s always there—along with supply. Thanks to our hyper connected world, markets change faster than ever, and so do opportunities.

Operating a strategy within a narrow scope or a limited target market is very risky. Investors and entrepreneurs should look to the largest markets possible and remain flexible as to where they sell and how they structure and continuously restructure their supply chains. So when the dollar strengthens it makes sense to sell to a growing US market. In the same way it makes all the sense to buy from Europe as the Euro weakens. It isn’t rocket science but the art of the game is in anticipating and being ready to change and adapt.

To most of us, the term “business model” is used to denote a static structure that operated for years at length. Such a notion is being challenged in unprecedented ways. What a business does is going after opportunities—fast, efficient, and in a manner that’s attractive for customers to remember it and to come back for more. What a business does today may not be relevant next year; but if the business is modeled on volatile and changing markets such change should not affect its raison d’etre.

It’s very easy to fall into the comfort trap of choosing obvious and convenient markets during the good times. But cycles teach us that the upside is there because it’s preceded and followed by a downside. A little planning and flexibility on the strategy side in exploring new markets and niches can go a long way when volatility points downwards.