Amidst soaring inflation a new research from Grant Thornton reveals how mid-market businesses globally face the threat of any revenue growth being wiped out this year.

Experts from the audit and advisory firm’s Bahrain business have rung alarm bells that around three-quarters of businesses world-wide have not taken necessary actions to protect their business.

The research coincides with the release of Grant Thornton’s ‘Essential action plan for managing in inflationary times’ and shows that key input costs are up globally nearly a fifth (19 per cent on average) led by raw materials (up 21pc), energy (up 20pc) and transport costs (up 20pc). Bank/interest costs meanwhile have surged 16pc and tax bills have risen by 17pc.

Businesses have been increasing prices in response.

The research shows that 52pc of business have increased prices in line with inflation, while a surprising 35pc have increased prices above inflation.

This is an extraordinary display of pricing power. The recent price increases have been supported by the particular combination of strong demand and supply shortages. These won’t last forever. Companies need to take a range of different actions to deal with inflation and can’t simply price their way out of this problem.

According to Grant Thornton Bahrain senior partner Jatin Karia, industry needs to take a close look at specific impacts rather than considering broad brush effects.

“A micro-level understanding of your particular business needs will influence which action needs to be taken and when. However, the use of technology to improve efficiency and agility as quickly as possible will strengthen resilience,” he explained.

The team of experts at Grant Thornton have identified seven actions that businesses should be taking now to deal with the threat of inflation – or at least consider taking as essential starter actions likely to have the maximum impact as follows:

– Identify the risks of inflation for your business;

– Take action to limit external cost increases;

– Outsource more activities to lower costs and ameliorate labour shortages;

– Improve your understanding of the true cost to serve clients;

– Change your pricing strategy so it is more in line with cost increases;

– Take action to improve capital structure and finally,

– Take steps to improve internal efficiency and costs, and/or reduce waste.

Yaser Abbas, the assurance partner at Grant Thornton Bahrain, asserted that to mitigate the risk of inflation, it is important to build an initial understanding of the forces that may affect business and agree on actions to address them, warning that ignoring this would directly impact financial performance.

Elaborating further, the firm’s managing partner Jassim Abdulaal said the main concern is that only a limited number of companies are aware of the impact of inflation on their businesses and very few are actually taking action that is needed.

“There is an urgent need specifically for mid-market companies to pull all these levers now,” he said.

 

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