With 2012 drawing to a close, businesses are planning for 2013.
Now is a good time for shareholders to consider what strategies to
adopt to mitigate risk and promote growth. Good strategy comes from
understanding the environment in which your business operates.
It is no secret that the global economy has been going through
periods of instability and turmoil. From the European debt crisis
to the U.S. economic downturn, economic growth has been limited.
Although Canadian business owners are well aware of the trickledown
effect these factors have had on their 2012 year-ends, business
owners must look ahead and consider the global economy's impact
on their businesses' 2013 projections and plans.
The Bank of Canada's Monetary Policy Report, issued
in July 2012, predicts that the 2013 U.S. economy will grow at
marginal rates, due to minimal improvements in U.S. labor markets
and lower external demand from suffering emerging market
economies.1 As Canada's largest trading partner,
what happens in the U.S. will undoubtedly affect Canadian
Because of the slowdown in the global economy, growth in
emerging economies like China and India has been stemmed by a
decrease in demand for their products.
This lack of demand contributes to cautious growth expectations
for 2013 and beyond.2 (See chart for International
Monetary fund predictions of GDP growth).
While these are macro-economic trends in the market, Canadian
business owners should consider how current market trends could
factor into the coming year. With the fiscal policies of large
economies like the U.S. and the Euro zone influencing domestic
monetary policies, Canadian businesses can use what they learn to:
predict domestic consumer confidence, modify sales forecasts and
inventory level projections, and quantify the effect of future
commodities prices on their bottom lines.
The Canadian government has tried to retain growth in the
Canadian economy by maintaining a hyper-stimulative monetary
policy.3 This has meant providing Canadian businesses
with historically low interest rates. However, the Bank of Canada
has signaled that these rates won't last forever. Canadian
financial institutions predict small interest rate increases
starting in March and April of 2013.4 Canadian business
owners are encouraged to revisit their debt levels and loan
agreements, and consider how increases in interest rates will
affect their cash flow and bottom lines.
Canadian business strategy should gear toward the expected
economic environment and economy. Developing realistic expectations
based on reputable forecasts will help Canadian businesses position
themselves to operate effectively within the boundaries of the
While this may seem a daunting task, the partners and staff at
Crowe Soberman LLP are dedicated to helping business owners assess
the impact of these economic factors and implement effective
strategies to mitigate any significant risks.
MICHAEL DUBE is a manager in Crowe
Soberman's Audit & Advisory Group. He joined the firm in
2010. Michael's client portfolio consists of various industries
and sectors. He provides assurance, planning, budgeting and
forecasting advice to small to mid-sized business operations.
Encountering the phrases, "best efforts", "reasonable efforts" and "commercially reasonable efforts" in commercial contracts sans definition leaves enough latitude for interpretation to cause uncertainty.
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