Business Decisions with Economic Uncertainty

Business Leaders Face Monumental Economic Uncertainty from President Trump’s Tariffs, Immigration Policy and Regulatory Actions. The Risk of Recession has risen, according to the Wall Street JournalSurvey of Economists. Federal Reserve Governor Christopher Waller Recently said“Considering all this uncertainty, it is impossible to forecast how the economy will evolve very far into the future.” As an economic forecaster myself, I echo that view.

Business leaders, however, cannot throw their hands in the air and shout “I don’t know what to do.” They must make decisions, even if that decision is to not make any changes. And doing nothing may be the worst possible decision. However, a business leader can take steps to support business goals in the midst of this high uncertainty.

Review Business Goals

In a stressful era, business leaders should remind themselves of their business goals. Some companies have established as a key goal growing market share. Others focus on increasing stock values. Others simply try to reduce the risk of bankruptcy. Unless Recent Policy Changes Justify a Change in Goals, it will be sufficient to just keep the pre-existing goals in mind. But that goal should be in mind throughout the rest of the uncertained analysis.

Assess Specific Business Risk

With so much change, with much of the change highly political, it’s easy to get caught up in General Frustration or Euphoria. Instead, business leaders should be begin by assessing specific issues. Direct effects of tariffs will probably be the first issue to consider for Businesses Dealing in Physical Goods. Heightened immigration enforcement will be high on some companies’ areas of concern, while others will feel regulatory changes.

Although we don’t have much clarity on where the tariffs will end up, one could lay out scenarios. For example, scenario 1 might be return to 2024 tariffs. Though I think that’s very unlikely, it provides a baseline to begin the analysis. Scenario 2 Might Be the Ten Percent Across-the-board tariffs that President Announced on April 2. We might go through more wild gyrations, then settled down to something like a ten percent average tariff. Scenario 3 could be very high tariffs, such as 25% on average with even higher levies on particular imports.

This Step of Business Strategy is Valuable in Bringing US from General Worry to Specific Concerns that we can deal with.

Assess business vulnerability to recession

Tariffs have lead many of us economists to worry about recession. Even for those (including Me) Whose best guess is no recession in 2025, our estimate of the probability of a recession has risen significantly.

But recession does not mean disaster for many companies. Some businesses have limited exposure to recession. For example, Healthcare Industry revenues hardly suffer at all in recession. Business equipment manufacturers, in contrast, usually see sharp declines in profits.

Company Leadership should also look at their own financial condition. Even in highly risky industries, well capitalized companies usually survive. Highly Leveraged Risk Risk Companies Bankruptcy Even in moderately stable Industries.

Develop Downside Contingency Plan

At this point, business leaders should sketch out contingency plans for their most significant risks. Those risks might be specific tariffs, either commodity or country of origin (for imports) or destination (for exports). Contingency Plan for recession will often be different than the plan for tariffs or other specific risks.

The plans need not be detailed. A single sheet of paper makes more sense than a three-ring binder. But making that one-page plan is valuable in two critical ways. First, plans developed before a crisis will be more rational, less emotional. The edge of catastrophe is a poor environment for calmly weighing pros and cons of different strategies.

The second advantage of contingency plans is that they will usually be executed more rapidly. If a plan needs to be executed some months after it was developed, it will be fine to pause for a day to review whether the plan still makes sense. There may have been significant Changes made at the company which justify an alteration of the plan. But plans that have already been hased out are usually implemented much faster than on-the-fly responses to Major changes.

When writing my Book About How Businesses Can Deal With UncertaintyI interviewed several bankers about which companies survive recession and which fail. The bankers consistently told me that company leaders are not stupid; They know what needs to be done. But some delay action that will be painful. They are less likely to survive. Those who keep their business in operation take prompt action. Having that contingency plan in place helps leaders take that prompt action.

Develop Upside Contingency Plan

When conditions are uncertain, some of the possible outcomes are positive. Businesses should ensure that they know what they will have to do to capitalize on good news. There may be marks that grow, or costs that fall or competitors who fall by the wayside. Business leaders should identify the possible paths that would be good for the company. Then they should identify what they will have to do to benefit from the good luck. They may need more working capital, employees or capital equipment.

Just like downside plans, upside contingency plans are better when developed calmly, and are executed more quickly when they have been developed in advance.

Conclusion

Economic uncertainty demands attention, even though uncertainty is usually challenging, uncomfortable and frustrating. A business leader might even think about retirement in this environment. But the business needs attention paid to the risks and opportunities that will arise. Real Live People Depend on The Business Responding Well to the Change: shareholders, employees, suppliers and customers. And today’s business leader is, most likely, the person best positioned to help the company survive-and even thrive-despite economic uncertainty.