The perfect storm is gathering momentum and tough times are coming, warns Alain Le Berre of Huron Consulting Group 

The perfect storm is gathering momentum and tough times are coming, warns Alain Le Berre of Huron Consulting Group

Several major economies are already in recession – either officially or, as Warren Buffet put it, “by any commonsense definition of the word”– and a number of other countries are likely to follow suit.

The brutal slowdown in the developed world is starting to affect strong economic growth in Asia, Eastern Europe and Latin America – reducing the chances that imports from these countries will help Europe and the US to rebound quickly.

The financial and banking crisis is far from being over. Many leveraged buy-outs remain dangerously over-leveraged at a time when they may struggle to meet ambitious business plan targets.

The housing slump will continue for some time and consumer confidence is dipping fast. Falling business confidence affects investments and inventory levels. As many believe, this will not be a short-lived touch-and-go recession, but a long-term slump, which some pundits have even started comparing with the 1930s depression. While we all hope that it won’t be as extreme, it may well be much more severe than what most of us have ever experienced in our business lives.

Companies and owners, therefore, need to prepare themselves to face unprecedented challenges. Sensible financing solutions are harder than ever to secure. Broken balance sheets need be repaired while there is still time to do so serenely. Covenant breaches must be durably cured in ways that will let management continue to focus on driving the business.

Lasting operational improvements are, more than ever, a vital necessity. Management needs the extra resources and experience of seasoned professionals to help them face up to all these challenges successfully. Expert support is more valuable than ever when all is at stake.

Only those moving quickly and decisively will come out of this ahead of the pack – or indeed come out of the storm at all. Now is the time for action.