04 January 2011 15:45 [Source: ICIS news]
LONDON (ICIS news)--The global chemical industry needs to take bold steps to plan for an uncertain macro-economic outlook for 2011 and beyond, a leading consultant says in a White Paper published by ICIS on Tuesday.
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Hodges, in his 'Budgeting for Uncertainty' paper, believes government action in
“We’re seeing the most uncertainty I’ve ever seen in 30 years in the industry," he said.
"There’s a lot going on in
Hodges believes that as we enter a “new normal” of sustained lower economic growth in mature economies, CEOs should implement a scenario planning strategy which will enable their companies to thrive even if the recovery falters.
'Budgeting for Uncertainty' describes three scenarios - upside, base, and downside - in which global chemical industry capacity utilisation heads from the current 85% to a full recovery, partial recovery, or decline.
“It’s a proven technique for companies to have a base case; an upside case (what would you do if supply constraints continue and the markets improve?); an also a downside case (what would you do if a lot of the demand-side case has been built on a lot of hot air and on inventory?).”
“If you ask me, honestly, I would plan for the downside and if it’s better, that’s great," Hodges said. "We’ve had 18 months during the worst recession for 50 years in which we’ve turned in record profits. That seems a bit unlikely and I worry about what could happen next.”
CEOs need to ask senior management teams to help with scenario planning, Hodges beleives. “The only way to get through uncertain times like this is by pooling knowledge. We all know that teams have a better record than individuals.”
Click here to download the White Paper from the ICIS site.Read Paul Hodges’ Chemicals and the Economy Blog
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