War and Finances

By Bruce Dortin

ATLANTA, GA. (2003-02-28) Uncertainty over what is next, regarding both Iraq and the war on terrorism, is having a negative financial impact across the corporate spectrum

Dr. Alan Amansan is an Associate Professor of Strategic Management at The University of Georgia. One thing companies need to prepare for, he says, is a drop in business due to consumer nervousness.

“As well as an increase in business in some activities, certainly a change of some sort,” he says, “there would likely be a drop in business in many types of products and services just as consumers get nervous about spending money.”

Many consumers stayed close to home following the September 11th terrorist attacks

And Dr. Amansan says businesses should consider how they can cater to that stay-at-home market.

“I think that that's probably a fair sort of way to reason it,” he says. “The advice wouldn't be the same for all businesses. It would be different, depending on what their products are. For instance, if people are going to stay home more, they would be eating out less. If they're eating out less you would likely see increased sales at grocery stores.”

Jim Birol is president of Birol Growth Consulting. He recommends companies make business plans for both a long and a short-term war.

“If it's a short war,” he says, “I think they should basically recognize that - for the time in which the war is actually going on - all attention will be diverted towards the T-V, CNN and NPR and away from immediate transactions. People will be riveted if this is a whirlwind blitzkrieg of sorts. And I think its one of those hiccups that everyone just everyone just needs, to recognize as business owners that their best action is not to overreact.”

Birol says if it looks like it's going to be a long war, the scenario changes significantly.

“If it's going to be a long one, I think its going to create some fundamental challenges that this country has not seen and dealt with in a long time because if it goes on long, it means we're not winning. It doesn't men we are losing it means that we haven't been able have a quick win and I think with the mixed support, I think owners of businesses are very likely to see some rather manic behavior on the parts of their customers. For a time they may be only buying what they consider too be necessities or staples.”

“Small businesses specifically should be stocking up on what they know their existing loyal customers buy from them, in good times and bad,” Birol adds.

“They should be honing up their customer relationship skills, because customers are going to turn for support, security and assurance from any and all sources that they've come to trust, respect and confide in. Businesses should have open ears and should recognize that everything from customer service lines to talkative customers at check out lines are going to probably take longer and are going to demand more attention and not as much because of the business but because they're reaching out and looking for assurance from symbols and practices and transactions that they've come to trust as happening in good times and in bad.”

Two industries that will almost immediately feel the negative effects of a war will be the hospitality and airline sectors.

Consumers are expected to cut back on wartime travel plans, especially if they involve traveling by air.

But corporations who rely on air travel for their business will also feel the impact.

Dee Runyon is Executive Vice-President of Atlanta-based World Travel B-T-I, one of the nation's largest corporate travel agencies, with thousands of clients worldwide.

She says the elevated national alert level has not affected her business, or its customer travel programs. But the company has instituted a number of procedures with its customers - to ensure their safety and relieve the fears about corporate travel.

“What we have really done more for the companies is go through a series of questions, ”she says, “and a checklist that they need, to ensure that they have in place for all of their individual travelers. Communication obviously is the key to ensuring that people feel safer and that they know about a situation, so we've instituted things with the corporation that they in turn can switch on and communicate directly to the individual travelers. We've set up travel intranet sites for them, that have messaging capabilities where the travel managers at corporations can turn on the switch and allow vital travel information to be sent to the travelers. It can be used for the mundane things, like gate changes as well, but certainly in a crisis management mode if there is an alert in a particular area or an airport, that can immediately be sent to a wireless device of a traveler or it can also go to their desktop or that of their administrative assistant or what have you.”

Analysts say the individual consumer also needs to exercise caution - when it comes to personal finances.

Dr. Conrad Ciccotello is Associate Professor of Risk Management/Insurance at Georgia State University. He's also Director of Personal Financial Planning Programs at the school.

A war he says, means increased uncertainty for the individual. It also means increased short-term risks for the stock market, volatile interest rates and an uncertain employment market. When an individual is looking at such a period of short-term high-risk, Dr Ciccotello recommends they define their goals and objectives.

“If this is a retirement goal and your retirement is in the distant future as it is for many, many folks, short-term uncertainty really doesn't have a whole lot of impact on that goal,” he says, “especially in terms of things like investing. So folks who are trying to market time or outguess the sentiment on the market, in terms of ups and downs in the short term, and who are making dramatic alterations to their retirement portfolio, are missing the boat in my opinion.”

Dr. Ciccotello also says the situation changes if you have shorter run goals.

“Like you are trying to save for a down payment on a house in a year or something like that,” he says. “You really don't want to put yourself in any sort of investment vehicle which if something happens that's worse than expected you could end up having a large drop in the value of that asset. Similarly, I would be reluctant to borrow large amounts at variable rates of interest because war can be very inflationary, we could see spikes in interest rates in the short term so I think the danger is merely a short term focus and that you should look at short term issues and see where you're vulnerable and try to limit that vulnerability.”

And Dr Ciccotello says being an independent thinker, understanding your situation and keeping your goals in mind are important during uncertain times.

The main thing during a crisis, he stresses, is acting - and not simply reacting

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