It is inevitable that in our fast-paced, global, interlinking economy, we face constant challenges in the way that we do business. We face changes in conditions, attitudes and influences and a shift in pressure and expectations clients put upon us, whilst at the same time trying to manage and balance the needs of our shareholders and employees.
But how do we best rise to these modern challenges? Well, by adapting and responding to working in a modern environment. A modern “VUCA” environment. VUCA you ask? Yes, VUCA.
A term first popularised by the US military in the 1990s, VUCA has steadily made its way into our modern business vocabulary over the last decade. It stands for:
V – Volatility
U – Uncertainty
C – Complexity
A – Ambiguity
For the next four months I will explain the definitions of VUCA.
Its usage applies principally to ideas of strategic leadership and how understanding the VUCA environment can have a positive impact on the business decisions we make. From decision making and forward planning to risk management and problem solving, no matter the size or nature of a business, we are all working in a VUCA environment.
Let’s delve a little deeper and look at what we mean by V, U, C and A.
This Week: Volatility
Although we don’t necessarily think about it all the time, there’s no denying we are living in a volatile world: on a daily basis we face a barrage of geopolitical and economic scenarios that quickly catch us off guard. As little as 18 months ago, despite being a theoretical possibility, many of us would never have envisaged a billionaire reality TV star sitting in the Oval Office and the UK making preparations to sever ties with its best buddy the EU. But, as if there has been some extraordinary alignment of the moon and stars, this is what has come to pass.
In the UK, the result of the Brexit referendum last year has sky-rocketed the level of volatility we now face. For a start, most people didn’t think it would really happen. Then we were faced with the resignation of a Prime Minister who had been elected with a substantial mandate just 12 months previously, the default appointment of a new unelected head of Government, indecision over the leadership of the opposition, the triggering of “Article 50” in March and a surprising “snap” general election in June which didn’t exactly prove to be a ringing endorsement for the incumbent Prime Minister. The result was a plummet in share prices and the pound dropping to its lowest level since the mid 80’s.
After all of that, one thing we can be sure of is further increased volatility will come about not only as a result of Brexit: you can’t stick your finger anywhere on a map these days and not find something going on that ultimately impacts us all. The external influences on our global financial markets that lead to increased volatility are not simply those of the political arena, but can be anything from an international health crisis or natural disaster to a threat to foreign oil supplies, terrorism or military intervention.
Whilst global financial volatility itself is not something new (frankly it’s always been there), the global crash that hit a decade ago shows that we are massively uncertain as to what degree of volatility we can sustain before we reach a financial crisis.