Top five worries of mid-sized companies for 2017
Originally published by the Globe and Mail
The series: We look at decision makers among Canada’s mid-sized companies who took successful action in a competitive global digital economy.
With 2016 ending on a decidedly uncertain note – the global economy is erratic, cybersecurity is top of mind and the recent U.S. election has left a big question mark in terms of trade – it is not surprising that many mid-sized companies are not feeling like they are on solid ground.
“Brexit, Trump, the global business environment … how is that going to play out?” says Val Monk, a family business adviser with Val Monk and Associates in Winnipeg.
She says the lack of clarity around these issues has led many of her clients to question their plans going forward. “They’re saying, ‘Do we move ahead with expansion? Do we pull back?’ Businesses are having a harder time right now.”
Barry Sharp, chief executive officer of AMA Management Ltd. in Vancouver, agrees. But he also feels Canadian mid-sized firms are well positioned to weather whatever may come.
“Economic uncertainty will continue,” says Mr. Sharp. “But we may have an actual advantage – we have an astonishingly stable environment.”
He feels that Canada may be seen as a solid and stable exporter if Europe’s supply-chain challenges following Brexit continue. “Maybe there are some opportunities for us, maybe we can fill those gaps,” he says. “We’re boring but reliable. And we make good products.”
Mr. Sharp suggests Canadian firms focus on what they do best. “Bundle up and hunker down,” he says. “Where possible stay home and try to build your business in Canada.”
Economically, there’s good news and bad news. The ever-falling loonie – new reports indicate it may fall to as low as 65 cents (U.S.) in 2017– may be good for some sectors, says Mr. Sharp, such as energy, manufacturing and tourism, though not for others, such as transportation and retail.
While the Canadian economy has been relatively stable in the past year, save for a poor showing in October, the U.S. economy could pose a challenge.
“It’s a little unfortunate the U.S. is our biggest trading partner,” says Dan Kelly, head of the Toronto-based Canadian Federation of Independent Business. Given president-elect Donald Trump has said he may renegotiate the North American free-trade agreement (NAFTA), exporters to the United States are worried. “Firms with ties to U.S. market are concerned,” says Mr. Kelly. “U.S. trade is still a wild card.”
The world is moving right of centre
The election of Mr. Trump, a populist Republican, coupled with the rise of far-right parties in Europe – the Freedom Party in Austria, The Sweden Democrats, and the National Front in France – also has Canadian companies on high alert. That is because with this political change come protectionism and isolationism, says Mr. Sharp.
For that reason, he suggests companies here look to expand domestically. “My advice would be to go to your biggest customers and learn how to expand their businesses,” he says.
Cybersecurity is big news, not the least because of allegations about hacking in the recent U.S. election. Depsite the average hack leading to the loss of just less than two million files, according to risk management and advisory firm Willis Towers Watson, there is lots of talk but little action. “Mid-sized clients talk about cyber challenges “but don’t do anything about it,” says Mr. Sharp. “Cybersecurity is considered IT stuff, but it’s becoming an enterprise issue. The risks are huge.”
In its latest Cyber Claims Brief, Willis Towers Watson suggests companies implement a comprehensive information security plan that includes “a cyber-risk assessment, external penetration testing (sometimes called ethical hacking, in which external cyber defenses are tested), as well as an internal evaluation.”
Mr. Sharp feels a good start would be fairly low-tech and inexpensive.
“If I were a medium-sized employer, I would buy every single person on my payroll a password manager,” says Sharp.
The next generation
As many mid-sized companies are family-run, a continuing concern is succession planning, says Ms. Monk, particularly how younger business owners will cope with the demands of their industry. She says many companies are asking: Does the next generation really know how much work it takes to sustain a competitive business?
Ms. Monk suggests businesses not wait to launch the succession process, which should include lots of dialogue with younger family members about their interest and suitability as future owners, as well as the expenditures involved. “Not everyone is tackling it soon enough,” she says.
And she says younger generations can have a lot to offer, particularly when it comes to technological innovation and social media savvy. “When there’s a range of generations in the business and the decision-makers are of a more established view that technology isn’t as important, then younger generations could have a lot of frustration with that. Being more tech savvy is something they should think about,” she says.
With minimum wage hikes across Canada, the introduction of widespread carbon taxes in 2018, and new Canada Pension Plan premiums set to increase starting in 2019, big bills loom for mid-sized firms. And these require planning sooner rather than later.
“They need to start budgeting now,” says Mr. Kelly. “And there is big pressure in the mid-sized business community. If your business is struggling already … these businesses are reaching the tipping point.”
Mr. Kelly says soaring electricity costs in provinces including Ontario have also added to their woes. “We have a group of members who are freaking out,” he says.
Mr. Kelly says that while some firms are relocating to save money, governments ultimately have to be the ones to rescue businesses. “We’re hoping that governments start to get the message that they’ve got to do something to ease the burden – rather than increase the burden – on the business community,” he says.