¶ … International Crisis on Businesses.
In this paper, I will assume the task of a consultant at McKinsey and Co. It is my duty to analyze the effects on international and local businesses of the problems which are erupted in Middle Eastern/Northern African countries particularly Egypt, Tunisia and others. This paper will be produced for the clients of McKinsey and Co in order to assist them in their respective strategies for the region. The main four topics which would be addressed in this paper are as follows, the local impact on business, the global impact on businesses and industries, the impact on shareholder value and wealth of the most affected companies and finally the short, medium and long-term political influences which might affect businesses.
Local Impact on Businesses
During the times of severe political or social unrest which is now seen in countries like Egypt, Tunisia, Syria and others, the overall environment of business sees serious challenges. Many of the business owners suffer severe loss on monetary as well as human resource terms, losses which may take many years to recover. "It is therefore very necessary to adapt to any sort of upcoming changes in the environment in advance in order to minimize damage." (Stiles, 2002).
"Many business owners take different steps in saving their companies, many different steps are also taken by the government in order to help reduce the local impact on business." (Hironaka, 2005). "It is a common observation that any business suffers losses in these circumstances mainly due to the "Low Sales" reason" (Madison, 1998), ordinary individuals in severe circumstances commonly choose to conserve their resources and spend less on buying. This is a common phenomena observed anywhere in the world. "Other reasons which can affect the local business include the threat of theft or robbery from any mob, the personal loss of life of key individuals which help in supporting the firm and so on." (Cardenas, 2004). Recently, the government of Syria has made huge progress towards taking appropriate steps which help in supporting the Syrian currency as well as to attract capital which usually flows away in troubled times.
It has allowed the central bank to cut its reserve requirements up to half (some five percent), cuts of up to zero percent are allowed in those cases when the assets of the host banks are used towards the investment projects and projects related to tourism. "This move is made to decrease the overall pressure on banks, by this step the banks would become more free in using its assets." (Vajpeyi, 2004). In this scenario, it has also been observed that the government has made some eight to ten percent of its local currency into U.S. dollars; this measure will help in giving more liquidity to the overall banking sector which will in turn appreciate savings as well as increase the trust of Syrian nationals in their own Syrian Pound. This step offers great chances of capital to flow in the market.
The Syrian regime in previous years have opened up more and more of its economy to the outside world after many decades of different socialist experiments. It has ended the monopoly at banking sector some nine to ten years ago at the time when private banks started functioning.
The central bank in this time of crisis has increased the saving ceiling on the individual deposits to up to two million Syrian pounds which was previously one million Syrian pounds, this move is said to encourage savings of the Syrian pound. This is also considered to stimulate the overall economy and increase the consumer confidence as well.
Global Impact on Businesses and Industries
Lets asses the global impact on businesses and other related industries due to the unrest in the above mentioned regions, the unrest in Egypt has affected many social as well as political and military circles across the world. The political chaos in countries like Egypt is reflected directly on the financial hubs of the world, which is seen as how the prices of crude oil as well as food commodities have risen. "This type of situation creates more unwanted risks in an already dubious economic climate." (Ralph, 1993).
The prices of oil during the peak of the civil unrest in Middle Eastern nations like Egypt went to its highest point since the year 2008, as a reaction the
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