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Surviving Political Uncertainty; a CEO’s Dilemma

From how to allocate resources, growth strategies, how diversify, to whether or not to exit a market…

TSIM writer

Ever since the aborted February 2021 elections, political temperatures in Somalia have been anything but friendly. The entire year has mostly been about simmering political tensions between political players loyal to President Mohammed Farmaajo and those who feel he has overstayed his welcome.

In the end, within this last month of the year (2021), in fact, within last week to be specific, political tensions in the country reached fever pitch; leading to a stand-off between Farmaajo loyalists on one side and PM Mohamed H. Roble and his men on the other. In the middle of all the confusion is an unmissable political uncertainty and the possibility of political instability.

For entrepreneurs and businessmen, political uncertainty presents a set of unique problems that they had to navigate all year round, or at least, within the period of extreme tension. So, what exactly should a business (company) do when its base of operations and its market enter into political turmoil (for whatever reason)? How can a CEO lead her/ his company through a national or regional political upheaval?

What will be affected?

Political instability means currency exchange rates will be affected, so will production cost, as well as the availability of labour, availability of raw materials, the ability to open up shops and run the day to day operations and in some cases it gets worse when even the supply of electric power is affected or roads and ports are cut off so supplies can’t be transported.

Political uncertainty such as the case in Mogadishu often times confine customers (a large number of them) within specific areas where they can move freely. In dire scenarios, customers do not regularly go out to make purchases. This is why it is imperative that CEOs know how to guide their companies through political turmoil.

The CEO must know how to allocate resources at such a time, how to time and make decisions that can affect company growth plans, what to do if the company’s investment strategy needs to change in response to new realities or be shelved altogether.

The first thing a CEO ought to do is undertake a proper audit of his firm’s position in the market… Is it a growing company or a stable one? Against its main competitors, how does it compare in good times and can this change in troubled political times? If the company was to adopt a new radical corporate strategy, how would this affect shareholders?

Available Options

Among the response options available for companies and CEOs operating in politically volatile environments (once they have understood the nature of the political problem) are; moving certain operations to new locations, diversifying into new product or service lines that can survive political uncertainty with ease, slowing down operations, shutting down the business completely and moving to new markets, taking advantage of opportunities created by the political uncertainty or doubling up and investing even more during the chaos, among other possible strategic interventions.

Political upheavals threaten business continuity. It doesn’t matter if it is the slow and winding yearlong squabbles or swift aggressive coups or a gradual slide into chaos and anarchy or war; political changes within economic markets demand a shift in strategy, including shifting operations, shutting down, slowing down, or in some cases acceleration.

A good CEO should know how to forge a path for his company and for his team, amid the political uncertainty in a way that encourages stability within the organization itself and inspires confidence in the team, in shareholders and in customers even when the world outside is falling apart.

Two types of CEOs you meet in politically volatile situations

It is common, at the onset of political instability/uncertainty, for CEOs within that market (in this case within Somalia) to fall into two categories: CEOs who freeze and are rendered inactive, perhaps even paralyzed in their decision making by the new set of circumstances that they have found themselves in.

Such CEOs tend not to make any strategic moves. Instead, they hibernate, lie in wait for conditions to either grow better or for some sort of stability before they can make strategic decisions like shutting down, shifting operations, moving to new markets etc.

The other group of CEOs during political uncertainty are CEOs who find growth opportunities within the environment created by the political tension. This group is proactive and often thrives (and occasionally makes serious business blunders) in an environment that is heavily uncertain and unfriendly to economic activity.

Such companies and CEOs adapt quickly and are adept at exploiting short-term advantages to gain a competitive edge.

In all, the CEO who survives and thrives in political uncertainty is the one who can read the market and adapt to the needs of the moment while safeguarding shareholder interest.

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