International flows plummeted in 2020 as supply chain disruptions and border restrictions rapidly shifted the business landscape, reinforcing doubts about the future of globalization. But, a year and a half since the onset of the coronavirus pandemic, the world economy is poised for recovery.

According to the DHL Global Connectedness Index 2020 edition, while people flows have remained fairly stagnant due to ongoing border restrictions, trade, capital, and information flows have rebounded strongly. And with global growth expected to accelerate to 5.6% this year, it’s clear that global business is here to stay despite the multitude of rollbacks the economy has faced.

That being said, recovery remains uneven and as the health crisis eases, executives will need to address the lasting effects of the changing economy on their business plans and take steps to ensure resilient growth while safeguarding their economic stability. 

Trade and Information Flows Looking Optimistic

Perhaps one of the most surprising rebounds following the coronavirus pandemic are world trade flows which have already surpassed early rebound forecasts of 7.2% in 2021. At the start of the pandemic, world trade volume plummeted, dropping faster in March and April of 2020 than during both the Great Depression and the global financial crisis of 2008.

However, as national lockdowns and social distancing guidelines stilled consumer spending on local goods and services, the need for imported goods within the healthcare and technology sector soared, setting the stage for what would end up being what some may consider the trade turnaround of the century.   

At the same time, global internet traffic soared 48% following the Covid-19 pandemic as digital flows from remote work and online education surged. According to one research study, even international eCommerce sales of non-essential goods skyrocketed an average of 53% in 2020 as more consumers were forced to spend time indoors.

As the 2020 boom in digital flows continues to shift consumer and commercial expectations, the long-term effects on the business landscape are starting to take root. Enterprises are beginning to see the benefit of reducing physical capital and instead are tapping into remote foreign talent pools as they expand their workforce. Similarly, smaller firms are getting their first chance to expand globally through the use of eCommerce.

While the pandemic surely slowed the growth of the global economy, cross-border flows are beginning to look optimistic which means that globalization, though once pushed to the side, should still be top of mind for enterprises looking to remain competitive. But as covid taught us, expanding and preserving your firm's financial stability don’t always go hand in hand. That’s why strategies for addressing shifts in demand, production costs, currency fluctuations, and more are all paramount to ensuring resilience in your firm, even during times of hardship.

For companies looking to expand into multiple emerging markets, perhaps through supplies chains or remote workforces, establishing a proactive hedging strategy can help ensure that negative exposure to currency fluctuations does not harm your bottom line. 

The Trends That Will Define 2022 and Beyond

Covid-19 has shifted expectations throughout the world and as cross-border flows begin to pick up once more, business leaders will need to keep in mind a few key trends as they prepare strategies to face this new normal. 

The Start of a Fourth Industrial Revolution?

The accelerated shift towards online channels has been perhaps the most obvious change to come out of the covid-19 pandemic. According to a McKinsey Global Survey of executives, many companies noted that they have “accelerated the digitization of their customer and supply-chain interactions and their internal operations by three to four years. And the share of digital or digitally-enabled products in their portfolios has accelerated by a shocking seven years.”

With this in mind, it’s clear that technology has become a critical component of successful business strategies. Whether this means utilizing APIs to fill technology gaps in your business or adopting a global workforce via international payroll, digital has taken the lead at both the industry and organizational levels, and understanding how to fit technology into your business model is a necessity. 

Diversifying and Restructuring Portfolios Becomes Key

The covid-19 pandemic proved that, just like with any crisis, the rippling effects following these dramatic times are largely uneven. Some industries remain unscathed while others fail to withstand the shocks and the dynamic restructuring within individual sectors can be even more unexpected.

According to a 2020 McKinsey study, the research found that the “top 20 percent of companies that had improved their Z-score during the current recession had increased their earnings before interest, taxes, depreciation, and amortization by 5%; the others had lost 19%.” The implication of these findings on the current business landscape is clear: the top businesses don’t just sit on their strengths and hope that everything turns out alright. Instead, they diversify and adjust their portfolios to ensure resilience, even during times of growth and profit. 

Looking Towards the Future

As the business landscape continues to shift post-pandemic, executives are finding new ways to reinvent their previously disrupted globalization plans. And though once stigmatized, asset-based lending is moving into the spotlight.

Traditionally, asset-based lending was considered a last resort for corporate borrowers and was primarily used by companies undergoing operational challenges or by those who had difficulty qualifying for traditional bank loans. But as more companies look to recover from the financial hardships of covid-19, the increased flexibility provided by the accommodative structure of ABLs means that, during this period of uneven economic activity, asset-based lending is now the number one choice for many borrowers. 

While asset-based lending can help companies improve their liquidity and flexibility within their capital structures, ABL borrowers doing business internationally should still consider a proactive risk management strategy. Market volatility, asset valuations, and cash flow can easily exhaust the borrowing base and hinder your overall company growth. Ensuring that you are proactively managing your foreign currency exposure with an FX hedging strategy can help stabilize your company’s assets and minimize any potential impact on cash flows. 

About Thomas Anderson

Thomas Anderson is the managing director at moneycorp where he also runs the structured solutions team. Prior to joining moneycorp in 2009, Thomas was a Managing Director in the FX Advisory Group at Bank of America for 12 years. At Bank of America, he held various senior FX advisory roles including FX Manager for the Asset Based Lending and Real Estate Divisions, team leader for the middle market, and small business FX groups. 

Prior to joining Bank of America in 1997, Thomas was a VP in the FX Group at First Union (Wells Fargo now). Thomas holds a BA from the University of Massachusetts Amherst and an MBA from Queens University in Charlotte, North Carolina. 

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