It’s not just your company where it’s happening. It’s every company, everywhere, all at once, and it’s undermining compliance. What is it? Uncertainty.
The World Uncertainty Index is a real thing produced by serious people and relied on by economists and organizations worldwide. The index spiked a couple of years ago, climbing 320 percent, and now sits well above its historical average.
Uncertainty is like an emotion — it can go through the roof, but it’s hard to sustain for long, so it settles back, although not all the way. The trend now is upward.
Where’s the uncertainty coming from?
The pandemic alone generated enough. Death, isolation, dislocation. That was the beginning.
The global supply chain turned out to be as fragile as glass. Empty shelves in grocery stores and pharmacies. Car dealers without cars to sell. No lumber to build new houses. Who wouldn’t be unsettled?
Speaking of unsettled, that’s what a lot of people did. They unsettled from familiar surroundings to work remotely from new places. More freedom, yes, but more uncertainty too.
Russia invaded Ukraine. The words are still surreal. But the real-world event and horror that followed altered global trade patterns. Even China (“The World’s Factory”) made a strange pivot less friendly to the West.
Inflation came back. In the United States, it hit 8 percent in 2022, the highest since 1981. To fight inflation, the Federal Reserve raised interest rates ten times starting in Q1 2022.
Skip ahead one year to March 2023. Silicon Valley Bank, Signature Bank, and First Republic Bank collapsed.
(A headline on March 22 this year from the Wall Street Journal said, “Fed Raises Rates but Nods to Greater Uncertainty After Banking Stress.”)
About our political leadership, well, you know what’s happening on both sides. There’s no way to put a smiley face on it.
In England, where nothing too exciting is supposed to happen, a Prime Minister was shown the door in 2022 for partying during lockdown and lying about it. His replacement at No. 10 served the shortest term in history — 45 days — and lost her job because of turmoil in the financial markets. Her replacement is struggling too. Three Prime Ministers in under 50 days. Keep calm and carry on? I don’t think so.
Help Wanted signs hang in storefronts everywhere. There must be an acute labor shortage. No, wait. There are too many workers.
In January this year, Google’s parent company Alphabet said it would cut 12,000 jobs. Meta, Facebook’s parent, announced it was slashing 10,000 jobs. Amazon said in March it plans to eliminate 18,000 jobs. Dell Technologies said 6,600 jobs would go.
It’s not just the tech companies. Disney is cutting 7,000 jobs, and Ericsson 8,500. Others downsizing are News Corp, McDonald’s, Goldman Sachs, Hasbro, Warner Music, and the list keeps growing.
Then, of course, there’s artificial intelligence. It’s either saving humanity or working out how to obliterate all of us, depending on who’s telling you the news that day.
Uncertainty? Plenty to go around.
Companies are dealing with the uncertainty by spending less, saving more, and keeping their powder dry for whatever calamity comes next. Compliance department budgets (and probably some headcounts) are shrinking, putting compliance at risk, as Harry wrote about last week.
There’s also this. Compliance is extra work and requires people to focus and concentrate. That’s what training and repetition are all about. But uncertainty is distracting. It diverts attention away from everything else.
Distracted leaders do less leading. Meanwhile, rank-and-file staff have their own uncertainty to deal with. How do you reassure workers who never come to the office? A pat on the back in the company canteen is no longer possible.
Uncertainty erodes confidence at all levels of the organization. When people lack confidence, fear takes over. Fearful workers are more likely to pay bribes to win work, lock in suppliers, and find cash to borrow.
What about those shortages, now scattered and intermittent? Scarcity can be real or perceived; it doesn’t matter, the result is the same. It brings out the worst in buyers and sellers and multiplies compliance risks.
Fifty years ago, economist John Kenneth Galbraith said the world had entered a new era. He wrote a book about it titled The Age of Uncertainty. Galbraith died at 97 in 2006, more right than he could know.
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