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What business leaders need to do as inflation continues, according to McKinsey

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good morning.

Yesterday’s unfortunate inflation report sealed the deal. “Short and shallow” has given way to “higher and longer,” high inflation and interest rates over a longer period. Investors and business his leaders would better get used to it.

Meanwhile, investors were quick to react to the news as the market plunged into its biggest sell-off since June 2020. “The biggest mistake right now is the belief that we are basically going back to prices similar to what they were before COVID. [era],” He said.

Business leaders face similar adjustments. “It may take years to bring inflation down to the Fed’s target level,” says a soon-to-be-published McKinsey paper.CEO Daily saw earlier). “Companies must utilize proven strategies to thrive in a world of low growth, high inflation and higher capital costs.”

What does that playbook look like? The consulting firm offers four pieces of advice:

— Don’t put growth projects on the back burner“Our research shows that growth-minded leaders respond decisively to short-term disruptions that can be turned into opportunities.”

— Build your talent smart“Employers overestimate ‘deal’ factors such as salary and development, and overestimate ‘relationships’ such as feeling valued by managers and the organization, dating trusted teammates, a sense of belonging, and flexible work schedules.” ” element tends to be underestimated. Employees say the most important thing. ”

Stay on course in sustainability. “In an economically constrained environment, a full cycle view of sustainability can be a means for companies to build resilience, reduce costs and create value. ”

— Rebuild your supply chain for resilience and efficiency. “We have found that a careful assessment of supply chain vulnerabilities can reduce spending on high-risk suppliers by 40% or more. ”

It’s very simple, isn’t it?

Also, thanks to Alison Taylor of NYU for sharing with members of the Fortune Impact Initiative yesterday. Thank you for sharing this clear view of why companies’ focus on social and environmental goals is driven by business realities, not politics.

“If you think about it very simply, we see a shift from tangible value to intangible value in terms of corporate valuation. , branding, network effects, stakeholder trust, R&D, IP, etc. So all of these basically make stakeholder perception, public perception, and employee perception far greater than before. , which means it represents a significant percentage of the company’s value, and that’s a big part of investor interest.” on social and environmental indicators.

Learn more about the Fortune Impact Initiative here. More news below.

Alan Murray
@alansmurray

alan.murray@fortune.com

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of this edition CEO Daily Edited by David Meyer.

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