S&P Downgrades Russian Sovereigns

Standard & Poor’s cut the Russian Federation sovereign debt credit rating citing the capital flight and risk to investment in the wake of the Ukraine crisis. S&P lowered Russia’s sovereign debt rating from BBB to BBB- placing it one notch above junk status.

Russia’s economy has slowed in step with the rest of the BRICs (Brazil, Russia, India, China). As the global economy entered recession in 2008, the BRICs were one of the few remaining bright spots still generating economic growth. For a variety of reasons tied to specific national and global macro conditions all BRICs economic growth has slowed considerably.

Russia’s fortune was closely tied to energy exports. The devaluation of the US dollar and acute political risk heightened by wars in Afghanistan, Iraq and Syria; and the uncertainty surrounding the impact of events in Libya, Egypt and Iran had supported a rich valuation of oil prices.

New sources of fossil fuels coming online in North America, Libya, Iraq and Iran has undermined oil prices. Political instability in Venezuela and the fracturing of Russia’s paternalistic relationship with Ukraine and the potential disintermediation of Russian oil exports to its largest market in the EC adds a new uncertainty to global energy markets. It may also serve to support the rich valuation for oil even as supply expands.

In its commentary, S&P notes the rising debt burdens the Russian Federations Local and Regional Governments, slowing domestic growth, over dependency on energy exports and the developing conflict with Ukraine as reasons for the downgrade.

Turning business cycles create powerful macroeconomic risk factors that challenge SMEs. Rapidly changing market dynamics surface grave threats to SMEs. The Ukrainian Crisis is a risk event that impacts the cost of capital for the global SME community, spikes increase in commodity prices and disrupts global supply chains and market access. Acute macro risk drivers force market players to compete for capital in realigning markets. How will this global risk event impact your business? SME's must continually assess market events to seize emerging market opportunities.

Get Risk Aware

Get risk aware with MERA, a Macroeconomic Risk and Event Assessment app available on Google Play. MERA's Mobile Office capabilities provides business managers a world class risk management tool to assess emerging risk factors to adapt and capitalize on the opportunities shifting markets present.

risk: Russian Federation, EU, Ukraine, commodities, oil, Standard & Poor's, sovereign debt, credit risk, sme lending, market dynamics, macroeconomic risk

Spring Thaw to Grow US Jobs

It was a hard winter in the US. For weeks on end massive weather fronts would creep across the continent spreading ice storms, howling blizzards and a polar vortex that brought frigid misery to large swaths of the Mid Atlantic States. It seemed winters assault would never end but seasons do change and as today's temperature nears 70 spring has arrived after all. 

Mark Zandie, Chief Economist for Moody’s used the springtime analogy in a recent note to describe the recovery of the US economy from the Great Recession. Zandie notes some emerging factors that are creating positive momentum for economic growth.

• falling rate of short term unemployment signals workers are returning to the job market 
• businesses are primed for expansion with strong balance sheets, consistent profits and favorable financial and market conditions
• fiscal and regulatory uncertainty that weighed on confidence is slowly clearing up

Rising employment and greater workforce engagement is a powerful economic stimulus. More people receiving paychecks translates into the exponential growth of buying power. Retail, real estate, entertainment and hospitality industries are best positioned to benefit from the recovery. As economic health of these sectors improve, employment opportunities within these segments and ancillary industries will also expand. 

SMEs must anticipate the advent of this positive business cycle. Managers can best position their enterprises for growth by assessing what emerging market factors bear the greatest weight on their business. This allows managers to determine how to align operational capabilities with capital deployment initiatives that best address conflating market factors to serve business growth.

For example as recovery in the real estate market proceeds, new opportunities open in a multitude of related industries. The construction of high density affordable housing in urban areas is a powerful demand drivers that stimulate the need for LEED certified construction firms, inspectors, engineers, architects and building supply companies. Attorneys, CPAs, community banks, credit unions and other service providers are also beneficiaries from these emerging developments. 

As community development accelerates demand is stimulated for hospitality, grocers and numerous products and services designed to address the specific idiosyncrasies of a young urban buying demographic that is affluent and growing.  Is your firm ready to address emerging opportunities that emerging in your marketplace?

Turning business cycles create powerful macroeconomic risk factors that challenge SMEs. Rapidly changing market dynamics surface grave threats to complacent SMEs. Acute macro risk drivers force market players to compete for capital in realigning markets. SME’s must assess new macroeconomic risk factors to seize emerging opportunities. 

Get risk aware with Macroeconomic Risk and Event App (MERA) on Google Play; a Mobile Office app that runs on MS Office and Android. MERA helps SME's assess emerging risk factors to profit from the opportunities shifting markets present.

Get Risk Aware

risk: Moody’s, Mark Zandi, sme lending, job creation, market dynamics, macroeconomic risk, credit risk, LEED compliant, real estate, unemployment