Why Economic Slowdown is an Ongoing Risk for Organizations

Economic Slowdown and the Challenge for Businesses

Trade tensions and geopolitical instability have intensified significantly in the past two years, slowing economic growth and creating risks across several fronts for businesses. The risk of an economic slowdown creates immense uncertainty, which can put companies at a disadvantage and often unable to use tactics they leaned on in more stable times. According to our most recent Global Risk Management Survey, economic slowdown is the third-largest risk facing respondents.

When the economy slows, consumer demand and business attitudes typically change, which can immediately impact revenue. At the same time, raising capital can become more expensive and difficult if market liquidity diminishes. These two factors pose an obstacle to profitability in the short term.

What’s Driving the Current Economic Slowdown?

Businesses are being buffeted by repeated shocks and persistent uncertainty. The International Monetary Fund (IMF) recently cut its global growth projections as tariff rates climbed to their highest levels in a century and unpredictable trade policy obscured outlooks.¹ These uncertainties are also creating problems for central banks, which now face a more complicated journey to easing monetary policy against a backdrop of rising inflation risk.

Meanwhile, high public debt levels and elevated asset valuations make market corrections more likely.² Inflation and potential recession,³ alongside growing regionalism and decoupling in trade, can increase organizations’ production costs, disrupt supply chains and undermine long-term growth prospects. 

What is the Impact of an Economic Slowdown?

Both consumers and businesses are likely to be affected and may have to reevaluate their spending plans. As these groups lose confidence, many could opt to save cash rather than spend, slowing economic growth further.

Additional impacts could include the following:

• Weaker earnings and corporate profitability
• Potential for job cuts, which can cause a negative self-perpetuating cycle 
• The need for government intervention to prevent a negative spiral

How can Organizations Mitigate the Impact of an Economic Slowdown?

Strengthen Liquidity and Capital Flexibility 

Maintaining robust cash reserves is critical as organizations face global uncertainty. Companies should prioritize liquidity to ensure they can continue to meet obligations during revenue dips and still capitalize on strategic opportunities such as acquisitions or investments in innovation.

Assess and Manage Workforce Needs 

Shifts in government policy, changes in public spending, and potential layoffs can all have wide-ranging effects on labor markets. To maintain agility and minimize disruption, organizations should assess their workforce needs through strategic actions such as skills mapping, reskilling and upskilling, and redeploying talent to high-priority areas.

Maximize the Value of Your Insurance Program

Organizations should use quantitative analytics tools to test and model scenarios and insurance program options, including alternative risk transfer. This can help businesses optimize their total cost of risk, ensure their program is aligned to their risk appetite and risk tolerance, and free up capital that can be reinvested elsewhere to support growth. 

Manage Risks and Monitor Economic Signals 

Organizations should regularly review and update their risk frameworks, stress-test their supply chains and enhance their scenario planning to address the compounding effects of economic, geopolitical and operational risks. Scenario planning and regular reviews of economic forecasts can help leaders anticipate oncoming economic headwinds.

Focus on Supply Chain Diversification and Resilience 

Global trade tensions and economic uncertainty underscore how important it is for organizations to broaden their supplier base and diversify their customer segments to reduce their exposure to specific markets or regions.

Use Digital Tools to Maximize Operational Efficiencies 

Deployed strategically, automation, generative AI and data analytics can all help organizations boost productivity and relieve cost pressures. These tools help unlock more efficient operations, more informed decisions and faster response times — all of which are integral to navigating tough economic conditions.

Why It Matters 

Moderate economic growth, inflation, high interest rates and trade policy uncertainty are likely to persist in the near term. But organizations can bolster their resilience and set themselves up for long-term success by remaining vigilant, strategic and focused on fundamental best practices.

¹ World Economic Outlook: A Critical Juncture amid Policy Shifts, International Monetary Fund, April 2025, https://www.imf.org/en/Publications/WEO/Issues/2025/04/22/world-economic-outlook-april-2025.
² “Global economic outlook uncertain as growth slows, inflationary pressures persist and trade policies cloud outlook,” OECD, March 17, 2025, https://www.oecd.org/en/about/news/press-releases/2025/03/global-economic-outlook-uncertain-as-growth-slows-inflationary-pressures-persist-and-trade-policies-cloud-outlook.html.
³ Wayne Duggan, “Recession 2025: What to Watch and How to Prepare,” U.S. News & World Report, July 14, 2025, https://money.usnews.com/investing/articles/recession-2025-what-to-watch-how-to-prepare.

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