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Home Comment Features 202102

Protect Yourself Using Environmental Scanning

22-Feb-2021
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We live in a globally interconnected world and it always surprising how things that happen on the other side of the globe can affect us all locally.

If you have a business or you are an investor then it can sometimes feel that there is no way to tell when something happens or how that might affect your interests.

But there is a solution - environmental scanning, and it is something that everyone who runs a business or invests in stocks or FX should know about.

What is environmental scanning?

Environmental scanning is the process of collecting as much information about the world that we operate in as possible whether it be locally, nationally or globally.

That information is then assessed to understand how that can affect our own interests, sometimes positively and sometimes negatively.

For a business that may be a reduction in world oil output increasing fuel prices, or for an investor the imposition of different interest rates by the Bank of Ghana that changes income received.

Above all, it is a systematic understanding of events that could lead to changing conditions locally.


Scanning globally

Environmental scanning is probably best understood if we look at the world stage.

A good example is the saying “when America sneezes the world catches a cold” and this demonstrates that the world economic system is interlinked and interdependent.

With much of the world economy trading in US Dollars, the price of a simple commodity that a business may need on a day to day basis can vary, not because of any underlying change in the physical thing itself, but simply because of American domestic policy.

By the same token, decisions taken by OPEC will affect the world crude price and by extension the cost of fuel in Tema or the price achieved for a barrel of oil on the commodities market.

Sometimes global events can overtake us and the perfect example of this would be the Corvid-19 pandemic. Smart investors would have seen the initial Chinese outbreak and then forecast how that would affect their positions in the stock market.

It’s useful to build up a series of tools that help with global environmental scanning so that it is possible to pick out events of note.

An economic calendar, showing the major announcements around the world and with specific stocks is helpful in this regard. Investors can track the impact of economic events on the stock market in the economic calendar and use that as a method to predict their own position.

Scanning nationally

National events can affect us all and are one of the quickest acting factors in the price of stocks, foreign exchange (forex) and commodities.

National scanning works in the same way as global scanning but has, by definition a smaller catchment area.

The typical example would be a new budget from the government which changes things like tax rates or provides new business initiatives that companies can take advantage of.

The national picture directly affects things at a local level and so increases in unemployment and poverty eans fewer buyers with less money to spend.

Even things like weather variations that affect the cocoa harvest will have primary effects (on cocoa producers) and secondary effects (on transport, wholesale and shipping businesses).

Scanning locally

Local scanning is especially important for businesses and really looks into the microenvironment that companies operate in.

A good example is where a new local road complex changes the way that traffic flows through the city.

A large bypass may help with city congestion but it will also reduce the number of potential customers coming into the local area.

Understanding the local world that they live in gives companies a competitive advantage over their peers and is vital if you want your company to thrive and grow.

How to start environmental scanning

The first step is to write down all of the most important things that affect your company or your investments.

What major themes would be bad? What good changes would bring positive benefits?

Then search out reliable sources of information.

The important point here is to make sure that you are not swayed by gossip and rumour but are more attuned to information that has a scientific and factual basis.

Make sure that you make a record of your findings. Our memories can play tricks with us and it will be important to make sure that you can look back and see how things have changed.

A good example would be the inflation rate.

If you think that high inflation is good for your business then make sure you have a graph showing where you are historically. That way you won’t make the mistake of thinking you have an opportunity when really you have just forgotten how things used to be!

Train yourself to notice how external events change the environment on the ground and look for examples of secondary effects that may prove to your advantage.

Join and become active in online communities of like-minded individuals. These may be people who are in business in different parts of the world, who own businesses like your or who are investors with a similar portfolio.

You will be amazed at how many little pieces of information you pick up in seemingly unimportant chats that actually end up making or saving you money!

The key to environmental scanning is to become almost an ‘information sponge’, finding and taking in data that could become useful at a later date.

Whenever anything happens globally, nationally or locally train yourself to ask the question ‘what does this mean for me?’ and then build your findings into your investment or business strategy.

Environmental scanning can give you the edge

Very often the key to a winning investment strategy or a competitive advantage for your business is one of timing.

If you have access to information quicker than your peers then you have the chance to move first, making the most of your advantage.

Why not start now by reading the business section and asking the question ‘what does this mean for me?

 

 
 

 

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