In recent years, the global economy has been marked by periods of unprecedented volatility.  Recession and recovery have followed one another in quick succession, and companies have had to scramble to adapt.  Notwithstanding these challenges, it is still possible for companies to grow during volatile times — it just takes a bit of creativity and ingenuity.  

 

One way to do this is by diversifying your product line.  Offering a variety of products helps to protect your company from the ups and downs of the market.  When you implement a diverse product model, if one product is struggling, you can lean on the others to keep the business afloat.  

 

Another way to grow during volatile times is by investing in innovation.  Pursuing new technologies and finding ways to streamline your processes can help you stay ahead of the competition.  By being proactive and prepared, you can weather any storm. 

 

1.  Understand what volatility really means. 

 

When most people hear the word “volatile,” they think of something that is dangerous or unpredictable.  In the financial world, however, volatility simply refers to the amount of price movement in an asset.  For example, a stock with a lot of price movement (whether up or down) is said to be more volatile than a stock with less price movement.  In general, volatile assets are riskier than non-volatile assets, but they can also offer higher returns.  

 

Thus, understanding volatility and its potential impact on business and assets is essential for any investor who wants to make sound decisions.  By definition, volatility is impossible to predict, but there are various tools and techniques that can help investors measure it.  With a better understanding of what volatility really means, investors can make more informed decisions about which assets to buy and sell. 

 

      2. Identify the sources of volatility for your industry. 

 

Volatility is a fact of life in the business world.  No matter what industry you’re in, there will always be some degree of uncertainty.  While some industries are more prone to volatility than others, all businesses must be prepared for the possibility of sudden changes in the market.  There are a number of factors that can contribute to volatility, and it is important to be aware of the potential sources of instability in your industry. 

 

One common source of volatility is changing consumer tastes.  What’s popular today, may be out of fashion tomorrow; and businesses must be prepared to adapt quickly to stay ahead of the curve.  Another potential source of volatility is new entrants to the market.  New businesses can bring new ideas and innovations that can disrupt established players.  

 

Finally, changes in government policy can also have a significant impact on industries.  Whether it’s a change in tax rates or new regulations, businesses must be able to anticipate and adapt to these changes in order to remain in the game. 

 

Through understanding the sources of volatility in your industry, you can be better prepared for sudden changes in the market, and to implement necessary changes to your business model.  If you’re able to remain agile and adaptable, you’ll position your business for success no matter what challenges come your way. 

 

      3. Anticipate how events will impact your company. 

 

Volatility is a normal part of doing business, but that doesn’t mean it’s easy to manage.  The key is to anticipate how events will impact your company, and to have a plan in place to mitigate the risks.  For example, if you know that a new product launch is coming up, anticipating related marketing and advertising budgets is essential, and could also position you to be able to set aside extra funds to ensure the launch is successful. Alternatively, if you’re facing tough economic conditions, you might cut back on non-essential expenses in order to stay afloat.  

      4. Have a plan — and stick to it. 

 

Always have a plan to deal with any situation, and then create a contingency plan for that!  The important thing is to be aware of the potential risks and to have backup plans in place to deal with them.  By being proactive, you can protect your company from the ebbs and flows of the business cycle. 

 

Volatility and Private Lending 

 

If volatility is a measure of how much the value of an asset fluctuates over time, then understanding volatility is important for private lenders because it impacts portfolio risk.  Loans are typically more volatile than other investments, such as bonds or cash.  This means that while private loans have the potential to be very financially rewarding for lenders and investors, they can also lose value quickly if there is a change in economic conditions.  

 

Private lenders can manage this risk by diversifying lending portfolios across different types of loans.  By understanding and managing volatility, private lenders can protect their investment and preserve capital.  Lenders can also leverage default protection solutions to move risk off their books, and enable rapid-fire growth at a time when other lenders might be cutting back. 

 

Defeat Volatility With AXY Wrap® 

 

One way for private lenders to leverage default protection is with AXY Wrap®.  AXY Wrap® was created to safeguard the investments of retail and wholesale private lenders.  The AXY Wrap® product is designed to work with many different types of loans, including fix-and-flip, bridge, new construction, and commercial loans.  AXY Wrap® protects lenders by paying them 100% of the unpaid principal balance for all defaulted loans.  AXY Wrap® is available in all 50 states, and can be customized to fit the specific needs of each lender.  

 

Contact us today to learn more about how AXY Wrap® can help you defeat volatility and safeguard your lending business. 

Legal Disclaimer:

This article does not constitute an offer to sell, or the solicitation of an offer to buy, any security interest in any jurisdiction. This material is distributed for informational purposes only and should not be construed as investment, legal, tax, regulatory, financial, or other advice. No assurance can be given that any investment objective will be achieved, or that an investor will avoid losses or obtain a return on an investment. While the information contained in this article is believed to be reliable, its accuracy is not guaranteed. Individuals should consult with their own professional advisors with respect to the legal, tax, regulatory, financial, and accounting consequences of any potential investment.