Ina Dimitrieva Elisabeth Wilson

Ina Dimitrieva is a business advisor in ESG & Sustainability, partnering with financial institutions, public organizations, and management consultancies to accelerate the transition towards a green economy. She provides state-of-the-art solutions for financial market participants, enabling them to be forerunners in sustainability and effective managers of ESG risks. She is based in Vienna, Austria, where she graduated from the University of Economics and Business Administration.

Inflation has multiple ramifications creating downside risks to growth. Traditional tools to control inflation are to raise rates and absorb excess liquidity that can diminish consumer demand propelled by price rises. When demand is brought down, the inflation trajectory can correct itself to eventually stabilise prices. The new thoughts on the nuances of reining in product pricing strategies can resonate as alternate ways to douse inflation.

today’s inflation risk: new approaches

by Maya Katenova

introduction

Inflation is a hot topic, which all economists are discussing across the world. Currently, it affects everyone indiscriminately. What shall we do? How to react? The classic corporate response to inflation is to select one of three unattractive traditional options. Managers can upset their customers by raising prices, upset their investors by cutting margins, or upset practically everyone by cutting corners in order to cut costs. The most popular option is the first one.

What they overlook, however, is that those three options are shortsighted tactical relics of earlier eras. In the 1970s, when “stagflation” gripped major economies, managers lacked the technology, the data, and in many cases the notion to do anything bolder or more strategic. Stagflation was a big problem and challenge. When inflation hit during the Great Recession of 2008-09, managers still saw themselves constrained within the same old trilemma, asking themselves, which of these shall we do?

Inflation in 2022 is a different story. Managers now enjoy a level of market visibility and agility that their predecessors could have hardly imagined even one generation ago. It’s an ideal time for them to treat inflation as a strategic opportunity rather than a tactical challenge, and to choose from a better set of options. Instead of worrying about how much more to charge their customers, they should devote their resources to figuring out how and why they should be charging them by bringing innovations in managing inflation risks.