Risk Trends 2025 and Beyond: The Economic Rollercoaster

How will economic volatility impact your business, and is your business model resilient enough for the future?

In 2024, Canada’s economy feels like an amusement park ride, filled with ups and downs that bring uncertainty and challenges. High interest rates, slow economic growth, and rising unemployment make it hard for businesses to succeed, or even to maintain the status quo.

It’s a bumpy ride, but one that can be navigated by understanding and mitigating some key risk factors. 

Our economy relies on commodities, like energy (e.g. oil, gas, renewables, and other natural resources). And when prices fluctuate, it creates a ripple effect, impacting exports, investments, and overall economic well-being. A drop in oil prices can hurt the economy by reducing the revenue generated by exports, which leads to decreased investment in the energy sector and a decline in the overall spending power in society.

The housing market continues to be an area of concern. High levels of household debt, high interest rates, and soaring housing prices — think of cities like Vancouver and Toronto — pose the risk of a market correction. This means that housing prices could suddenly drop, impacting consumer spending and financial stability. This may have dire consequences for a business, especially when losing customers because of the increasing cost of living.

Interest rate impacts 

Interest rates impact borrowing costs for consumers and businesses. Higher rates result in reduced consumer spending and housing market activity as household manage increased debt servicing costs.

To navigate this risk trend, businesses may want to focus on reducing debt and avoid over-leveraging in real estate. This risk can be managed by locking in low-interest rates on loans. A healthy flow of cash can help cover these higher costs, but sometimes this is more easily said than done.

Domestic policy decisions and political dynamics add yet another layer of uncertainty, impacting investment climates and economic priorities. To prevent these risks, stay informed on policy changes and be prepared to adapt quickly. You may also want to consider engaging in advocacy yourself. This can help make sure the interests of your business are represented. 

Why stop there? Here are other risks to consider:

• Trade dependencies and disruptions
• Global economic/market volatility
• Climate change and environmental risks
• Cyber threats
• Demographic challenges — like an aging workforce of leaders who will retire at a later age
• Geopolitical tensions and uncertainties, including the impact of wars

Questions to consider: 

• How has the economy and an interdependent global market impacted your business model, customers, and/or third parties?
• Can your business model survive the changes expected in the next three years?
• Will inflation and increasing prices help or hurt your value proposition?
• Do you have sufficient cash flow to be resilient to further fluctuations in the economy?