Outsourcing: Your Best Way to Manage Recession Risk 

When economic headwinds point to recession, there is a natural tendency for businesses to self-protect and isolate. Yet, that may mean pulling back from the very partnerships and strategies that can help companies manage uncertainty and remain agile when faced with volatile market conditions. The question we should focus on is not “is the U.S. headed for recession?’, but rather, ‘what will make my business less vulnerable to economic shocks?’ Because shocks do routinely occur, whether they happen today, tomorrow, or five years from now, and when they do, outsourcing may just be your best way to manage recession risk. Here’s why… 

Is the U.S. Headed for a Recession?  

What is the likelihood of a U.S. recession this year? Although it may be impossible to fully predict, according to J.P. Morgan, the growing trade war with China has raised the probability to 60%, and according to Forbes’ recession tracker, some economists place the odds as high as 90%. Then, there are the more modest assessments from the CEOs of the U.S.’ biggest financial institutions, saying chances of a recession are just shy of the halfway mark, around 40-45%.  

The usual indicators of recession, which often include rising inflation, higher unemployment, and lower economic growth, are also leaning more towards a ‘yes’ than a ‘no’, even though the U.S. unemployment rate remains little changed from last year.  

What seems to be tipping the scales is the uncertainty created by America’s fluctuating tariffs, which have been aimed at nearly every U.S. trading partner. This has more than 8 out of 10 financial managers predicting weaker global economic growth overall, says Forbes analysts. The stock market also continues to remain volatile, with a recent dive in the S&P that wiped out nearly $10 trillion in market value. 

What’s even more telling is U.S. consumer sentiment, which has deteriorated sharply over the past few months, reaching dismal levels not seen since the start of the global pandemic. Inflation expectations are also the highest since 1981, which means many Americans are prioritizing savings, delaying purchases or reining in discretionary spending in anticipation of harder economic times or potential job layoffs. 

What to Do in Such Uncertainty 

It’s always a good idea to plan for less-than-ideal markets, as there are natural peaks and troughs of economic activity throughout the U.S.’ history. America has in fact weathered at least five official recessions since 1980, according to National Bureau of Economic Research, and though sales revenues often bounce back to normal levels once the economy recovers, consumers often pull back on spending when a recession is looming.  

Corporate spending and investments tend to be reduced, with a hesitancy to commit to longer contractual commitments with outsourced vendors and reduced budgets for sales, marketing and customer support. But, the true risk when nearing a recession is to pull back on resources tied to your customer experience (CX).

By reducing customer support options or reducing staff levels within your CX teams, you could end up compromising overall service quality and could risk your brand’s reputation and market position, especially to businesses that stay “all in” even in recessionary times. At worse, you could even alienate your loyal customer base – whose sales you will need when market conditions turn favorable, and people start spending again.  

A study by Watermark Consulting found that companies that prioritized customer experience during the 2007-2008 recession experienced over 6% revenue growth, while CX laggards saw an average revenue decline of 57%. 

Starbucks is one example. During the 2008 recession, the company focused on rebuilding its customer relationships through staff retraining and customer-centric campaigns like "My Starbucks Idea", a way for customers to directly share their ideas about Starbucks products, services, and marketing. This built a large fan base and allowed the company to signal that quality and consistency were priorities even in a recession, which helped maintain its market leader position. 

How Outsourcing Can Be Your Best Way to Manage Recession Risk 

The major risk in a recession is the unpredictability of consumer demand and sales revenues, as well as costs that could suddenly escalate due to inflation. How can outsourcing help companies to better navigate this volatility? 

Remain Flexible During Times of Fluctuating Demand 

In a recession, there could be fluctuating consumer demand, and a business needs to be able to quickly adapt. With an outsourcer, you don’t have to take on the financial or logistical burden of suddenly hiring or laying off contact center staff. Outsourcers are accustomed to seasonal shifts and can seamlessly adjust their workforces with no disruption to your support levels, which gives businesses the advantage of rapidly scaling during sudden peaks or downsizing as needed.  

Keep Things Lean Without Sacrificing Quality 

During economic downturns, companies sometimes bring customer support back in-house to save costs. But, this often leads to smaller, overworked teams, with higher rates of errors and attrition, which negates the original benefit of staff reduction. The Caribbean supports a lean operating model without sacrificing quality, with cost savings of 40-50%, which can become even greater in a recession, as supplier’s currencies often depreciate against the U.S. dollar. 

Prioritize Core Business Functions That Focus on Growth 

If nothing else, outsourcing allows businesses to focus on their core competencies, which in recessionary times is essential. By switching to a variable cost model, where you pay only for the CX services you need, without having to invest in IT infrastructure, contact center equipment and staffing admin, it means that you can reallocate vital resources and energy to other initiatives, like product development, to enhance your business’ growth, efficiency, or competitiveness.  

Find the Right CX Partner 

Of course, it’s critical to partner with an outsourcer that understands your concerns, one that can work with you to manage risk and maintain operational flexibility. Look for a partner that has a proven track record of reliability and effective communication, as well as flexible service agreements that allow you to adjust staffing capacity as needed. This will ensure that your business remains agile enough to navigate the difficulties of a recession, while guaranteeing that support quality is consistent throughout a downturn, something customers will remember. 

Learn more about our CX management and how we can give your business the agility it needs during unpredictable economic times.