Reading is often shared among millionaires and billionaires pursuing success and wealth. The business world and various industries are constantly evolving. Successful people understand the value of lifelong learning.
Books often provide a platform for shaping one’s mindset and attitude. Positive thinking, resilience, and a growth mindset can be reinforced through literature. This is why even the most brilliant entrepreneurial minds read books. Some of the most popular ones have been listed below.
The Fountainhead – Top Books Millionaires and Billionaires Read
Mark Cuban is one of the world’s most liberal-minded billionaires and is a massive fan of The Fountainhead by Ayn Rand.
The book’s protagonist, Howard Roark, is a young, uncompromising architect who rebels against social norms and refuses to give in to pressure from an institution that isn’t open to new ideas. Roark epitomizes what Rand saw as the ideal man, and his struggle reflects Rand’s opinion that individuality is better than collectivism. Ayn Rand stated that the central theme of The Fountainhead was “individualism versus collectivism, not in politics but within a man’s soul.“
Snow Crash
Book
Snow Crash
Author
Neal Stephenson
Goodreads Rating
4.02 out of 5
Snow Crash – Top Books Millionaires and Billionaires Read
Ev Williams, Larry Page, Sergey Brin, Tobi Lütke, Cameron Winklevoss, and Mark Zuckerberg have all recommended the science fiction book Snow Crash by Neal Stephenson.
In Snow Crash, the brainstem’s programming language is Sumerian, and all characters are personifications of computer and technological components. In a far-off future where technology has developed to the point where organic matter and mechanical parts have been combined, the book’s narrative depicts the impact of technological advances on our daily lives.
Another theme in the story examines how American culture runs and how it glorifies consumerism. The narrator points out that people are constantly attacked by advertisements promoting various items and that an average person can’t avoid them. Stephenson establishes the story following a financial crisis to examine cryptocurrencies and anarcho-capitalism.
Zero to One
Book
Zero to One
Author
Peter Thiel
Goodreads Rating
4.16 out of 5
Zero To One – Snow Crash – Top Books Millionaires and Billionaires Read
Elon Musk is the founder of SpaceX and Tesla and the owner of X (formerly Twitter). His recommendation for young and upcoming entrepreneurs is Zero to One by Peter Thiel. Thiel begins the book by asking a contrarian question: “What important truth do very few people agree with you on?” The intention is to encourage readers to recognize distinctive viewpoints essential for transformational innovation. He applies his experience with the ‘PayPal Mafia’ to investigate how close-knit organizations can grow into successful businesses. He believed that the culture of a corporation should, in some ways, be similar to a cult. Throughout the book, Peter Thiel encourages business owners to go after monopolies, question the current status quo, and concentrate on the last-mover advantage.
Principles
Book
Principles
Author
Ray Dalio
Goodreads Rating
4.12 out of 5
Principles – Top Books Millionaires and Billionaires Read
Andrew W. Houston and Jack Dorsey are two top American Internet Entrepreneurs who recommend Principles by Ray Dalio. Ray Dalio is an American billionaire, hedge fund manager, and philanthropist. He is the co-founder, chairman, and chief investment officer of Bridgewater Associates, one of the world’s most significant hedge funds. This book is divided into three sections: Work Principles, Life Principles, and a thorough description of Dalio’s personal experience. Dalio discusses approximately five hundred high-level, mid-level, and sub-level concepts in his book.
Antifragile
Book
Antifragile
Author
Nassim Nicholas Taleb
Goodreads Rating
4.10 out of 5
Antifragile – Top Books Millionaires and Billionaires Read
Vinod Khosla is an Indian-American entrepreneur and venture capitalist. He is a co-founder of Sun Microsystems and the creator of Khosla Ventures. Antifragile by Nassim Nicholas Taleb is a thought-provoking book that delves into the concept of antifragility. According to Taleb, most individuals, groups, and systems are inherently fragile and depend on comparatively high degrees of predictability and stability to prevent collapsing. In contrast, antifragile systems are designed to flourish in unstable and unpredictable situations.
The Ride of a Lifetime
Book
The Ride of a Lifetime
Author
Robert Iger
Goodreads Rating
4.42 out of 5
The Ride Of A Lifetime – Top Books Millionaires and Billionaires Read
Bill Gates is known not to be a fan of the typical leadership books as he believes they are unrealistic or impractical. However, the one book that he considers to be excellent enough to make an exception is The Ride of a Lifetime by Robert Iger.
The Ride of A Lifetime depicts Robert’s rise to the position of CEO of Disney and illustrates how his vision, tactics, and direction helped the business survive through a period of challenging conditions. Robert Iger’s career has been defined by taking chances and taking calculated risks. Having met an ABC executive by accident, he entered the TV business and helped establish the company’s entertainment and sports sections. After joining Disney and surviving the company’s worst downturn, he worked his way up the corporate ladder to become CEO in 2005.
How Bill Gates Reads Books
High Output Management
Book
High Output Management
Author
Andrew Grove
Goodreads Rating
4.31 out of 5
High Output Management -Top Books Millionaires and Billionaires Read
High Output Management by Andrew Grove has been recommended by nine entrepreneurs, including Brian Armstrong, Brian Chesky, Larry Ellison, and Ron Conway. This book will introduce you to the fundamentals of management.
Andrew shares many of the managerial techniques that helped him turn Intel into the world’s biggest semiconductor manufacturer. He served as Intel‘s CEO and Chairman during the company’s rapid expansion. He teaches you how to use concepts in situations such as team management, self-management, the nature of the production process, running successful meetings, recruiting, and much more. Andy also recommends that businesses start with the longest, most difficult step and work their way backward. He also believes that production process issues should be resolved at a cost that is as low as possible.
The Remains of the Day
Book
The Remains of the Day
Author
Kazuo Ishiguro
Goodreads Rating
4.14 out of 5
The Remains Of The Day – Top Books Millionaires and Billionaires Read
Jeffrey Bezos is an American entrepreneur, media owner, and investor. He is the founder, executive chairman, and former CEO of Amazon, the world’s biggest cloud computing and e-commerce corporation. His number one recommendation is Kazuo Ishiguro’s The Remains of the Day.
The Remains of the Day is the narrative of Stevens, a middle-aged English butler who worked at Darlington Hall from the 1920s to 1956. Stevens has never had the opportunity to reflect on his history, but the time off that he receives from his vacation causes him to do so. The novel’s flashback style helps Stevens criticize himself for devoting so much of his time to revisiting memories that he cannot change. Dignity and greatness are also discussed throughout the novel in a broader sense, with the author suggesting that they do not have rigid definitions.
Only the Paranoid Survive
Book
Only the Paranoid Survive
Author
Andrew Grove
Goodreads Rating
3.97 out of 5
Only The Paranoid Survive – Top Books Millionaires and Billionaires Read
Only The Paranoid Survive by Andrew Grove is a book that has been read and recommended by Bill Gates, Steve Jobs, Vinod Khosla, and Jamie Dimon. Grove draws on his expertise as Intel’s CEO to provide clear advice on planning for, identifying, and responding to the types of upheavals that drive less adaptable organizations out of business. It is a must-read for everyone hoping to succeed in today’s fast-paced business world as a timeless guide to adaptability and success in the face of constant change. He also presents practical tools and ideas to help the next generation of corporate descendants stay competitive.
The Hard Thing About Hard Things
Book
The Hard Thing About Hard Things
Author
Ben Horowitz
Goodreads Rating
4.22 out of 5
The Hard Thing About Hard Things – Top Books Millionaires and Billionaires Read
The Hard Thing About Hard Things by Ben Horowitz is a book that has been favored by seven highly renowned entrepreneurs, including Google co-founder Larry Page and Meta’s Mark Zuckerberg.
In The Hard Things About Hard Things, Ben discusses his experience leading startups and businesses through good and bad times. It discusses decision-making, hiring and firing, developing culture, and dealing with failure. Horowitz offers both particular and general guidance on how to build a successful business while being true to one’s principles. Hard things can be difficult, but they are an unavoidable part of life and needed for growth. Taking care of your physical, mental, and emotional health is necessary for remaining focused and motivated throughout these difficult times.
The Intelligent Investor
Book
The Intelligent Investor
Author
Benjamin Graham
Goodreads Rating
4.25 out of 5
The Intelligent Investor – Top Books Millionaires and Billionaires Read
Berkshire Hathaway owner Warren Buffet says The Intelligent Investor changed his life and recommends reading two chapters from the book in particular- Chapter 8 and Chapter 20. Benjamin Graham’s book The Intelligent Investor is regarded as one of the most influential works on value investing. This book won’t show you how to outperform the market. Instead, it gives you three significant lessons.
Graham covers the unavoidable nature of market fluctuations and the emotional challenges investors face during volatile periods. The analytic sections of the book adapt Graham’s principles to contemporary market conditions and offer up-to-date analysis. He also strongly supports investing with a margin of safety or when the price is significantly lower than the predicted intrinsic value.
What book does Elon Musk recommend for aspiring entrepreneurs, and what is the main idea?
Elon Musk recommends “Zero to One” by Peter Thiel. The book encourages readers to identify unique and valuable ideas for starting businesses and to focus on building strong company cultures.
What is the concept of “Antifragility” discussed in a book recommended by Vinod Khosla?
Vinod Khosla recommends “Antifragile” by Nassim Nicholas Taleb. The book explores the idea of systems that benefit from volatility and uncertainty, rather than just surviving it.
What life-changing book does Warren Buffett recommend for investors?
Warren Buffett highly recommends “The Intelligent Investor” by Benjamin Graham. The book focuses on value investing principles and avoiding emotional decisions during market fluctuations.
On March 10, 2022, the entire business world woke up to this shocking news from the Federal Deposit Insurance Corporation (FDIC),
“Today, Silicon Valley Bank, located in Santa Clara, California, was shut down by the California Department of Financial Protection and Innovation. The Federal Deposit Insurance Corporation (FDIC) has been designated as the receiver in this case.”
This news sent shockwaves throughout the sector. This was the largest bank to have failed since the 2008 financial crisis & the second largest in the history of the US. This created huge chaos in the financial market because the shutdown of a bank as large as SVB would mean a very large situational crisis for businesses all over the world.
Nestled in the heart of innovation and techie dreams, Silicon Valley Bank stood as the financial bedrock of the world’s most dynamic and groundbreaking industries.
Since its inception in 1983, SVB has been one of the largest banks in the USA with more than $200 billion in assets. Silicon Valley Bank is a venture debt provider that specializes in funding tech startups all over the world.
As the financial pulse of the tech mecca, SVB had greatly adapted to the fast-paced rhythms of Silicon Valley.
This financial powerhouse had been more than a bank to the startups; it was a strategic partner, a mentor to startups, and a catalyst for entrepreneurial success.
With a client list like Tesla, Uber & LinkedIn, SVB had carved a niche as the go-to financial institution for the ever-evolving needs of the tech community. In 2022, Forbes named SVB among America’s best banks.
Largest Bank Failures in the United States, March 2023
Chronology of the Events Leading to the Downfall
Just like the many other important events of the past decade, this too had its genesis in the pandemic. Adding fire to the flame was the Ukraine-Russia war.
Let’s dig deeper into its roots.
The Pandemic
As the pandemic hit and the whole world came to a standstill inside the four walls, the software industry was one among the few others that remained largely unaffected.
This turned the attention of the venture capitalists towards this industry. This resulted in the tech startups raising a huge sum of money in 2021. These venture capital investments nearly doubled year-over-year to around $329 billion in 2021.
This further resulted in banks holding a lot of deposits including the SVB. According to data by Bloomberg, it was estimated that as of March 2021, SVB had jumped to $124 billion from $62 billion in the previous year.
On the other hand, due to the pandemic, the interest rates have gone too low. SVB wanted to make use of this situation & provided high-interest rates to the depositors at around 2.33% while other banks like Bank of America were giving an interest rate of 0.96%.
This also resulted in many big businesses depositing their money with SVB resulting in a huge influx of cash.
As a result, SVB invested heavy sums of money in long-term bonds for its Hold to Maturity (HTM) portfolio with 10 years of maturity.
Everything was smooth until the next major factor came in.
Ukraine-Russia War
The war led to an energy crisis all over the world leading to a high inflation rate. According to the Bureau of Labour Statistics, inflation in the US peaked at 9.1 % in 2022. So, as the usual financial procedure goes, the interest rates skyrocketed to 4.33%.
This led to the lowering of bond values affecting the values of bonds bought by SVB. Also due to high interest rates, businesses, instead of opting for loans for their financial needs, started withdrawing their deposits from the bank. This led to billions of dollars being withdrawn from the bank at the same time.
To address this liquidity crisis, SVB had to sell a $ 21 billion bond portfolio at a $1.8 billion loss.
As the news spread, this led to a situation of bank-run further creating a sense of fear in the whole business world and the stocks of SVB plunged by 60% in a single day. As a result, SVB couldn’t carry on further with its banking activities.
Eventually, the Federal Deposit Insurance Corporation (FDIC) took over and created a new bank called the National Bank of Santa Clara to continue the business activities further.
The Indian Government and the economists had assured that there wouldn’t be much of a contagion effect on the Indian market due to the collapse of SVB.
Sakshi Gupta, Deputy Vice President of HDFC Bank says, “The SVB collapse is unlikely to turn into a systemic risk. India’s banking system exposure to the SVB collapse is low and the health of the banking system remains sound….”
That said, we need to understand that some sectors including our tech-based startups and IT firms will be affected to some extent.
For example, among the startups, specifically those that were funded by the American incubator, YCombinator will have to face the consequences of the collapse. That’s because about 60% of the YCombinator’s startups in India have exposure to SVB.
Also, this collapse might slow down the funding that the whole startup ecosystem has been getting & result in an overall slowdown of the sector.
Another important factor to consider is the decline in overall confidence that the public has in the banking system resulting in a drop in deposits & other banking activities.
As far as SVB’s Indian clients are concerned, their priority should be to determine how exposed they are to the bank and take the necessary precautions to safeguard their assets and enterprises. This may include getting legal help, revisiting loan terms, and looking for other finance and investment options.
Current Status
Currently, Silicon Valley Bank is operating as a division of the First Citizen Bank
Conclusion
The downfall of a bank as big as SVB is a reminder of the significance of prudent risk management and investing methods, particularly in the financial industry. It also emphasizes the importance of policymakers carefully considering how their choices would affect the financial sector and the overall economy.
In a company, one of the most significant factors is the employees. Without them, one cannot even imagine running a company, no matter how small the business is. Your employees are the main assets of your company. However in 2022, we are seeing, some major, popular companies laying off their employees. Some of these layoffs have stunned the world of business as they are even reaching thousands of employees at once.
The reason for the layoffs varies, from cost-cutting to bad performance to financial difficulties. Some of the companies even faced criticism for their sudden decision. Many people lost their jobs during the pandemic and now these strings of similar layoffs are creating a ruckus in the world. The economic situation of the world is also a big reason for these layoffs. According to reports over 8000 people alone in just the first half of 2022 have been laid off by their companies.
In this article, we will talk about those companies who have laid off their employees and their reason for doing that. Furthermore, we will also talk about the companies that have the possibility to follow the path of laying off their employees. So, without any further ado, let’s get started.
“Your employees come first. And if you treat your employees right, guess what? Your customers come back, and that makes your shareholders happy. Start with employees and the rest follows from that.” -Herb Kelleher
Founder – Bill Hewlett, David Packard Founded – 1939 Laid Off – Up to 6,000 Employees (by 2025)
HP – Top Companies Laying off Its Employees
The American multinational IT Company, HP has joined the list of top tech companies laying off its employees. HP will lay off 4,000 to 6,000 employees, which is around 10% of its current global workforce of 61,000, over the next three years as a part of its cost-cutting efforts.
The company will also reduce its real estate footprint along with the layoffs. HP’s ‘Future Ready Transformation’ plan is expected to save the company as much as $1.4 billion annually by the end of 2025. It expects the restructuring and other activities to cost around $1 billion.
India’s prominent food delivery startup, Zomato, is reportedly planning to lay off its employees on account of its cost-cutting efforts to become profitable. Zomato is going to lay off about 3-4% of its workforce, which currently consists of nearly 3,800 employees. Around 100 Zomato employees have already been affected in the product, technology, catalogue, and marketing areas. Zomato has called it a “regular performance-based churn.” Earlier, Zomato laid off around 520 employees (13% of its workforce) in May 2020 as a result of the business downturn caused by the pandemic.
Amazon
Founder – Jeff Bezos Founded – 1994 Laid Off – 10,000 Employees (November 2022)
Amazon – Top Companies Laying off Its Employees
Amazon has also joined the bandwagon of layoffs and is reportedly laying off 10,000 employees in corporate and technology jobs. The company’s layoffs will be focused on its device business, including its Alexa products, and its retail and human resources divisions. The layoffs represent less than 1% of Amazon’s global workforce of more than 1.5 million. It is the biggest job cut that Amazon has ever made in its history.
Meta
Founder – Mark Zuckerberg, Andrew McCollum, Chris Hughes, Dustin Moskovitz, Eduardo Saverin Founded – 2004 Laid Off – 11,000 Employees (November 2022)
Meta – Top Companies Laying off Its Employees
On November 9, 2022, Meta, the parent company of Facebook, Instagram, and WhatsApp, announced that it is laying off more than 11,000 employees, accounting for nearly 13% of its workforce. It is one of the biggest tech layoffs of 2022. According to Meta’s CEO, Mark Zuckerberg, the reasons behind the company’s mass layoffs include the macroeconomic downturn, increased competition, and diminishing ad revenues, which caused Meta’s revenue to be lower than what he had expected.
Meta also plans to cut down its discretionary expenses and continue the hiring freeze through the first quarter of 2023.
Twitter
Founder – Jack Dorsey, Biz Stone, Evan Williams, Noah Glass Founded – 2006
Twitter Recent Layoffs
November 2022
3,700 employees
July 2022
100 employees
Twitter – Top Companies Laying off Its Employees
Twitter is an American communications company founded by Jack Dorsey, Biz Stone, Evan Williams, and Noah Glass on March 21, 2006. Currently headquartered in San Francisco, California, United States, Twitter is one of the biggest social media platforms that has been all over the news in relation to one of the biggest acquisitions in modern times ($44 billion), led by billionaire techie, Elon Musk. Twitter laid off 30% of its staff (nearly 100 employees) from the recruiting team in July 2022.
On November 4, 2022, Twitter laid off about 3,700 employees, accounting for nearly 50% of its global workforce, including 90% of employees in India, as a way to cut costs following the company’s acquisition by Musk, which closed on October 27, 2022.
Founder – Amod Malviya, Vaibhav Gupta, Sujeet Kumar Year – 2016 Laid Off – 350 Employees (November 2022)
Udaan – Top Companies Laying off Its Employees
Udaan, a B2B eCommerce platform and a proud unicorn startup in India has joined the list of top companies laying off its employees. The startup laid off about 350 full-time employees in November 2022 in order to attain profitability and better efficiency. However, this is not the first time that the startup has laid off its employees. Earlier in June 2022, it laid off 180 employees as a part of its cost-cutting initiatives. The second round of its layoffs this year comes only a week after the startup raised $120 million through convertible notes and debt.
Coinbase
Founder – Brian Armstrong and Fred Ehrsam Founded – 2012
Coinbase Recent Layoffs
November 2022
60
June 2022
1,100
Coinbase – Top Companies Laying off Its Employees
Coinbase is an online platform from which you can buy and sell cryptocurrency. The employees of the company work remotely and it doesn’t have any headquarters. It is considered the biggest crypto exchange platform. On a very shocking note, the company laid off around 1,100 of its employees which amounts to almost 18% of its workforce in June 2022. According to the company, the decision has been taken to control and manage the expenses of the company with the ongoing situation in the market.
Coinbase laid off another 60 employees from its recruiting and institutional onboarding departments in November 2022.
Unacademy
Founder – Gaurav Munjal, Hemesh Singh, Roman Saini Founded – 2015
Unacademy Recent Layoffs
November 2022
350 employees
June 2022
150 employees
Unacademy – Top Companies Laying off Its Employees
One of the biggest EdTech companies in India shocked everyone this year when they decided to lay off around 600 employees. It was a sudden decision in the month of April. The reasons for this layoff were said to be that the performances of the employees were not good enough.
After that, the edtech giant laid off 150 employees in June 2022. On November 7, 2022, Unacademy conducted another round of layoffs and laid off around 350 employees, accounting for nearly 10% of its workforce of 3,500, as the company tries to cut its expenses and generate a profit.
Microsoft
Founder – Bill Gates, Paul Allen Founded – 1975
Microsoft Recent Layoffs
October 2022
1,000 employees
August 2022
200 employees
July 2022
1,800 employees
Microsoft – Top Companies Laying off Its Employees
Microsoft Corporation or Microsoft was founded by Bill Gates and Paul Allen on April 4, 1975. Microsoft is an American multinational technology corporation that is unarguably one of the biggest tech companies in the world today. However, after the company announced that it would be laying off as part of a “realignment”, Microsoft also joined the list of big companies laying off their employees. Besides, it is also important to note that Microsoft became the first tech giant to lay off employees.
Microsoft laid off 1,800 employees in July 2022, and a month later, it laid off another 200 employees. In October 2022, it laid off around 1,000 employees, marking the third round of layoffs in the same year.
BYJU’S
Founder – Byju Raveendran, Divya Gokulnath Founded – 2011 Laid Off – 2,500 (October 2022)
BYJU’S – Top Companies Laying off Its Employees
In October 2022, the biggest Edtech in India, BYJU’S took a drastic decision and announced that it will lay off 2,500 employees or 5% of its workforce. The unicorn, even after reaching a valuation of around $22 billion, decided to sack its employees. The startup’s co-founder and CEO blamed macroeconomic conditions and the startup’s plans to achieve profitability by the end of the current financial year as the reasons behind mass layoffs.
Noom
Founder – Saeju Jeong, Artem Petakov Founded – 2008
Noom Recent Layoffs
October 2022
500 employees
April 2022
500 employees
Noom – Top Companies Laying off Its Employees
Noom is a wellness app that deals with tracking the weight of a person and also focuses on mental health. The company in the month of April announced the dismissal of 500 employees. The layoff is done because of the sole reason for changing the coaching model. The strategy of coaching has been changed, and the employees were dismissed for the betterment of the business. In October 2022, Noom laid off about 500 employees, accounting for nearly 10% of its total staff.
Clear
Founder – Ankit Solanki, Archit Gupta, Srivatsan Chari Founded – 2011 Laid Off – 190 to 200 Employees (September 2022)
Clear – Top Companies Laying off Its Employees
India’s leading Fintech SaaS startup, Clear (formerly Cleartax) is another prominent name that has joined the list of companies laying off their employees in 2022. The Bengaluru-based startup laid off 190 to 200 employees across different departments on September 15, 2022. This number amounts to nearly 20% of the company’s workforce. The layoffs are said to be a part of the company’s restructuring efforts to increase its cash flow.
Rupeek
Founder – Sumit Maniyar Founded – 2015
Rupeek Recent Layoffs
September 2022
50
June 2022
180-200
Rupeek – Top Companies Laying Off Its Employees
Rupeek is a digital gold loan provider company whose headquarters is situated in Bengaluru, India. It is present in over 35 cities. The company laid off about 180-200 of its employees which is 10-15% of its workforce in June 2022. The layoff has been done from different departments and teams. Rupeek gave the reason for cost-cutting for firing its employees, the company is looking forward to making its structure leaner and more compatible. In September 2022, Rupeek once again laid off around 50 employees across different departments as part of its strategy to become profitable in the next 12-18 months.
Meesho
Founder – Sanjeev Barnwal, Vidit Aatrey Founded – 2015
Meesho Recent Layoffs
August 2022
300 employees
April 2022
150 employees
Meesho – Top Companies Laying off Its Employees
Meesho, in a sudden and surprising move, fired 150 employees of the company from their grocery business in the month of April. The popular reselling startup in India had its grocery business called Farmiso, which has now been renamed Meesho Superstore. The company is in discussion to merge the grocery store with its main app. The reorganization of the store is said to be the reason for the layoffs. This is also based on their performance in the business till now and their efficiency in adapting themselves to the new form of Meesho Superstore.
A few months later, in August 2022, Meesho laid off more than 300 employees after shutting down its grocery business in India, Superstore.
Better.Com
Founder – Eric Wilson, Erik Bernhardsson, Shawn Low, Viral Shah, Vishal Garg Founded – 2016
Better.com Recent Layoffs
August 2022
250 employees
April 2022
1,000 employees
March 2022
2,000 employees
December 2021
900 employees
Probably the most controversial layoff that has been done is by Better.com. The company was facing the heat since last year when it fired over 900 of its employees over a single Zoom call in December 2021. In March 2022, it laid off 2,000 employees and about 1,000 employees were fired in April 2022. In this year only, they have laid off almost 3000 of their employees. As per the company, the reason for the layoff is based on the performance of the employees. They have stated that the employees are fired because of their lack of productivity and their inefficiency in work. Since December 2021, the company has fired almost 50% of its workforce.
In August 2022, Better.com conducted yet another round of layoffs, by firing about 250 employees.
Ford
Founder – Henry Ford Founded – 1903
Ford Recent Layoffs
August 2022
3,000 employees
April 2022
580 employees
Ford – Top Companies Laying off Its Employees
The American multinational automobile manufacturer Ford, in the month of April, announced that they are laying off 580 of its US employees. This decision comes right after when the company announced that it will restructure the company and will focus on the making of electric vehicles. The dismissal is mainly done by the engineering department as the making of electric vehicles required different skill sets. Therefore, as per the company, it is done for the future needs of the company.
In August 2022, Ford confirmed laying off around 3,000 employees and contract workers. The job cuts are effective September 1, a spokesman said. The reason behind the layoffs is said to be the change in operations and redeployment of resources as the company plans to embrace new technologies that were not previously core to its operations, such as developing advanced software for its vehicles.
Walmart
Founder – Samuel Moore Walton Founded – 1962 Laid Off – 200 Employees (August 2022)
Walmart – Top Companies Laying off Its Employees
Walmart Inc., the popular American retail multinational corporation disclosed that it would be cutting the job roles of hundreds of corporate employees. In its Bentonville, Arkansas, headquarters, Walmart reported on August 3, 2022, that it would have to part with nearly 200 of its employees. The departments that would have to bear the brunt are numerous, including merchandising, real estate, and global technology, among others.
Robinhood
Founder – Vladimir Tenev, Baiju Bhatt Founded – 2013
Robinhood Recent Layoffs
August 2022
700+
April 2022
300+
Robinhood – Top Companies Laying off Its Employees
Consumer investing and trading service company, Robinhood before announcing its financial performance in the first quarter of 2022 announced that they are going to lay off 9% of its employees that is more than 300 of its employees in April 2022. All these employees were their permanent employees. The company went public last year in 2021 but they face a decline in trading, as per reports, this is said to be the main reason for the dismissal. In August 2022, the company again laid off about 23% of its workforce which might account for more than 700 employees. The Financial Times estimated the number of employees impacted to be nearly 780.
Yes, another popular Edtech startup, Vedantu has laid a good number of employees. Vedantu laid off 424 employees both full-time and contractual, in May 2022. Before that, it laid off 200 of its employees in the same month. The reason for this is to increase their Capital runway as per Vedantu. Apart from that, the reopening of schools and classes being conducted offline, are also said to be the reason for the layoffs of the Edtechs. Vedantu again laid off 100 employees across departments, in July 2022. This was done due to the business restructuring procedure that Vedantu is planning.
BlueStacks
Founder – Rosen Sharma, Jay Vaishnav, Suman Saraf Founded – 2011 Laid Off – 120 to 150 Employees (July 2022)
BlueStacks – Top Companies Laying off Its Employees
BlueStacks was founded by Rosen Sharma, Jay Vaishnav, and Suman Saraf in 2011. Headquartered in Campbell, California, United States, BlueStacks is known as the 2nd largest PC gaming platform in the world that aims to bring PC gamers and the Android gaming library. The pouring demand for Android smartphones has helped the company witness humongous growth throughout the year. This popular Android emulator platform has laid off 60 Indian employees, as per reports dated July 20, 2022. BlueStacks reportedly informed a majority of the employees via video calls on July 18, 2022, that their services would not be needed anymore.
Along with India, the company has also cut down its workforce in many other countries as well, from its offices in London, Tokyo, Seoul, and Beijing. The total count of layoffs might be as high as 150 employees as well, ranging between 120-150, according to the reports. The reason behind the layoffs is internal restructuring. BlueStacks has offered 1 month of salary as severance pay to the laid-off employees along with medical benefits, as mentioned by sources.
TikTok
Founder – Zhang Yiming Founded – 2016 Laid Off – 100 Employees (July 2022)
TikTok – Top Companies Laying off Its Employees
TikTok is a short-form video hosting service platform that is owned by the Chinese company ByteDance. TikTok has achieved sensational growth in India and across the world for its viral, short-form content, which even resulted in several countries complaining and banning TikTok. The platform is still growing with 8 new users joining TikTok each second. It has over 1 billion monthly active users, as of July 2022.
The popular, controversial ByteDance subsidiary TikTok has reportedly started reducing its workforce by laying off staff working in the EU, EK, and the US. These layoffs, according to Wired and some other news and media networks might affect around 100 TikTok employees, which currently work with a workforce of around 10,000 employees across the US and Europe. The TikTok layoffs are in line with the global restructuring initiatives of the company.
Netflix
Founder – Marc Randolph, Reed Hastings Founded – 1997
Netflix Recent Layoffs
June 2022
300 employees
May 2022
150 employees
Netflix – Top Companies Laying off Its Employees
The biggest streaming platform, in a surprising turn of events, announced that it was going to lay off 150 of its employees across the company in May 2022. Although it was not a huge number, it still became the talk of the town. Some of Netflix’s sudden decisions led to its slower growth of revenue, which was said to be the prime reason for laying off 150 employees. According to Netflix, it was basically done to cut costs at the streaming giant. Netflix recently lost over 2 lakh subscribers and is expected to lose more; this is one of the reasons for its slower revenue growth. In the month of June 2022, Netflix again laid off 300 of its employees, and again the reason was cost cutting.
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Founder – Elon Musk, Martin Eberhard and Marc Tarpenning Founded – 2003 Laid Off – 200 (June 2022)
Tesla – Top Companies Laying off Its Employees
Tesla which was working on its Autopilot advanced driver assistance features has faced a sudden shock. In an unexpected turn of events, Tesla laid off around 200 employees who were working on the autopilot feature in June 2022. This decision comes after Elon Musk asked the company to decrease the headcount by 10%.
CityMall
Founder – Angad Kikla and Naisheel Vardhan Founded – 2019 Laid Off – 191 (June 2022)
CityMall – Top Companies Laying off Its Employees
The three-year-old Ecommerce startup CityMall stuns everyone when it announced the layoff of 191 of its employees in June 2022. The Gurugram-based startup even after raising $75 million, added its name to the list of startups that have laid off their employees in the year 2022. The reason for this layoff as stated by the company is the structural changes that are taking place in the system.
Cars24
Founder – Gajendra Jangid, Mehul Agrawal, Ruchit Agarwal, Vikram Chopra Founded – 2015 Laid Off – 600 Employees (May 2022)
Cars24 – Top Companies Laying off Its Employees
Cars24 said goodbye to over 600 employees of the company, which is 6% of their workforce. The fired people include employees from different departments and roles. The company has not provided any special reason for the layoff and has only stated that it is based on the performance of the employees. Every year employees are laid off if they are not providing their very best. Cars24 decision of firing its employees comes at a time when the company is looking to expand itself globally.
Klarna
Founder – Sebastian Siemiatkowski, Niklas Adalberth Founded – 2005 Laid Off – 700 (May 2022)
Klarna – Top Companies Laying off Its Employees
Klarna is a Swedish fintech company that deals with online financial services. In a pre-recorded video the CEO of the company forwarded the news to the employees that the company will lay off 10% of the global workforce. Almost 700 employees were affected by this decision in May 2022. The CEO said that the Ukraine-Russia war and a likely recession are the reason behind this drastic step.
In September 2022, the company disclosed over a video meeting that it is planning another round of layoffs in an attempt to “reflect” its new and “more focused nature.” According to Klarna, the new round of layoffs will affect less than 100 employees, globally.
MFine
Founder – Prasad Kompalli, Ashutosh Lawania Founded – 2017 Laid Off – 500 (May 2022)
MFine – Top Companies Laying off Its Employees
MFine is a digital health platform based in Bengaluru that provides services like doctor consultations, diagnostic tests and others. The health platform’s sudden turn of events laid off almost 500 employees of the company in May 2022. It is almost 50% of their workforce. The company hired employees even in the month of April but after the struggle to raise funds started increasing, it decided to lay off its employees.
Blinkit
Founder – Albinder Dhindsa Founded – 2013 Laid Off – 1,600 approx (March 2022)
Blinkit – Top Companies Laying off Its Employees
Blinkit, previously known as Grofers is an online grocery shopping platform, recent in the month of March it laid off some of its employees. It is said to be 5% of their workforce which is about 1,600. The layoff has been done in mostly three cities, Hyderabad, Kolkata and Mumbai. The company has spent almost INR 600 Crores to focus on their 10 minutes delivery offering. Apart from laying off their employees, the online grocery platform is also delaying the payments of the vendors. The main reason for the layoff is said to be cost-cutting.
Trell
Founder – Agrawal, Sachan, Arun Lodhi, Bimal Kartheek Rebba Founded – 2016 Laid Off – 300 (March 2022)
Trell – Top Companies Laying off Its Employees
Nothing seems to be going right for the Social commerce startup Trell. Amidst its investigation of its alleged financial irregularities, it is said to have decided to fire 300 of its employees almost 50% of its workforce. The situation that has led to this decision is mainly the investigation that is going on by EY India. However, the company gave out the reason for restructuring and strengthening the company for the layoff. The roles that are not needed are cut off from the company.
Furlenco
Founder – Ajith Karimpana Founded – 2012 Laid Off – 180 (March 2022)
Furlenco – Top Companies Laying off Its Employees
Furlenco is a startup that provides rented furniture to its customers. The company is said to lay off about 180-200 of its employees. It is also reported that the startup has stopped all their operation in the cities like Kolkata, Jaipur, Chandigarh and Mysuru. The company has given restructuring as the main reason for the firing of their employees, the staffs mostly belong to the customer support and grievance management departments.
OkCredit
Founder – Gaurav Kumar, Aditya Prasad, Harsh Pokharna Founded – 2017 Laid Off – 40 (February 2022)
OkCredit – Top Companies Laying off Its Employees
OkCredit is a digital ledger company and on a shocking front, the company laid off around 40 of its employees in the month of February 2022. The organisation said that the reason for the sudden decision was because of the company’s changes in their priority. This has led to the restructuring of the company and the roles of the employees in the company which has led to the dismissal of several employees from the company.
Lido Learning
Founder – Sahil Sheth Founded – 2019 Laid Off – 150+ Employees (February 2022)
Lido Learning – Top Companies Laying off Its Employees
The employees of Lido Learning faced a shocking and terrible situation when about 150 to 200 of them were laid off in the month of February 2022. Lido Learning has been backed by some of the most prominent investors like Anupam Mittal and Mukesh Bansal. The company also raised over $10 million in the month of September 2021. Lido Learning founder Sahil Sheth informed the employees that because of facing some financial difficulties, the company wouldn’t be able to pay their salaries. Apart from that, some employees were asked to look for other jobs.
Unilever
Founder – Antonius Johannes Jurgens, Samuel van den Bergh, Georg Schicht Founded – 1929 Laid Off – 1,500 Employees (January 2022)
Unilever – Top Companies Laying off Its Employees
Unilever, the consumer goods multinational company revealed its plan to cut 1,500 jobs from the company in January 2022. This will be valid worldwide, the decision comes after its failure to buy the consumer health division of GlaxoSmithKline. Unilever has decided to opt for a more competitive operating model and reorganize the company for its growth and to be more responsive to consumer trends.
DiDi
Founder – Cheng Wei, Zhang Bo, Wu Rui Founded – 2012 Laid Off – 3000 (February 2022)
DiDi – Top Companies Laying off Its Employees
Chinese Ridesharing service DiDi decided to lay off 20% of its workforce in the month of February. Approximately 3,000 employees lost their jobs because of this decision. The reason for this decision is said to be the regulatory pressure that the company faced since an investigation was launched against the company last year. With its shares facing a huge decline and the company suffering a loss, the decision was taken to analyse the whole matter.
Royal Mail
Founder – Henry VIII Founded – 1516 Laid Off – 700 (January 2022)
Royal Mail – Top Companies Laying off Its Employees
The postal company of Britain, Royal Mail has been present for centuries. The company in January 2022 decided to cut off 700 employees of theirs. This decision comes after the company faced problems because of Covid, which has led to delays in deliveries. The performance of the postal company was criticised, therefore to bring change and restructure the company, they decided to fire their 700 employees.
In October 2022, the company announced that it is planning to cut down its workforce by around 10,000 by August 2023. Royal Mail attributes this decision to ongoing strikes and rising losses at the company.
Nestlé
Founder – Henri Nestlé Founded – 1866 Laid Off – 104 (March 2022)
Nestle Logo
Nestlé is a Swiss multinational food and drink conglomerate. In a sudden decision, the food processing giant has decided to close down its Sweet Earth food facility that is in California. This has led to the laying off of 104 employees in March 2022. The decision comes after, the plant-based meat company was seen to have negative growth and experience losses. Nestle acquired Sweet Earth Food Facility in 2017, it sells plant-based meat food items.
Tesco
Founder – Jack Cohen Founded – 1919 Laid Off – 1600 (February 2022)
Tesco Logo
Tesco is the biggest supermarket chain in Britain, now the supermarket chain is looking for a major overnight transformation. They are mostly shutting down the meat and fish counters of 300 stores because of low demand. This decision may lead to the layoff of 1600 employees of Tesco. The job cuts are followed as the supermarket chain is on the verge of reorganising itself.
Cineplex
Founder – Ellis Jacob, Garth Drabinsky, Gerald W. Schwartz Founded – 1999 Laid Off – 5000 (January 2022)
Cineplex Logo
Cineplex is a movie theatre chain in Canada. The pandemic situation has created many problems throughout the world, the theatre chain also faced a problem due to this. The company in the month of January announced that it was temporarily laying off 5000 employees of their as theatres are shutting down in Ontario. This decision comes after the surge of the Omicron variant of Corona in the country. However, the layoff is said to be a temporary one.
Primark
Founder – Arthur Ryan Founded – 1969 Laid Off – 400 (January 2022)
Primark Logo
The UK-based multinational fashion retailer Primark has decided to cut off 400 employees of theirs in the month of January. As per reports, the decision was taken to simplify the management structure. As the omicron variant surged and the inflation seems to get serious, the sales of Primark were hit. Now to restructure the company, the layoff was needed.
Conde Nast
Founder – Condé Nast Founded – 1909 Laid Off – 90% of the Workforce
Conde Nast Logo
Conde Nast is one of the biggest global media companies, home to some iconic brands like Vogue, GQ and Vanity Fair. On a quite shocking front, the Magazine giant announced that they will lay off 90% of employees in Russia and will halt the distribution of Vogue Russia and other publications of theirs. The biggest reason for this decision was said to be the Ukraine invasion by Russia. The company has cut off its term permanently with Conde Nast Russia.
Common Reasons for the Layoffs
Big companies and organisations are facing problems and many of them are laying off their employees in response to that. There are multiple reasons, varying from company to company. Some of the common reasons for the layoff are:
Companies are not able to adapt to the situations after the lockdown and pandemic.
Inflation is on the rise again.
Companies facing financial difficulties.
The slowdown of funding in the business world.
The Ukraine invasion by Russia has led many companies to stop doing business with the latter.
The inefficiency of employees.
Restructure and modernisation of a company.
Companies That Have to Freeze Their Hiring
With the economy of the world facing jeopardy and several other reasons, a number of companies have frozen their hiring and they are:
Meta has frozen their hiring and it is said to be lasting through the first quarter of 2023. The main reasons, the company has given are the industry-wide downturn and privacy data changes.
In May 2022, Wayfair froze their hiring for 90 days and again the reason is the situation with the economy of the world.
Twitter freezes their hiring and many of its top employees are getting fired, the sole reason is the ownership change of the company, as it now belongs to Elon Musk.
Google is another company that has slowed down its hiring, though it has not frozen its recruitment yet, as mentioned by Google CEO Sundar Pichai, in the first week of July 2022.
Conclusion
Various companies are taking the step of firing their employees as mentioned above the reason varies from economic conditions to the pandemic to the restructuring of the company, and even the inefficiency of the employees. Apart from all these, there also seems to be a slowdown in funding and pressure by investors to make the company more and more profitable. With the current global economic situation, it seems like the worst is yet to come.
FAQs
What is a layoff?
A layoff simply refers to the termination of an employee of a company. It occurs due to business-related reasons and not because of the employee’s fault. A company may lay off a single employee or multiple employees at the same time.
Why Companies are laying off their employees?
Companies are firing employees for various reasons that vary from economic conditions to the pandemic to the restructuring of the company, and even the inefficiency of the employees.
Which Indian startups are laying off their employees?
Many Indian startups are laying off their employees in 2022, including Udaan, Unacademy, BYJU’S, Vedantu, Meesho, Cars24, Clear, Lido Learning, and more.
Is Meta laying off its employees?
On November 9, 2022, Meta, the parent company of Facebook, Instagram, and WhatsApp, announced that it is laying off more than 11,000 employees, accounting for nearly 13% of its workforce.
How many Twitter employees were laid off?
On November 4, 2022, Twitter laid off about 3,700 employees, accounting for nearly 50% of its global workforce, including 90% of employees in India, following the company’s acquisition by Elon Musk.
The worldwide COVID-19 pandemic may have pushed the world economy into a chaotic situation, with 2020 and 2021 projected to be worse than any of the years since the global financial crisis. However, billionaires, in theselected group of countries, have seen their financial situation improve during the phase of the pandemic, which has been financially painful for most people around the world.
According to a US report, Billionaires have doubled their wealth in the pandemic. Their wealth sees more growth during Covid-19 than in the last 14 years. The total wealth for billionaires stood at around $5 trillion and it is the biggest surge since forever.
The sharp surge in the wealth of the richest Americans is being driven by the bounceback of the stock market in the US, primarily driven by the unprecedented action from the US Federal Reserve. Despite the surge in US Covid-19 cases and the record 43 million Americans filing for unemployment benefits, the country had hovered at record highs.
Investors have been buying equities, with Big Tech companies and those linked to healthcare such as Big Pharma and hospital stocks among the major beneficiaries as the US Fed’s emergency responded to the crisis by cutting interest rates to 0% and undertaking to buy unlimited amounts of bond translated into assets such as stocks, despite being risky investments, seeing fresh demand.
During the pandemic crisis, Amazon shares surged nearly 50% while Facebook recovered from the troughs that it hit in the month of March to record highs. Bezos, Facebook founder’s net worth surged over $30 billion since March 18.
A recent study calculated billionaire wealth using data provided by the Forbes Global Billionaires List, an actual assessment of net worth. March 18, 2020, is used as the starting date as it roughly corresponds with the time when the US Government began imposing lockdown restrictions.
“At a time of enormous economic pain and suffering, we have a fundamental choice to make. We can continue to allow the very rich to get much richer while everyone else gets poorer and poorer. Or we can tax the winnings a handful of billionaires made during the pandemic to improve the health and well-being of tens of millions of Americans,” the US Senator Bernie Sanders said.
Billionaires in India
In India, Mukesh Ambani’s net worth rose to nearly $79.3 billion, calculated on August 10, 2020, making him the fourth richest person in the world. Ambani’s wealth rose by $22 billion in 2020. He slowly shifted his focus to e-commerce, with tech giants seeking to buy a piece of India’s fastest-growing digital market.
On the other hand, his conglomerate Reliance Industries was slammed by a decrease in demand for oil amid COVID-19, its share price has more than doubled from the low in March as its digital unit got billions in investments from companies including Facebook and Google.
Major Indian pharma companies’ Share prices were on fire amidst the raging pandemic. Pharma tycoons like of companies like Sun Pharma, Dr Reddy’s Laboratories, Aurobindo Pharma, Divi’s Laboratories, Cipla etc. have doubled their net worth during the crisis. The wealth of Sunil Mittal and Gautam Adani of Adani Group has also grown largely.
There is a severe wealth level of financial inequality, which exists in India, and the fact that during the pandemic that inequality has become much worse. The extraordinary wealth gains that billionaires have earned during the pandemic come at a time when COVID-19 pandemic may double the poverty in India.
Billionaires Who Got Richer
Some of the Worldwide Billionaires who have grown richer and richer even during the Pandemic, they have never ceased to grow and surprise their onlookers.
Billionaires who got rich in pandemic
Steve Ballmer
The former Microsoft CEO Steve Ballmer’s net worth has increased tremendously during the pandemic. The tech billionaire had donated around $28 million to coronavirus charities in the month of August. The initial net worth was $52.7 billion and the amount gained was $18.5 billion, summing up the total endnet worth $71.2 billion.
Ma Huateng
Chinese advanced technology billionaire Ma Huateng’s wealth has increased by 53.5% during the pandemic. The beginning net worth was $38.1 billion, it rose to end net worth of $58.5 billion with total amount gained $20.4 billion.
A giant tech company called Facebook, its Founder and CEO Mark Zuckerberg became 77% richer during the pandemic. He donated $180 million to coronavirus charities as of August in 2020, a drop in the bucket for the tech billionaire. The initial net worth was $54.7 billion, which turned into a net worth of $96.8 billion. Gaining a huge amount of $42.1 billion.
Mukesh Ambani
The net worth of the Indian billionaire, Mukesh Ambani has increased to around $48.4 billion during the pandemic. He donated $68.32 million of the amount and 0.09% of his total net worth to coronavirus causes. The beginning net worth was $36.8 billion, it became the total sum of $85.2 billion. It makes the gained amount as $48.4 billion.
Jeff Bezos
Currently, the richest man in the world, Jeff Bezos, has made most of his profits during the pandemic through his e-commerce site called Amazon. Bezos gave nearly 64.3% of his total net worth to coronavirus causes, which amounts to $127 million worth of donations. The beginning net worth stood at $113 billion and the latest net worth was $185.6 billion, gaining the amount of $72.6 billion.
Conclusion
The worldwide billionaires did extremely well during the global pandemic crisis, growing their already-huge fortunes to a new level. Millions and millions of citizens faced great economic desperation, the already rich Billionaires became richer all this while.
FAQs
Who is the richest man in the world?
Elon Musk is currently the richest person in the world with his net worth of $219 billion.
Has billionaires beme richer in pandemic?
Billionaires has increased their wealth duric pandemic.
31st March has just passed. Was the last month of the gone financial year full of a hassle for you? Do your last-minute tax-saving plans always lead you to invest in the wrong instruments? Well, if your answer is yes, you are at the right place. In this blog, we have brought you tips on how to organize your personal finance in the new financial year.
A book named “Personal Finance” written by E. Thomas Garman and Raymond Forgue defines Personal Finance as the study of resources, both personal and family, that can be considered important from a financial perspective. It involves spending, saving, protection, and investment of these financial resources.
Financial freedom is available for those who learn about it and work for it. – Robert Kiyosaki
Key Aspects of Personal Finance
The reason most people fail in making a successful financial plan is a lack of awareness. Although people make a lot of effort while managing their finances, they often overlook important areas. In this section, we will discuss the 5 key aspects of Personal Finance.
Saving
Warren Buffet has said “Do not save what is left after spending, but spend what is left after saving. This is indeed a great piece of advice. You cannot predict when the financial crisis will hit you. Therefore, it is better to remain prepared.
Savings help you to keep calm in such situations and look for a solution. As per experts, your optimum savings should be equal to your six months expenses.
Earlier, the most preferred option for savings was a “Saving account”. However, recently a lot of people are moving towards debt instruments such as liquid funds for saving.
There are a number of reasons for this shift. Foremost, Liquid funds have minimal credit and interest risks attached. Further, you can easily withdraw money in small time. Also, though there is no guarantee, these funds provide you with better returns than your savings account.
Investing
Investing
As Benjamin Graham said, “Successful investing is about managing risk, not avoiding it”. Many people confuse saving and investing to be the same. Well, they are not.
While investing, you are actually using your money to make more money. There are plenty of investment options available in the market such as mutual funds, real estate, stock market, etc.
To choose the correct investment options organize them into short, long, and mid-term goals. The option best suited for your requirement, horizon, and time frame should be chosen.
Financial Protection
As per WHO, financial protection is the heart of Universal Health Coverage (UHC). If chosen well, it gives a safety net to you and your loved ones. The key is to ascertain prepayment and pooling of resources to save you from financial hardship.
Financial protection ensures that these impromptu situations do not hamper your savings and investment plans. Insurance is classic financial protection. Basically, four types of insurance plans are considered mandatory for an individual. They are Term insurance, Health insurance, Mortgage Protection, and Personal accident insurance.
Tax Plan
Tax Planning
You can save your tax by identifying the right kinds of investments and purchases. In India, there are almost 70 exemptions and deductions that can be used to lower your taxable income.
Section 80C and 80D of the Income Tax act may help you save a lot on your income. Under Section 80C, you can reduce your taxable income by investing in certain tax-saving instruments such as EPF, PPF, NPS, NSC, etc.
On the other hand, Section 80D allows you to save tax on the money you pay as a premium for the health insurance of you and your family.
Retirement Plan
“Planning for retirement is not something we can put off until a later date. The time to plan is now.” Here Bob Reid has correctly described the need for a retirement plan.
Unless you are planning to become a liability to your kids, you should start planning for your retirement now. This is actually because you never know when you will stop working.
The greater life expectancy and frequent inflations have further enhanced the need for a retirement plan. Investing in sources of steady income can be the best option. Life insurance annuity, rental income, and mutual funds are good options to consider for your retirement plan.
How to Organize Your Personal Finance in the New Financial Year?
Now that we know the key aspects, we are ready to organize our personal finance. We have listed tips to help you organize your personal finance in the new financial year.
1. Start Early
“Haste makes Waste”. If you have tried to plan your finances and investment in the last month of the financial year, you can certainly relate to this statement. During the last-minute rush, not just you but investors are also impatient. Thus, there are maximum chances of making a wrong decision. Therefore, it is better not to wait for March to plan your finances. Starting early helps you to make calculated decisions. Put your financial plan in place in the month of April itself.
If you wish to invest in PPF or SIPs in your equity-linked saving schemes (ELSS funds), better start at the beginning of the new financial year.
2. Plan your Budget
Living within your means is important. Plan your expenditure and savings for the next year in the beginning. Go through your previous year’s income and expenses to make the right decision.
Set your financial goals and decide your cash flow accordingly. If you have received a good bonus, try to prepay your loans, at least partially. Our income and aspirations play a major role in deciding our financial plan.
This would help you to identify your spending. So, you can strike the right balance between spending and savings. If cutting down your expenditure is not an option, try using smart spending means such as loyalty programs, credit cards, or some apps.
Try competing with your previous month’s budget. It would help you grow as a smart spender. Try setting goals and make efforts to reach them.
3. Create an Emergency fund
This is the fund that will help you take care of the unexpected expenses in “just-in-case” situations. Usually, financial experts advise keeping 20% of your every paycheck in this fund.
As per Forbes, you can create an emergency fund by simply following a few steps. They are:
Setting up a target date to start your fund.
Reallocating some amount from existing assets.
Drawing a monthly commitment.
Creating a separate account for gathering.
Channelize extra income towards this fund.
4. Determine your insurance needs
Determine Your Insurance Needs
Insurance is not only meant to save tax, rather it is a means to serve critical needs. The beginning of the new financial year is a good time to determine if you have adequate insurance coverage.
The finance experts believe that your insurance cover must be 10 times your annual income. Also, reviewing your insurance needs as per your changing life goals is important for example, if you are planning to get married, have a child, or buy a house.
As per a Swiss report, people in India are awfully uninsured. The protection gap is almost 83% wide. This means that if the Rs 100 insurance cover is needed only Rs 17 are spent by the policyholders.
To evaluate the adequacy of your insurance cover you can also use Human Life Value (HLV) tools. These tools are available online and help you assess your financial requirements based on your liabilities, increments, earning capabilities, and your age.
5. Review your investment portfolio
It is always a great idea to review your investment portfolio at the beginning of the new financial year. Track the market performance of your existing assets to understand how it has changed since last year.
Readjusting your investment strategy is especially important if you have experienced any major life changes in the last year. For example, if you are nearing retirement, you may want to invest in a good retirement plan. Evaluate your needs and invest accordingly.
6. Plan to spend your annual bonus
If you have received an annual bonus do not let the money get fritter away. Plan your spending well. For example, if you have a loan you can partially or completely prepay it. Or if you have a child try spending the bonus on good Children’s plan.
Even if you have no such liability, this does not mean you can just cross your budget and waste that money. Try channelizing it towards your savings or emergency fund. This will help you meet your financial goals.
7. Plan your taxes
Planning your taxes at the beginning is a great way to start your new financial year. It is actually a part of the financial discipline. To initiate tax planning, you first need to identify your tax slab. The tax rates are different for different levels of income. If you know your tax slab, you can easily calculate your tax outgo. This will help you to figure out your tax-saving requirement.
To analyze the scope for reduction, first, evaluate your existing tax-saving investments. This is crucial as there is a maximum limit for reducing the tax outflow.
A number of tax-saving instruments are available to choose from such as PPF, NPS, tax-saving mutual funds, etc. It is also important to distribute your tax investment across the year instead of doing it in the last month. However, it is equally important to understand that investment goals must be derived from your financial goals and not for the purpose of tax savings.
8. Limit your debts
It sounds easier said than done. Anyways who wants to remain in debt? It just happens. However, as per Central Bank, there are certain strategies to keep your debts in check. They are:
Do not buy anything which you cannot afford without a credit card.
Completely pay off your credit card balance, every month.
Focus on your needs not wants.
Plan your budget as per your financial goals and requirements.
Limit the number of cards you own.
Maintain a master sheet to track your expenses.
9. Monitor your credit score
It is almost impossible to not own a credit card in today’s world. However, it is crucial to managing your credits correctly. A solid credit report is required if you are planning to obtain a loan or mortgage a property. For this, you better pay off your balance every month or at least try to keep a minimal credit utilization ratio.
The most popular credit score these days is FICO (Fair Isaac Corporation) score. The factors that determine your FICO score include payment history (35%), length of credit history (15%), amounts owed (30%), credit mix (10%), and new credit (10%).
It is also a good idea to subscribe to credit agencies that provide you with regular updates on your credit score. This would not just help you in identifying mistakes but, also to detect any fraudulent activity.
10. Maintain financial records
It is always important to keep your financial records organized. This will help you track any discrepancies at later stages. Traditionally, a folder or drawer is used to keep all your bill and payment receipts. However, this increases the risk of missing or forgetting one or more of them.
Currently, a number of apps are available to keep track of your finances. These online services help you separate the old bills and receipts from the new ones. Also, you can set reminders for upcoming payments. This saves you from the hassle of looking through every document in your folder while trying to find one.
Conclusion
Therefore, it is important to understand the five key aspects of personal finance i.e. savings, investment, financial protection, tax plan, and retirement plan before you start to plan. Moreover, organizing your personal finance in the new financial year using the tips mentioned above would certainly help you get more out of your available assets.
Hope you enjoyed reading this article and learned something. Keep visiting for more fun and knowledge.
FAQs
How do I write a financial plan for the new year?
Start early, create an emergency fund, plan your taxes, and monitor your credit score.
Which financial plan should be set first?
Creating an emergency fund should be your priority because you never know when a crisis will hit you and you’ll be buried under debts.
What is the 50 30 20 budget rule?
According to the 50 30 20 budget rule, you should allocate 50% of your income to needs, 30% to spending, and 20% to savings.
Economics has always been an important thing for a country. You may not like the subject in your school but it is something that is super real in nature. It is basically the allocation of resources to achieve the most optimum efficiency. As the number of people grows in a country, so does the responsibility and the load to be more active and unbiased in every sphere of allocation of resources. Good allocation of resources is important because resources are finite.
If not managed well, the whole economy can just crash, however big or small the economy is. This is what we are reminded of every now and then. This unusual year brought up the news of a country getting economically unstable. The country is Sri Lanka and it is in a really serious economic condition. The people of Sri Lanka are facing extreme situations associated with their economy. This article focuses right on the same topic.
Read this article to know about what is happening in Sri Lanka and what the world is saying about it, how the country plans to get out of this tight phase and much more. Here we go,
A Little Brief About the Sri Lanka Economic Crisis
Recently, the news broke out about Sri Lanka from which we came to know that the country to the south of India is facing a financial crisis and there are fears of bankruptcy. News resources reported that Sri Lanka is in a super tight place right now and it might have extreme economical conditions in the near future.
The Sri Lankan foreign reserves have hit a record low where the commercial banks are failing to secure “dollars to finance imports of food, fuel and medicines”, as says Deccan Herald. All of these started with the outbreak of the COVID-19 pandemic, which devastated the country’s tourism sector, a pivotal industry of the Sri Lankan revenue, and also reduced the foreign workers’ remittances.
To save the country, the Sri Lankan government announced a broad import ban in March 2020. However, this backfired in the form of shooting the food prices up by 25%, as per the reports of February 2022, and has contributed to an overall inflation of 17.5%. Furthermore, the country is also facing 5-hour electricity blackouts each day because the thermal generators have run out of fuel. According to the reports, the country is still battling its $51 billion sovereign debt.
It has been heard that he Sri Lankan government had received a $1.2 billion economic relief package from India for a cure. This economic relief package, as announced by the government on January 4, 2022, amidst the ongoing forex crises of the country, ensures that the Sri Lankan government is optimistic about their future. They want to communicate that the country will not default on its international debt.
The Current Situation in Sri Lanka Due to the Crisis
The GDP of Sri Lanka over the years
Sri Lanka’s external reserves were dropped severely in November of 2021. The fall marked the external reserves to $1.6 billion. This fall triggered alarm in most of the domains and quarters of the country. Concerned people warned about this in the government. Economists and Think tank’s warned that this fall in foreign reserves will mean a sovereign default in the future.
American credit rating organisation ‘Fitch’, after the event in Sri Lanka downgraded the nation’s rating to CC. A CC rating is the lowest rating just before the defaulter tag. It is to be noted that Sri Lanka had a piling pile of feigning debt over the last few years. However, the island has never defaulted on any of the foreign debts until now.
Fitch Ratings of Sri Lanka
This downtrend in the year 2020 is seen as the record breaker for Sri Lanka. The current situation is seen as a super meltdown and has impacted the whole island. Living costs are rising impeccably, food shortages are forecasted up this year and as per the reports, Sri Lanka will likely default on the debt that it has accumulated.
Having said about the economic crisis and the depleting foreign reserves, there are many issues that Sri Lanka is facing right now. Inflation is seen at an all-time high in the country and the basic living conditions are getting costlier. Food prices are skyrocketing and its treasuries are shrinking.
The economic crisis that the country is facing right now is inhumane and the hole is too deep to get out from. The country appears to be staring at a human crisis that will hurt not only the growth rate in the pandemic era but the basic sustainability index of the country.
According to World Bank estimates, 5 lakh people in Sri Lanka have fallen below the poverty line since the pandemic struck, which it described as a “huge setback equivalent to five years’ worth of progress”.
The World Bank has estimated that about 5 lakh people have fallen below the poverty line and this trend started during the Covid 19 pandemic. This setback was so deepening that it took away Sri Lanka’s five years worth of growth with itself. This is a huge shock for the economy of Sri Lanka and the people who make up the economy.
In further reports, it is said that the country’s economy has contracted by 1.5%, just by the end of the third quarter of 2021. With the new year 2022, it is not going to be easy for Sri Lanka to sustain itself as there are real concerns about the country going bankrupt.
The government, however, said Tuesday the country will not default on its international debt as it announced a USD 1.2 billion economic relief package.
Finance Minister Basil Rajapaksa said Sri Lanka would duly pay the international sovereign bond of USD 500 million due in a fortnight, a PTI report said.
Sri Lanka, which is an Island to the south of India, is a great tourist spot. It is estimated that tourism revenue makes up about 10% of the island’s GDP (Gross domestic product). This was the usual rate in the island country.
With the onset of the Covid19 pandemic, this rate was badly hit and the tourism sector came to a sudden halt. This had really a cascading effect on the earnings of the nation. However, every other major tourist destination faced this issue but the effect was real. Magnified on Sri Lanka as the tourism there makes up a good chunk of the GDP.
While the halting of tourists was a good attack on the economy, there were some other reasons as well. The other ascertained reasons for the fall would include, Heavy Expenditures. The president of Sri Lanka, Gotabaya Rajapaksa did some hefty expenditures during the year.
Gotabaya Rajapaksa – President of Sri Lanka
His government tried to cut taxes from people that impacted government revenues. More and more spending led to less and depleting foreign reserves and thus the reserves hit a rock bottom. The country is very high on loans and grants and has China as a major debt partner. The Guardian recently reported that Sri Lanka has massive debt repayments to China alone.
Sri Lankan rupee (Currency of the island) crashed too. This is basically termed as ‘Inflation’. Inflation reached a record high in Sri Lanka, and is rising continually, leading to a spike in food prices, which was the reason for worry for the common citizens of the country. Reacting to the rise in inflation, President Rajapaksa announced an economic emergency in August 2021, just a couple of months before the foreign reserves crash. This emergency was implemented to control the situation and contain it. The effect was to lessen the hoarding of items by people in their homes, which could lead to more severe shortages.
Four months went by and as the inflation rose more, basic goods became unaffordable for the general public. Not just that, it has been reported that even well off or socially rich people are having trouble affording basic needs and wants. These many months, the citizens of Sri Lanka faced a tough time to make both ends meet.
The government had appointed a former army general as commissioner of essential services, giving him the power to seize food stocks hoarded by traders and retailers, and ensure essential items were sold at prices set by the government, but little was done on the ground to lift people out of their misery, the Guardian report said.
What Sri Lanka is facing right now is inhuman and horrendous. The economic conditions there have seen very tight phases but this phase is the most horrific. Adding to that, this is when the whole world is facing a global pandemic which could lead to any ruins. This has broadened the possibilities of Sri Lanka going bankrupt. After witnessing a drop of 70% in foreign exchange reserves during the past 2 years, the government of Lanka and the people of the island country, are experiencing a currency devaluation and are looking forward for help from the global lenders. According to the latest news dated March 28, 2022, Sri Lanka, which is a country for 22 million people, is struggling to pay for essential imports Let us see what the numbers and opinions about the country say.
This is not a certain statement but the probability of this country going bankrupt has never been this high. It has been reported that the country is super deep in debts and owes tremendous amounts to other counters. Here we are presenting a few stats that prove the misery of Sri Lanka.
Sri Lanka owes an amount that is more than $5 billion to China. This is probably the biggest amount of debt that the country has ever taken. The country is paying the China debt in instalments.
Not only that, but Sri Lanka is also a debtor to Beijing for $1 billion, which it took to overcome the previous acute crisis. Along with the major countries and regions that Sri Lanka owes money to, it is reported that there are many private and government entities that it owes money to. This situation of enormous debts and depreciating foreign reserves can be a ‘Checkmate’ situation for the republic of the nation.
“We have high debt from three countries — China, Japan and India. The total outstanding for this year would be USD 6.9 billion,” FM Rajapaksa, the younger brother of President Rajapaksa and Prime Minister Mahinda Rajapaksa, was quoted as saying in the PTI report.
The finance minister of Sri Lanka openly announced the amount they owe to countries. He said that Sri Lanka owes a sum total of about $7 billion to countries like China, Japan and even its neighbour, India.
Sri Lanka’s huge foreign debt burden is one of the main reasons for its economic crisis. As of November, foreign currency reserves available with the country were just $1.58 billion, down from $7.5 billion when Rajapaksa became the president in 2019, the report said.
National debt of Sri Lanka
Amid the falling environment, the opposition party in Sri Lanka also took a dig. An opposition member of parliament, Harsha de Silva (who is also an economist) told parliament that foreign reserves would be in the negative if the rate of decline continues. Moreover, the Sri Lankan newspaper ‘Daily mirror’ quoted “The nation will go totally bankrupt”.
Opposition MP Harsha de Silva, who is also an economist, told Parliament in December that the country’s foreign currency reserves would be minus $437m by January, and the total foreign debt services would be $4.8 billion between February and October 2022. “The nation will be totally bankrupt,” Sri Lankan newspaper Daily Mirror quoted him as saying.
De Silva said he was not trying to scare anyone but it was a reality that “all imports will come to a halt, the entire IT system will be shut down including the google map as we will not be able to pay for it”.
The government has, however, always made an optimistic approach and has insisted that it can meet the obligations.
Minister Ramesh Pathirana has said they would try to settle past oil debts with Iran by paying them with tea. Sri Lanka plans to send $5m worth of tea every month to Iran to save “much needed currency”, The Guardian reported.
Ministers are worried about what the future may look like and all they want is to minimise the damage.
Central Bank Governor Ajith Nivard Cabraal has also said that Sri Lanka would be able to pay off its debts “seamlessly”.
Former central bank deputy governor WA Wijewardena, however, told The Guardian that there were high chances that the country would default on repayments, and that would have catastrophic economic consequences.
“When the economic crisis deepens beyond redemption, it is inevitable that the country will have a financial crisis too. Both will reduce food security by lowering production and failing to import due to foreign exchange scarcities. At that point, it will be a humanitarian crisis,” he warned.
The chances of Sri Lanka defaulting on loans and debts have never been high. However, when we dug up information about the finance department in the government and what the finance minister has to say about this, we found that they have a plan.
The plan is a new and strong relief package that will try to rebalance the economic imbalance. The debt can be looked at as a secondary objective but for now, the thing that they would like to focus on is the foundation of the economy. The employees, pensioners and differently-abled soldiers are the first-hand people who will get the benefits.
The finance minister, meanwhile, said Tuesday they have a plan in place. He said the new $1.2 billion (229 billion Sri Lankan rupees) economic relief package includes payment of a special monthly allowance of Rs 5,000 to 1.5 million government employees, pensioners and differently-abled soldiers from January 2022.
This is by far the response of the Sri Lankan government to the crisis that the nation is facing. Let us now look at some of the major factors on why and how the economy at Sri Lanka sunk this much, the first one is the tourism setback.
Reasons Behind the Economic Crisis in Sri Lanka
Tourism in Sri Lanka and turmoil
The impact of the pandemic was huge on Sri Lanka. Covid 19 has stopped any sort of travel and tourism in the country for a long time now. According to the reports of the world travel and tourism council, nearly 2 lakh people have lost jobs in the travel industry since the pandemic began and globalised.
The loss of foreign revenue is huge too. According to the Hindu report last year, forex reserves have dropped from $7.5 billion to $2.8 billion, which is a steep decline and is obviously not healthy at all. The loss of foreign revenue from the sector has been substantial.
Adding to the above-mentioned deficits, the Sri Lankan rupee is depreciating too. This is known as inflation and it is very high in Sri Lanka right now. Basic livelihood items such as food items’ prices have risen manifold and people have to face difficulties to meet both ends. The nation, for now, has to depend heavily on imports.
Food Shortage in Sri Lanka
Photos of Lines and queues of people can be seen all over the news from Sri Lanka. These are the lines of people who are in a queue to buy home essentials, like food items. Prices of such basic items have risen enormously and are out of reach for many. Prices of bread, rice, wheat, sugar etc., have all risen several times.
People standing in Queue in Sri Lanka
It has never been hard for poor and middle-class people to buy items like these. The daily wage earners especially are affected the most.
Quoting a man who works as a chauffeur in Colombo, The Guardian report said he has now taken up a second job and his family now eats two meals every day, and not three. He said his village grocer now makes ten 100g packets out of a 1kg milk powder packet because no one can afford to buy the full packet.
The pandemic has just more severely affected those in the nation. The government’s efforts to make Sri Lanka ‘100% organic’ is at a loss. Last year, The Hindu reported that the country is planning to cut the use of chemical fertilisers to almost zero. To which farmers opposed and replied that this will affect food production. Pandemic made the food situation of Sri Lanka more severe.
“The government has no money for fertiliser subsidies. Many of us farmers are reluctant to invest money because we don’t know if we will make any profit,” A farmer was quoted as saying.
At the time of crisis, everyone hopes high from the government and the people of Sri Lanka are hoping the same from the government there. Speaking at the parliament in December 2020, MP, Harsha de Silva said that the only solution to the crisis is to seek assistance from the IMF(International Monetary Fund). He said homegrown solutions would not help, and only the IMF can revive the country’s economy.
The president’s office did not have an official notice or announcement for the citizens and the central bank is appealing for the foreign currency. The government of Sri Lanka is hustling to make things better for the people but it is just too hard. They are trying to stabilise the situation and try to help poor and sick people first and apply that others have to sacrifice a little.
The central bank had earlier last year prohibited traders from trading more than 200 Sri Lankan rupees for a single US dollar, they also have stopped traders from entering into forwarding currency contracts. The government has since been taking temporary relief measures to ease the situation.
Early December, Finance Minister from Sri Lanka Basil Rajapaksa visited neighbour India and commenced talks with his Indian counterpart Nirmala Sitharaman and India’s External Affairs Minister S Jaishankar to which they were thinking to take forward.
Basil Rajapaksa with Nirmala Sitharaman
The talks included a total of $1.9 billion of assistance for the country and besides that, a $500 million credit line for fuel and $400 million swap was discussed too. Similar talks were also held with China and Bangladesh.
Of all the reliefs and grants, Rajapaksa, (The President) assured that the relief package would not contribute to further inflation and that there won’t be any new taxes.
India’s Relations with Sri Lanka and the Assistance
India has always been a healthy and supportive friend to its neighbours. One of the neighbours of the Indian subcontinent is Sri Lanka. Speaking of help and assistance from India, the news is flooded with nice gestures from the Indian government for the Sri Lankan government. Let us have a look:
India assured Sri Lanka of its support to ally over these “difficult times” even as it welcomed the Trincomalee tank farms project saying it will augment bilateral energy security.
External Affairs Ministry Spokesperson Arindam Bagchi, when asked at a media briefing on the possibility of India extending the credit line to help Sri Lanka overcome its economic crisis, said it has always stood by the people of that country.
It is a great hope to notice how countries are helping each other in such times. India has agreed to mostly increase the credit line and time for repayments for Sri Lanka. Decisions like these will help foster friendly relationships with neighbouring countries.
After a telephonic conversation with his Sri Lankan counterpart, External Affairs Minister S Jaishankar said India will support Sri Lanka in “these difficult times”. “Greeted FM G.L. Peiris of Sri Lanka in the New Year. A reliable friend, India will support Sri Lanka in these difficult times. Agreed to remain in close touch,” Jaishankar tweeted.
“We have seen reports that the Sri Lankan Cabinet has approved the development of the Trincomalee tank farms. Energy security is an important area of our bilateral cooperation with Sri Lanka,” he said supporting relations with the neighbour.
The Sri Lankan government replied that after analysing the three existing agreements with the Indian government about the strategic Trincomalee oil tank complex, usually known as the Trinco oil tank farm, the two countries have reached an agreement to implement a joint development project to make
On the query on extending the credit line time by India, Bagchi referred to the visit to New Delhi by Sri Lankan Finance Minister Basil Rajapaksa last month.
“He briefed the Indian side on the economic situation in Sri Lanka and his government’s approach in addressing these challenges. India has always stood by the Sri Lankan people and Sri Lanka is an important part of our neighbourhood first policy,” Bagchi said relying on support to the island.
The above dialogues and discussion proved that India was ready to help Sri Lanka. Therefore, after mutual agreements and deals that were beneficial for both the countries, India extended a relief fund of $1 billion to the present Sri Lankan government. This was a good move indeed and helped Lanka in its time of need. However, after the March relief extended by India, Sri Lanka is again seeking for an additional credit line of $1.5 billion on top of the earlier funds. This credit line will also be met by India, which will be used by Sri Lanka for the import of its essential goods like rice, flour, sugar, pulses, medicines and more, as far as the Reuters reports go.
The help, extended by India, will undoubtedly be beneficial for the economically devastated Lanka and will further help in bettering the relations between the countries. India always proves that it is very much ready to help out everyone and set an example of moral duties for onlookers.
It is not that the nation of Sri Lanka has found this issue very sudden, but that the country is experiencing it for quite some time now, which is more worrying. It has been two years since the pandemic started and globalised but the foreign reserves at Sri Lanka were depleting long back and it only shows some leniency. The tolerance of the Sri Lankan government can be detained in the present crisis as a reason for the same.
India, as a supporting country, has always been together with other countries who are in need. It plans to do the same this year too, even when the shadows of the pandemic are hovering above still and India itself needs support. It is time that every country follows the same rules and morals so that the world can be a happier place to live in. The pandemic has massively accelerated empathy in the world and whatever lies ahead, we can feel a sense of togetherness.
FAQs
Why is there an economic crisis in Sri Lanka?
The economic crisis that Sri Lanka is currently undergoing points to a severe depreciation of the country’s foreign exchange reserves. The crisis started back in 2019, when there was a massive dip in the country’s overall produce, which declined by 50%. Then the Covid19 pandemic struck, which made it insanely difficult for the country to recover, followed by a ban on import on March 2020. Now, the struggle of the country is real, with debts piling in and the government requesting relief funds from the other countries to import the essential goods.
How much does Sri Lanka owe the world?
The national debt of Sri Lanka is around $51 billion, as of March 2022.
Is Sri Lanka in an economic crisis?
Yes, Sri Lanka is facing its worst economic and debt crisis, which started in 2019 and is continuing even now!
Crisis management is a method that can be used for two purposes: as a way to help the contractor deal with a crucial problem that could cause severe losses; and also as a form of prevention against any type of crisis, preparing the company to deal with this situation.
In other words, this methodology brings together a set of strategies and actions aimed at minimizing, reducing, or reversing the possible consequences of these problems, which can range from economic to those related to the organization’s image.
But after all, what exactly characterizes a crisis?
According to a communication and crisis expert, this concept describes any serious event that breaks the normality of a company or causes an extremely formal impact, causing serious damage and even affecting people’s safety and lives.
Companies must always be prepared to give a quick and effective response in these situations, and for that, the first step is to know the main types of crisis that can affect your business.
Every company can be affected in different ways, there is no single source and in each of them, the answer must be as assertive as possible. Therefore, it is important to know the main cause of the crisis in the corporate world so that you can adequately prepare for each one of them.
Check out this brief description of the main causes of the crisis:
Economic or Financial:
One of the most common types to be seen, and occurs is when the company suffers a significant reduction in its business. When there’s more supply than demand, your profitability and revenue decline, and your cash flow or working capital isn’t enough to balance the bills.
Structural failures:
Structural failures are most often seen in large companies such as factories and construction companies. They are characterized by the failure of equipment or structures. In more serious cases, damage to families can result in the loss of life.
Rumours of sabotage:
Many rumours or accusations spread by competitors or even dissatisfied customers can cause significant crises in organizations, especially when spread quickly through technology and social media.
Reputation:
When internal and confidential information leaks to society, every company is at great risk of facing a severe crisis, especially if this data involves illegal issues about its operation.
Natural disasters:
Natural disasters like earthquakes, storms, floods can damage your business, causing operational and, consequently, financial problems.
With these examples, we can see how there is a great diversity of causes that can lead to a business crisis, whether internal or external. But don’t worry, we will give you fundamental tips, later on, to help you with this management.
How to Manage a Crisis in a Company?
There is no denying the importance of having good crisis management, but the big question that makes this process difficult for many professionals is: where to start?
Assertive crisis management must be organized and prepared with great care, which is why we have created a step-by-step guide that can help your company with this task. Check out:
1. Map the Company’s Risks
For your company to have good crisis management, it is necessary to carry out a complete mapping of all the company’s risks.
Raise the entire history of the organization and analyze the main issues that could affect it. It is important to simulate these possible scenarios to have a better understanding of what could happen and, based on that, devise the best strategies for each situation.
2. Create a Crisis Committee
Once all the risks that could affect your business are mapped and understood, the second step is to establish who will be responsible for this crisis management.
The leaders and managers should be in front of this command-line process, but beyond them, you have to define representatives from each sector of the company, who will also be responsible for dealing with problems that reach their respective areas.
After all, the crisis can affect the organization as much as a specific sector, so it is important to have an employee responsible for this task in each team.
3. Strategy Elaboration
Strategy Elaboration
Then, it is time to devise the strategies to be used in each crisis.
Establish the actions that will be taken, train the spokespersons responsible for each team, and analyze how information about the event will be transmitted, both internally to all employees and the press and the public.
With these actions, your company will be better prepared to deal with crises and solve the problem in the best way possible. Besides them, other tips are fundamental for this process and must also be followed to avoid mistakes that could compromise this management.
4. A Contingency Plan to Manage a Crisis
No company wants to face a crisis, but as we mentioned above, we are often subject to unexpected situations that will drastically affect our daily lives.
Therefore, all companies must be ready to deal with these unexpected events, not only through the strategies we mentioned above but also through a contingency plan.
Typically, it is based on risks that have already been identified and decided upon as situations that can critically impact the company, to maintain or restore the organization’s critical operations.
As an example, we can mention the coronavirus pandemic, which impacted and changed the routines of several organizations, forcing them to quickly adapt to this new scenario to ensure that their business continued to function.
In situations like this, the contingency plan must be activated so that the company can maintain its operations. At this point, all teams must be aware of the actions that will be taken to resolve the crisis and work together to put them into practice.
Good communication is essential not only for this plan but for all crisis management so that everyone is aligned on the procedures that will be taken. In addition, the organization’s response must be as quick as possible, as the longer it takes, the more difficulties can arise in solving the problem.
Finally, it is noteworthy that this process must be closely monitored by leaders or managers so that they can be sure that the necessary actions are being taken and that the desired results are being achieved.
5. The Importance of Internal Communication in Crisis Management
Internal Communication
In times of crisis, a small flaw, miscommunication or rumours can disrupt this entire process, and even bring serious consequences. Therefore, the first item that should not be dispensed with is internal communication.
In this process, HR must be concerned with being transparent and objective about the procedures being taken, and always be available for any queries that may arise.
Maintaining good internal communication will bring greater security to those involved, ensuring that employees are always aware of the organization’s position at these times, feel at ease, and know what is being done to fight the crisis.
How can HR Help in Crisis Management?
HR is one of the most important departments in the corporate world. As well as dealing with bureaucratic issues, the contractor is also responsible for a broad range of management that involves the welfare of employees. Therefore, in times of crisis, the professionals in this department are extremely important to contribute to the management’s focus on the internal public, that is, in establishing all the measures that will be aimed at the company’s employees.
These actions provide high-performance management, which will not only increase the teams’ performance but also contribute to greater motivation and, consequently, better crisis management.
Managing a crisis is not an easy task and requires a series of components to be able to minimize the consequences, such as good planning, preparation, and leadership from everyone involved.
Therefore, in this article, we explain the main crisis that can affect your business and offer tips on how your company should prepare to face these moments.
We hope that it will help you in developing a great crisis management system for your company.
FAQs
How do Companies Manage Crisis?
To manage crisis companies should develop a crisis management plan by assembling a crisis management team and ensuring strong leadership and training the employees.
How do you prepare for crisis management?
The company should be prepared for the crisis by recognizing a potential crisis, checking the crisis readiness, researching your company records, reviewing your social media status, building the image of key leaders, strengthening your key relationships.
What are the six steps of handling a crisis?
The six stages within every crisis are warning, risk examination, response, management, resolution, and recovery.
What are the three stages of crisis management?
The management of crisis can be divided into three phases are pre-crisis, crisis and response, and post-crisis.
A crisis is any event or period that will lead, or may lead, to an unstable and dangerous situation affecting an individual, group, or all of society. Crises are negative changes in human or environmental affairs, especially when they occur abruptly, with little or no warning. – Wikipedia
Ever since the inception of human life on the planet earth, or even before that time, We have faced Crisis. So much so that it is a part of life and we don’t deface the fact anymore. Crisis has taught us that we lack something, and we need to work more on the present systems to make things more liveable. Making us more decisive, it cures indecision. This is a kind of help in our constant journey of making things better. However, We humans are the dominant species in nature.
Why, you may ask ? Because we have hacked evolution !
Ours is the only species that has decided to actually become better or more efficient without waiting for the process of evolution to take place (that is always slow). So, we are the only animal who has hacked evolution. That makes us the most fast-paced living species than anyone. Does that mean we don’t have a crisis anymore? No, we get crises every now and then to showcase us that some things are just so fickle. A house of cards.
We all are terrestrial mammals, we live on earth, land. Build houses and earn a living. Housing or real estate is a super demanded domain in this world. As population boosts we will want more and more houses, dwellings to accommodate people. Amongst the constantly rising demands for land, it is very imperative for all of us to make sure that land is distributed justifiably. To provide for the need that is round-the-clock. Not to mention, being such a big sector, Housing sector or real estate sector is not oblivious to shockwaves, you know CRISIS. Whenever a wave hits this epicentre, human lives move. It moves to that extent of magnitude which we cannot even measure on a Richter scale.
China is the world’s most populous country on the globe. Most humans live there. Housing sector is as big as it gets. It has seen its share of crises in this magnanimous sector. A really big economy. It has seen his share of strides and waves of uncertainties on his pupils. Lets see an example for clarity.
Real estate in China is developed and managed by public, private, and state-owned red chip enterprises. In the years leading up to the 2008 financial crisis, the real estate sector in China was growing so rapidly that the government implemented a series of policies—including raising the required down payment for some property purchases, and five 2007 interest rate increases- due to concerns of overheating. But after the crisis hit, these policies were quickly eliminated, and in some cases tightened.
The Chinese property bubble (2005-2011) was a real estate bubble in residential and/or commercial real estate in China. The phenomenon has seen average housing prices in the country triple from 2005 to 2009. It deflated in 2013.
Massive doesn’t even begin to describe the situation with China’s property market, but that’s somewhat expected with a population of 1.4 billion people.
And as the chart below shows, the bubble keeps on getting bigger!
China Real Estate Bubble
Well we know that this thing is of the past. This was a crisis and China hopefully learned some things from it. That’s why storms come, to make us more stable. This article is not about the past but for the future. This point in time, we are gonna see another crisis. Maybe more tense than the past. Maybe a more lethal Than past. So, what is it this time ?
EverGrande Crisis in China
China’s second biggest real estate mogul EverGrande is facing a crisis. To be more precise the company is going through financial difficulties. It is having liquidity issues to pay back its lenders. To give you some context, China’s real estate market has been booming in the recent past and to capture the trend and grow, Evergrande had taken up so much debt that they are struggling to pay it off now. The magnitude of this upcoming crisis is such that, if it collapses, people will lose homes. Not only China’s economy but the global economy as a whole could be affected. Lets see what is the scene here,
The Evergrande Group or the Evergrande Real Estate Group (previously Hengda Group) is the second largest property developer in China by sales, having developed projects in over 170 cities in China. It is ranked 122nd on the Fortune Global 500. It was founded in 1996 by Xu Jiayin. It sells apartments mostly to upper and middle-income dwellers. In 2018, it became the most valuable real estate company in the world. Evergrande Group owns 565 million square metres of development land and real estate projects in 22 cities, including Guangzhou. The company and Alibaba own 50 percent each in Guangzhou Football Club and Evergrande football school is the biggest football school in the world. In the year 2009, the company filed for an IPO, An Initial Public Offering to get public
As of September 2021, the company is at risk of defaulting on its debt. An estimated 1,500,000 customers could lose deposits on Evergrande homes that have yet to be built.
“I think ultimately the Chinese authorities will step in to make sure at least the wider financial system doesn’t run into a crisis,”. “If you’re a property developer you’re facing a few bleak months ahead. The key distinction I think is policymakers will allow property developers to suffer considerable pain, but they’ll step in to make sure the banking system is okay.” – Mark Williams, chief Asia economist at Capital Economics.
Kotak tweeted, the threat over China’s second-largest real estate developer reminded him of Infrastructure Leasing & Financial Services (IL&FS). Last year in September, the infra leasing and financial services company wasn’t able to pay its debt due to shortage of funds. The financial services market felt the tremors, and led to a liquidity crisis. However, the government came to its rescue and hand-picked nominees to replace the board in October. It had extended Kotak’s term as non-executive chairman of the debt-ridden group by one year.
Lauding the government’s swift decision-making, the 62-year-old veteran banker said the Indian leaders provided calm to financial markets. “The government-appointed board estimates 61% recovery at IL&FS. Evergrande bonds in China trading, approximately 25 cents to a dollar,” he wrote.
The Lehman Brothers Financial Crisis
Lehman Brothers Holdings Inc. was a global financial services firm founded in 1847. Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States (behind Goldman Sachs, Morgan Stanley, and Merrill), with about 25,000 employees worldwide. It was doing business in investment banking, equity and fixed-income sales and trading (especially U.S. Treasury securities), research, investment management, private equity, and private banking. Lehman was operational for 158 years from its founding in 1850 until 2008.
The bankruptcy of Lehman Brothers on September 15, 2008 was the climax of the subprime mortgage crisis. After the financial services firm was notified of a pending credit downgrade due to its heavy position in subprime mortgages, the Federal Reserve summoned several banks to negotiate financing for its reorganisation. These discussions failed, and Lehman filed a Chapter 11 petition that remains the largest bankruptcy filing in U.S. history, involving more than US$600 billion in assets.
The bankruptcy triggered a 4.5% one-day drop in the Dow Jones Industrial Average, then the largest decline since the September 11, 2001 attacks. It singled out a limit to the government’s ability to manage the crisis and prompted a general financial panic. Money market mutual funds, a key source of credit, saw mass withdrawal demands to avoid losses, and the interbank lending market tightened, threatening banks with imminent failure. The government and the Federal Reserve system responded with several emergency measures to contain the panic.
Radhika Gupta (MD and CEO of Edelweiss) said in a public notice that the real estate sector is highly regulated, given the large role it plays in the Chinese economy. In synopsis, the fund managers(at Edelweiss) do not think that the sector is facing systematic risk(Risk inherent to the entire market). The government is prioritising this issue and rapid regulations are expected. She also advised that investors with a long term horizon should stay patient as fund managers at Edelweiss see a transitory volatility.
Tweeted as a part of a disclaimer, the Edelweiss Greater China Equity Offshore Fund was at its highest risk on the Riskometer.
Dear Shareholders, I am pleased to present the reports of China Evergrande Group (“Evergrande” or the “Company”) and its subsidiaries (the “Group”) for the year ended 31 December 2020. The Group’s turnover and gross profit for the year amounted to RMB507.2 billion and RMB122.6 billion respectively. Net profit was RMB31.4 billion. Core business profit was RMB30.13 billion. In order to repay the trust and support of shareholders, the Board recommended the payment of a final dividend of RMB0.152 per share for the year 2020, which will be distributed upon approval at the general meeting of the group. – Prof Hui Ka Yan (Chairman of the Board of the Group, Chairman of the real estate group)
This is quoted from the annual report of 2020 of the company. It paid a dividend. The company was saying it out loud and clearly, that we are fine, Everything is fine, we are paying dividends, Take your profits share, shareholders. Well now we see the whole big picture, Loud and clear.
Evergrande founder and Chairman Hui Ka Yan continued his precipitous drop in Bloomberg’s wealth ranking as the company’s shares fell to their lowest in a decade. His fortune now stands at $7.3 billion, down from a peak of $42 billion in 2017.
Smothered by a $300 billion liabilities burden that has crushed its credit rating, share prices and reputation among a once-adoring public. Throughout last week, the concourse outside Evergrande’s mirrored offices in the southeastern city of Shenzhen was occupied by unpaid contractors, angry sales agents and investors scenes echoed across a country where prolonged protest is rarely tolerated.
Now, as default appears all but inevitable, fears are abounding of a contagion within the Chinese property market — and far beyond.
The month of September is typically when real estate companies in China record higher contract sales of properties. However, the ongoing negative media reports concerning the Group have dampened the confidence of potential property purchasers in the Group. The Company expects a significant continuing decline in contract sales in September, thereby resulting in the continuous deterioration of cash collection by the Group which would in turn place tremendous pressure on the Group’s cash flow and liquidity.
Here is a little excerpt of previous financial statement to back the downward trend in operations of the company.
Balance Sheet Excerpt of last year.
As disclosed in the Operating Statistics Announcements, the contract sales of properties of the Group in each of June, July and August 2021 amounted to RMB71.63 billion, RMB43.78 billion and RMB38.08 billion, respectively, which showed a decreasing trend.
Announcements and Notices by Evergrande (14 September,2021) The Real estate giant also mentioned in a recent public open notice that –
No material progress on sales of interests in members of the Group
The disposal of the Company’s office building in Hong Kong has not been completed within the expected timetable
The Problems:
The company has $300 Billion debt to bondholders
Property sales declining for months and will continue
Company owes $103 billion to construction companies and other business creditors
Banks are not ready to refinance
Company wants to repay debt in the form of property and parking spaces
China’s Government has imposed limits on the amount of real estate borrowings, which caused bondholders to withdraw their money
EverGrande now needs to pay interest of $83.5 Million on bonds now, with a grace period of 30 days
China stock markets and Global markets, mainly in the US is reacting negatively to the news.
Stock markets globally sank on Monday as investors weighed the risk of a spillover from Evergrande’s debt. Bitcoin dropped 5.4 percent this week to $45,025
China’s property market is majorly affected and we see the 2008 financial crisis all over again.
Evergrande bondholders might sell their other investments too to keep their money as cash at the moment. This might cause market correction
In an effort to flatten the crisis curve, China’s central bank boosted its gross injection of short-term cash into the financial system after concern over a debt crisis at China Evergrande Group roiled global markets. The People’s Bank of China pumped 120 billion yuan ($18.6 billion) into the banking system through reverse repurchase agreements, resulting in a net injection of 90 billion yuan.
Injecting funds to flatten curve.
China bails out the company indirectly by asking borrowers(state owned banks mainly) to take the property and parking spaces and waive off the debt.
Evergrande Crisis Effect on India
Sensex and Nifty are at great heights and thus are more volatile to corrections.
Short term corrections may happen
Over a medium term, India can benefit from the situation because the Chinese crisis cause increased money flow into the Indian markets
This crisis can put the rupee under pressure. If Evergrande is allowed to default, the market could see a massive sell-off with significant contagion risks for global financial markets – HDFC bank economist’s report.
If one single company that owes $304 billion can develop financial exposure to hundreds of lenders, millions of investors in bonds and stocks, and hundreds of thousands of homebuyers, Then we cannot be sure of big corporations anymore in china.
Indian steel still sees a strong spine as evergrande goes to a cash crunch.
Improvement In indian steel sector
Shailendra Kumar, Chief Investment Officer at Narnolia Financial Advisors feels till now Evergrande issue looks localised and Chinese policymakers should be able to handle it using steps like restructuring. He believes the Indian economy and Indian equity market is set for exciting times ahead. “While the global trend of digitalization is a megatrend favouring the Indian economy, domestically, formalization is another megatrend adding further positivity to Indian equities,” he said.
So, what shall happen tomorrow, for sure we can’t predict it to a nice accuracy, But we can surely see that what we are facing is risk, Uncertainty or maybe the silence before a storm. Let’s call it a crisis.
FAQs
What is Evergrande crisis?
Evergrande is an enormous company embedded across China’s financial system and economy, that relies mainly on real estate.
What does Evergrande do?
Evergrande Group is an investment holding company in China. It is involved in real estate business. Evergrande group does development, investment, and management of real estate properties.
Who is the founder of Evergrande Group?
Xu Jiayin (Hui Ka Yan) has founded Evergrande Group, headquartered at Shenzhen, Guangdong, in 1996.
Ria Sahni
