If you're feeling frustrated and overwhelmed because despite your efforts to improve risk management through scenario planning, you're still struggling to prepare for inflation and stagflation scenarios, then you are not alone!
In this episode, you will be able to:
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Comprehend the influence of inflation and stagflation on public sector financial decisions.
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Learn about the primary contributors to inflation, including supply shock and monetary policies.
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Recognize the value of strategic financial planning and risk management for local governments.
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Explore the importance of cooperation between HR and finance directors for labor agreements.
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Analyze the potential consequences of inflation and stagflation on bond ratings in public finance.
My special guest is Charlie Francis
With a wealth of experience in public sector budgeting, Charlie Francis is a highly respected financial professional who has navigated through periods of high inflation and economic uncertainty. As a former finance director, Charlie has firsthand experience in addressing the challenges of budgeting during times of inflation and potential recession. His deep understanding of financial planning, labor negotiations, and the effects of inflation on both urban and rural communities makes him an invaluable resource for public sector finance directors. Charlie's expertise in developing financial scenarios and strategies is crucial for those preparing for potential inflation and stagflation scenarios.
The resources mentioned in this episode are:
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Consider developing game plans for three possible outcomes from the Federal Reserve's efforts to crush inflation: a soft landing with a slow recovery, a downturn with a quick recovery, or a severe crash with a protracted recovery.
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Use contemporary budgeting systems like Questica's Foreman's Budgeting Systems to model revenue and expense scenarios and develop plans to prevent wage-price inflation spirals from setting in and causing significant problems for government budgets.
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Collaborate between HR and finance directors during long-term financial planning and labor negotiations to avoid structural imbalances that might come from negotiating labor agreements without input on their impact on the long-term financial plan.
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Develop strategies and plans to combat the impacts of inflation on vulnerable residents with the American Rescue Plan's state and local Recovery funds.
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Consider preparing financial scenarios and scenario operation plans if stagflation occurs, which could trigger another recession.
Strategies for Preparing for a Recession To ensure financial stability during recessionary periods, local governments must develop a balanced and forward-thinking approach. This includes scenario planning, risk assessment, and execution of well-informed decisions that help public sector organizations weather the storm. By employing such strategies, local governments can better anticipate potential risks and be prepared for any possible economic downturn. When talking to Andrew, Charlie Francis shared valuable insights on preparing for a recession. He emphasized the importance of creating different scenarios and developing well-structured plans to cope with the challenges of each situation. He also encouraged a strong collaboration between HR and finance directors, ensuring that everyone is on the same page and working towards a financially sustainable future.
Stagflation and Bond Ratings Given the dual nature of stagflation, it's possible that public finance bond ratings could be affected if local governments struggle to make debt service payments during slowed revenue growth periods. Therefore, it's crucial for public sector finance directors to remain vigilant and effectively manage the risks associated with inflation, stagflation, and other potential economic downturns. Charlie Francis expressed his belief in the podcast that stagflation could indeed impact public finance bond ratings. He advised local governments to focus on risk management through financial scenario planning and the implementation of robust analytical tools. By preparing for the variety of possible scenarios, local governments can better safeguard their organizations against the uncertain economic environment and protect their bond ratings.
Strategies for Preparing for a Recession To ensure financial stability during recessionary periods, local governments must develop a balanced and forward-thinking approach. This includes scenario planning, risk assessment, and execution of well-informed decisions that help public sector organizations weather the storm. By employing such strategies, local governments can better anticipate potential risks and be prepared for any possible economic downturn. When talking to Andrew, Charlie Francis shared valuable insights on preparing for a recession. He emphasized the importance of creating different scenarios and developing well-structured plans to cope with the challenges of each situation. He also encouraged a strong collaboration between HR and finance directors, ensuring that everyone is on the same page and working towards a financially sustainable future.
