Companies operating in today’s evolving business landscape are no strangers to change and disruptions. They have become too aware, based on experience, about the different changes that can make or break their business.

One of these threats is high inflation, predicted by experts to continue posing risks to business and the economy in the coming years. As inflation continues to stir economic uncertainties, firms remain wary about its effects to sales and profit. With economists predicting that high inflation will likely persist into 2023, mid-market companies are facing unprecedented challenges including making sound investment decisions.

This notwithstanding, Grant Thornton’s International Business Report (IBR), a bi-annual survey of senior executives of around 10,000 firms in 29 economies, found that 54% of global respondents strongly agreed that they expect to increase profits in 2022 even as inflation drags on and pushes up input costs.

The same sentiment was expressed by mid-market firms surveyed in the Philippines. IBR data show that 61% of firms surveyed were optimistic that they will see an increase in profit over the next 12 months.

This positive outlook comes despite an increase in costs of wages and staff compensation (up 15%), energy/utilities (up 17%), and transport costs (up 18%) on the back of high inflation. Meanwhile, raw materials and equipment rose by 16% and 17%, respectively.

Revisit pricing strategies

One of the ways organizations can protect against the effects of inflation is to revisit and adjust, as needed, their current pricing strategies. More than half or 51% of Philippine mid-market firms polled for the IBR said they have adjusted their pricing strategies by increasing prices exactly in line with costs. However, 41% admit that they have increased the prices of their products and services more than costs.

During a challenging time like this, flexibility is crucial. It is inevitable that prices of raw materials and equipment will change, inflation or no inflation. What is vital is that organizations maintain a resilient and flexible mindset, that they be able to adjust prices of their goods and services and focus on their primary business objectives.

In addition, taking a hard look at how to cut down on expenses is also part of this strategy. While this may seem daunting, this can be achieved by keeping a sharp focus on expenses geared towards improving your company’s core business products or services.

How investing in tech can help

The report also found that to cushion the blow of inflation to their business, respondent-companies in the Philippines are now either considering investing more on digital/IT (59% of firms from 54% in H2 2021) or investing in skills development of staff (57% of firms). In addition, a big number of firms surveyed expressed their intent to invest more on research and development (58% of firms).

To help mitigate the effects of high inflation, local businesses can adopt various strategies, among them, investing more in technology and digital transformation.

The IBR survey further reveals that two-thirds of respondents agreed that the risk of inflation is accelerating investment in digital within their business, with 60% of global respondents saying that they intend to increase investments in tech and digital transformation in the next 12 months – the highest level recorded.

What specific technology or digital transformation programs should businesses aim to invest on? For most companies, automation, robotics and machine learning will be key. These technologies improve productivity by lowering output costs and allowing companies to deploy manpower more effectively. According to the same survey, 30% of global mid-market firms cited they are investing in operational automation to fuel growth.

Investing in data technology should also be at the top of global companies’ priority list. Nearly half or 49% of respondents said that they are keen on making investments in IT security management, as well as in company-wide IT infrastructure (40% of global firms).

Sustaining the trajectory

Sustained investment in digital transformation even after this period of high inflation is a good business decision. It will allow companies to boost consumer or client engagement and ramp up work productivity. The key lies in not being too complacent. There are many action plans that corporate management can undertake, such as boosting current IT programs and cybersecurity initiatives. In the end, continuous upgrade of tech processes and equipment is a huge step toward remaining profitable regardless of the type of threat or risk to be addressed.


As published in The Manila Times, dated 17 August 2022