In 2020, the world woke up to an unprecedented scale of turmoil with no end in sight. The word ‘pandemic’ entered the global lexicon surpassing language barriers and geographical boundaries. As infection rates soared and governments of numerous countries started implementing stay-at-home orders, the world as we knew it changed overnight and the humdrum of human existence was reduced to an eerie silence. The global economy found itself in choppy waters with supply chains being disrupted, businesses having to either shut shop, adapt, or embrace the digital path overnight and stock markets tumbled.
The concept of VUCA — which stands for volatility, uncertainty, complexity, and ambiguity – became an appropriate lens to encapsulate the milieu brought about by the coronavirus in 2020. VUCA stands for volatility, uncertainty, complexity, and ambiguity. Wikipedia says the acronym was first used in 1987 and has its underpinnings in the leadership theories of Warren Bennis and Burt Nanus – to describe or to reflect on the volatility, uncertainty, complexity and ambiguity of general conditions and situations.
A new ‘VUCA’ and the onslaught of the pandemic
The pandemic put almost all aspects of human existence on an extremely unfriendly terrain – it would not be an exaggeration to say that the VUCA terminology made more sense with a different elaboration as the country tried to make sense of the new normal – Virus, Unpredictability, Chaos, and Anxiety.
The Virus set in motion a series of lockdown restrictions that upended human lives. The economy and the market too received a jolt. Unpredictability became the buzzword in 2020 with chaos reigning supreme and there being little room to predict as to how long the pandemic and the lockdown would continue to impact daily lives. Jobs and livelihoods danced on slippery slopes with fear of significant income losses. Chaos replaced any semblance of order in our daily lives – be it the effects of the lockdown life, worries about income disruptions and most importantly the fear of our loved ones getting infected or seeking appropriate medical intervention for those suffering. In the business environment too, chaos assumed colossal proportions and businesses struggled to forge the way ahead with constrained analytical abilities. Anxiety stemming from the lack of enough information for navigating the way forward in terms of finances, health and work hung heavy over people’s minds as it became clear that absolute normalcy may be a distant dream for a while.
Redefining VUCA in 2021: Vaccine, Understanding Clarity, Alertness
Following the doom in the first quarter of 2020, the economy showed significant recovery in the second quarter. This was congruent with the optimistic sentiments among the populace that was fanned by the imminent commencement of vaccination along with the calibrated reopening of the regional economies since July 2020 and the decline in COVID-19 cases across the country.
K S Rao, Head - Investor Education & Distribution Development, Aditya Birla Sun Life Asset Management Company Ltd
However, the period of sunshine did not last long, and the second wave of the pandemic fuelled by the Delta variant dimmed hopes of a smooth economic recovery. By April 2021, India was in the throes of a colossal human tragedy with skyrocketing caseloads and deaths. While a nationwide lockdown was not implemented and it was up to the state governments to impose restrictions to curb the spread of the virus, normal lives were thrown completely off gear.
However, as infections began to ebb July 2021 onwards and vaccine uptake increased, it became clear that although the virus was here to stay, and subsequent waves would be inevitable vaccines considerably reduced the threats posed by the disease. The fallout on the economy too, thankfully was not protracted and economic indicators started showing an uptick, even though the recovery continued to be iffy and far from the V-shape growth that was previously envisaged. The investment landscape also looked lusher than in 2020 - the BSE Sensex gained 10,054 points between January 1, 2021 to December 29, 2021 and it was reportedly the highest year-on-year increase in absolute terms historically.
Considering the turnaround witnessed post the second wave, the meaning of VUCA can again be relooked with a fresh perspective in the Indian investment context – Vaccination, Clarity, Understanding and Alertness. The latter half of 2021 saw a redefined, yet much more palatable version of normalcy returns than what was previously imagined, thanks to the Vaccination efforts made by the government. This ushered in a reinvigorated sense of Clarity among people – be it livelihoods, businesses, jobs, or domestic duties - the fear that was so all-pervasive previously had given way to a nascent confidence with new ideas firmly taking shape in the minds of people for moving ahead in life. A by-product of the difficult times witnessed has also been a heightened sense of Alertness – that life - as we knew it - had to go on despite the pandemic and that it was a doable endeavour.
The undulations seen in the two pandemic years made people better prepared to deal with the vagaries brought by the third wave in January 2022 and an unprecedented geopolitical event in the next month with far-reaching consequences – the Russian invasion of Ukraine. VUCA seemed more relatable with the meanings offered by its original definition – volatility, uncertainty, complexity and ambiguity and it also drove home the message that episodes exemplifying VUCA was, is and will be a recurrent theme in human lives.
The VUCA Antidote
The antidote to any kind of VUCA episode lies in abiding by a different terminology—vision, unleashing, competency and agility. A vision for the future—be it taking your career ahead or meeting your financial goals such as retirement or child’s education—is paramount to keep the wheels of life moving ahead in the right direction. Unleashing is synonymous with tapping into different opportunities and mapping them with your goals—both at the individual and the financial levels by keeping oneself open to change and novelty. Competency ensures you stay abreast in the game of life—be it with your skillsets or money—to deal with changes and still stay aligned to your goals. And finally, agility can be a powerful weapon in your arsenal of life and financial mantras as this will ensure you are adaptable to changes because nothing in life is constant.
Disclaimer
“An Investor Education Initiative By Aditya Birla Sun Life Mutual Fund”