Fluctuations in the economy are a perfect example of the negative impact of fluctuation. One minute the stock market may be booming, and a few hours later, it may be crashing. Due to the rise in technological advancements, the stock market has become even more unpredictable. This unpredictability has led to the need to have a risk management framework that minimizes the impact of negative fluctuation.
The effects of fluctuation are felt across all industries. Take the manufacturing sector, for instance. Due to the COVID-19 pandemic, the global supply chains have been disrupted, leading to massive production losses. Manufacturers depend on accurate forecasting to plan their operations. However, with the unpredictable nature of fluctuation, forecasting has become more complicated, leading to inaccurate planning.
In the agricultural sector, fluctuation comes in the form of weather patterns. Farmers depend on consistent rainfall patterns to plant and harvest their crops. In the event of erratic rainfall patterns, farmers may end up with a poor harvest, leading to food insecurity issues. In a study conducted by the United Nations Office for Disaster Risk Reduction, the agriculture sector is one of the sectors most vulnerable to the effects of fluctuation.
While the negative effects of fluctuation are felt across different spheres, there are also positive impacts of fluctuation. Take the tourism sector, for instance. During the off-peak season, the prices of accommodation and flights drop considerably. This, therefore, becomes an opportune moment for vacationers to take advantage of the lower prices and travel.
The fluctuations in oil prices, for example, drive the prices of other commodities. A rise in oil prices leads to an increase in transport costs, which, in turn, increases the prices of goods and services. Conversely, a fall in oil prices lowers transport costs, leading to the decrease in prices of other commodities.
Fluctuations in the property market have both positive and negative effects. While housing prices tend to fluctuate, the situation can become dire for homeowners in times of negative fluctuation. Homeowners may end up with underwater mortgages, whereby the value of their home is less than the outstanding mortgage. The positive impact of fluctuation in the property market is that it creates opportunities for investors to buy low and sell high.
The management of fluctuation is essential in ensuring that the negative impacts are minimal. The use of predictive analytics is one way through which companies can forecast fluctuations and plan their operations accordingly. In the agriculture sector, farmers can cultivate drought-resistant crops to minimize the impact of erratic weather patterns.
The COVID-19 pandemic has brought to the fore the need for companies to have contingency plans in place to mitigate the effects of unpredictable fluctuations. This includes having remote working solutions and diversifying supply chains.
In conclusion, fluctuation is a natural occurrence whose impacts are felt across all industries. While negative fluctuations can be devastating, it is essential to note that positive fluctuations do exist. The management of fluctuation is key in ensuring that the negative impacts are minimal. Scientest, analysts, and researchers continue to develop models that provide insights into the workings of fluctuation, thereby helping businesses and governments make informed decisions.