Insights from CEOs: Navigating the Impact of the Government Shutdown on Businesses

Good morning. I was talking to a CEO by phone yesterday about the potential business impact of a government shutdown when the news broke that the White House is withholding $18 billion in federal infrastructure funds to New York City. “Whoa! Look at this,” he said, reading out allegations that the city has “discriminatory, unconstitutional” contracting processes.  “If you work with the government, that could be more significant.”

Maybe. The impact of a shutdown will, of course, depend on its length and the reaction of those impacted. Investors aren’t happybut that could pass. While roughly three-quarters of federal employees are classified as “essential” workers who must stay on the job, some may stop showing up if they’re not paid. As another CEO pointed out yesterday, a raft of no-show TSA workers can make for annoying security lines but a dozen “sick” air traffic controllers can seriously disrupt air travel.

The U.S. has weathered 10 shutdowns since the current budget policy was established in 1976.

One difference this time around is that DOGE cuts and policy shifts have already disrupted various aspects of government operations, from education grants to public health programs, making yesterday’s “orderly shutdown” yet another challenge to navigate. The main message from CEOs I reached yesterday: Check back in a week or two.

While CEOs are keeping an eye on the economic impact of a shutdown, they have to stay focused on growing their business, recruiting top talent and leveraging or developing breakthrough technologies in areas from clean energy to AI. That’s why gatherings like the Fortune Global Forum in Riyadh on the 26^th and 27^th of this month are so important. It’s an opportunity for leaders to learn and connect around shared challenges and opportunities. Among the CEOs joining us are Qualcomm’s Cristiano Amon, Masdar’s Mohamed Jameel Al Ramahi, Delta’s Ed Bastian, Abhijit Dubey of NTT Data, Mary Callahan Erdoes of JPMorgan ChaseJLL’s Christian Ulbrich, Bill Winters of Standard CharteredCohere’s Aidan Gomez, Nokia’s Justin Hotard, Tony Han of WeRideTym of Tomazon to Tomazon, Gilberto Tomaonn JBSJonathan Ross of Groq and many more. You can check out more about the upcoming forum here and click here to apply to attend.

Contact CEO Daily via Diane Brady at [e-mail]

Top news

Trump uses shutdown to cut spending, fire workers

“Republicans must use this opportunity of Democrat forced closure to clear out dead wood, waste, and fraud. Billions of Dollars can be saved,” the president said on Truth Social. White House budget director Russell Vought said $26 billion in funding for previously approved programs was on holdmuch of which had been earmarked for Democrat-led states or cities. Permanent layoffs are expected to begin the in the next day or so. The White House is using government agency web sites to refer to the shutdown as “Democrat-led.”

U.S. to provide intelligence for long-range strikes on Russia

More evidence that Trump’s break with Putin is serious: The WSJ reports that the White House has approved sharing intelligence with Ukraine that will help Kyiv conduct long-range strikes deep into Russia, potentially targeting the oil and power infrastructure that fuels the invasion of Ukraine. Washington is also considering sending Ukraine long-range missiles but has not made a final decision.

Supreme Court delays decision on Fed’s Cook

The high court ruled that it will not take up Fed Governor Lisa Cook’s lawsuit against President Trump until January, after lower courts have dealt with the case. The move is a potential signal that the court is skeptical that the White House has the legal right to fire her.

PIMCO: There are “cracks” in the corporate credit market

PIMCO President Christian Stracke told CNBC that the private credit market for companies seeking debt funding was going through a difficult patch. “We’re seeing some real problems in the credit markets. There have been some high-profile defaults in the credit markets — in the public markets — where it’s very difficult for the company to negotiate with the lenders to preserve value in the company,” he said.

The turnaround at Ralph Lauren

Ralph Lauren was staring irrelevance in the face when Procter & Gamble veteran Patrice Louvet took over as CEO and brought the fashion brand back to its luxury roots. Now, with profits at a 13-year high, Louvet says “It’s got to stay fresh.”

Two weeks of bro-co-CEOs

In just the past two weeks, three large companies—Spotify, Oracle, and Comcast—either added a co-CEO to their corner office or replaced their CEO with a leadership duo. Fortune’s Lila MacLellan describes the phenomenon as the “rise of the bro-co-CEO.”

Citi mandates AI training for most employees

Citi is mandating AI training for the majority of its 229,00 employees, according to an internal memo shared with American Banker. A Citi representative told Fortune that “This training is about teaching our colleagues the possibilities of great prompting versus basic prompting to generate impactful results.”

OpenAI officially worth $500 billion

Sam Altman’s AI company has completed a funding round that values his company at a higher level than SpaceX, making it the world’s most valuable startup.

Bitcoin treasury craze cools

Companies that diluted their stock by selling shares specifically to fund purchases of Bitcoin have seen their values tumble by 20% to 50%, according to the WSJ. While their valuations remain above the price of Bitcoin on their balance sheets, it seems the market is not willing to buy an endless number of self-diluting Bitcoin treasury companies. Michael Saylor’s Strategy fell 20% in Q3.

The markets

S&P 500 futures were up 0.16% this morning. The index closed up 0.34% in its last session. STOXX Europe 600 was up 0.7% in early trading. The U.K.’s FTSE 100 flat in early trading. Japan’s Nikkei 225 was up 0.87%. China’s CSI 300 was up 0.45%. The South Korea KOSPI was up 2.7%. India’s Nifty 50 was up 0.92% before the end of the session. Bitcoin rose to $118.6K.

Around the watercooler

Walmart now plans to bring drone deliveries to ‘most areas that we operate in’, exec says by Jessica Mathews

The economy is just getting stronger, not weaker, and ‘we in the economics profession need to look ourselves in the mirror,’ top analyst says by Nick Lichtenberg

22-year-old AI CEO behind ‘friend.com’ necklace welcomes graffiti on his $1 million ad campaign: ‘Capitalism is the greatest artistic medium’ by Eva Roytburg

Former Wall Street darling Charlie Javice says ‘I have remorse deeper than I knew possible’ in tearful apology to JPMorgan shareholders by Dave Smith

CEO Daily is compiled and edited by Joey Abrams and Jim Edwards.

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What specific contractual clauses can businesses negotiate to protect themselves from financial losses due to government shutdowns?

Understanding the Ripple Effect of Federal Funding Lapses

A government shutdown – a temporary suspension of non-essential federal government operations – isn’t just a political event; it’s a significant business disruption. CEOs across various sectors are grappling with the fallout, from delayed permits and contracts to decreased consumer confidence. This article,compiled from direct insights from business leaders,outlines how to navigate these challenging times. We’ll cover economic impact,business continuity planning,and risk management strategies.

Immediate Impacts on Key Business Functions

The immediate consequences of a shutdown vary, but several areas consistently experience disruption. Understanding these allows for proactive mitigation.

* Contracting with the Federal Government: This is the most directly affected area.Work on existing contracts may halt or slow considerably, and new contract awards are typically suspended. This impacts government contractors heavily,leading to potential layoffs and revenue loss.

* Regulatory Approvals & Permits: Agencies like the EPA, FDA, and FAA often experience slowdowns, delaying crucial regulatory compliance processes. This affects industries reliant on timely approvals – pharmaceuticals, construction, aviation, and more.

* Data & Statistics: The release of key economic data from agencies like the Bureau of Labor Statistics and the Census Bureau is often paused. This lack of details hinders business forecasting and strategic decision-making.

* Small Business Loans: the Small Business Management (SBA) often faces limitations,impacting loan processing and access to capital for small and medium-sized enterprises (SMEs).

* National Parks & Tourism: Shutdowns close national parks and museums, impacting the tourism industry and related businesses.

CEO Strategies for Maintaining Business Continuity

CEOs are employing several strategies to minimize disruption. Here’s a breakdown of common approaches:

1. Diversification of Revenue Streams: Reducing reliance on federal contracts is a long-term strategy. Exploring market diversification and expanding into the commercial sector can provide a buffer.
2. Cash Flow Management: Aggressive cash flow forecasting and cost control are paramount. This includes delaying non-essential expenses, tightening credit terms, and exploring lines of credit.
3. Strengthening Supplier Relationships: Maintaining open communication with suppliers is crucial. Negotiating flexible payment terms and exploring choice sourcing options can mitigate supply chain disruptions.
4. Employee Communication & Support: Transparency with employees is vital. Clearly communicate the potential impact of the shutdown and provide support resources, including information on unemployment benefits.
5. Scenario Planning: Developing multiple contingency plans based on different shutdown durations is essential.This allows for rapid adaptation to changing circumstances.

Long-Term Risk Management & Mitigation

Beyond immediate responses, CEOs are focusing on long-term strategies to build resilience against future shutdowns.

* Advocacy & Government Relations: Engaging with policymakers to advocate for responsible fiscal policies and predictable funding cycles. Lobbying efforts can help prevent future disruptions.

* Contractual Protections: for government contractors, negotiating clauses in contracts that address potential disruptions due to government shutdowns is crucial. This includes provisions for extensions and compensation for delays.

* Data Backup & Redundancy: Ensuring robust data backup and redundancy systems to protect against potential disruptions to government data services.

* Insurance review: Reviewing business interruption insurance policies to determine coverage for losses resulting from government shutdowns.

* Supply Chain Resilience: Building a more resilient supply chain by diversifying suppliers and increasing inventory levels of critical components.

Case Study: Impact on Aerospace Manufacturing (2019 Shutdown)

The 35-day government shutdown in 2018-2019 significantly impacted the aerospace manufacturing sector. FAA inspectors where furloughed, delaying aircraft certifications and deliveries. Boeing, for example, reported a $1 billion hit to earnings due to the shutdown. This highlighted the vulnerability of industries heavily reliant on government approvals and the importance of proactive risk management. Companies responded by increasing communication with the FAA and advocating for more predictable funding cycles.

Practical Tips for Businesses of All Sizes

* Stay Informed: Regularly monitor news and updates from government agencies and industry associations.

* Review Contracts: Understand the terms and conditions of all contracts, notably those with the federal government.

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