Accounting firm, Kreston Pedabo, yesterday said organisations relying on repeated cost-cutting cycles risk eroding long-term competitiveness, urging them to opt for a structural shift towards what it describes as “cost transformation” to build resilience.

The firm, in a report titled ‘From Cost Reduction to Cost Transformation: Building a Lean, Resilient Cost Base that Drives Lasting Competitive Advantage’ argued that persistent inflation, foreign exchange volatility, supply chain disruptions and rising regulatory pressures were exposing the limits of traditional cost-reduction strategies.

The report was co-authored by the firm’s Managing Consultant, Albert Folorunsho, Senior Partner for Tax Compliance and Advisory, Killian Khanoba, Tax Services Partner, Olubunmi Kuteyi, and Management Consulting Lead Tyna Adediran.

According to the report, many organisations continue to treat cost management as a short-term exercise focused on immediate savings rather than a strategic lever for value creation.

“Reacting with another round of cuts is no longer enough,” the authors stated, noting that businesses that will endure are those that deliberately design cost structures to be “lean, resilient and strategically aligned”.

The analysis highlights a recurring pattern across industries where organisations implement across-the-board cuts such as hiring freezes, travel restrictions and deferred projects only to see costs gradually return within 12 to 24 months.

This cycle, the report notes, reflects a failure to address underlying structural inefficiencies.

Among the key issues identified is the persistence of operational complexity, as they noted that while headline costs may fall temporarily, fragmented processes, duplicated roles and overlapping systems often remain intact.

In some cases, the report states, cost reductions simply shift workloads onto fewer employees or external contractors, increasing operational and human capital risks.

It also warns that indiscriminate cuts can undermine future growth by reducing investment in high-potential areas such as technology, data and innovation.

“Savings are booked, but structural complexity remains untouched,” the authors noted, adding that organisations frequently restart previously suspended projects once economic conditions stabilise, returning the cost base to its original trajectory.