The pandemic has claimed many businesses victims, forcing once thriving establishments to close their doors indefinitely. After witnessing the affects the pandemic has had on the business environment, you may be asking yourself if it is possible for a business to navigate out of the current crisis? The answer is yes. There is a way to bounce back from uncertainty.
Recent history confirms that the organisations that navigate a period of crisis often remerge stronger than ever. During the Global Financial Crisis of 2008/09, the businesses that were nimble, agile and resilient came out stronger than their peers who stagnated or perished in the 12 years since.
To ensure your organisation effectively navigates through the current period of uncertainty and emerges with strength, you need a strong business strategy and plan to lay the foundation for long-term resilience and success.
Building a strong and resilient business for growth
When assessing and responding to the market, no matter whether there is severe uncertainty or a rapid growth opportunity, ensuring you have a plan that keeps your business agile is crucial for the long-term success and commercial viability of your organisation.
Below, we focus on the three stages you need to work through to develop a successful business strategy that can grow and evolve as you do. These stages are designed to:
How to stabilise and defend during crisis
Stability is a critical factor when navigating change, particularly when the situation requires agility and rapid adaptation. Due to the fast-moving nature of the world and pace of change in a crisis, it’s critical that businesses already have documented policies, protocols, processes and plans as a basis. These documents may include a crisis communications plan, handbooks to mobilise your workforce and keep them engaged if they need to work remotely, and commercially driven plans that detail how the business will respond if world events impact the business. For example, if your business’s revenue falls to a certain level, you should have a plan that details how the business will respond to ensure its financial stability.
Five key factors need to be addressed to ensure your business effectively navigates rapid change and challenges. These include the following:
- An emergency response plan and project team
- People management
- Customer and supply chain management
- Financial stability
Prepare an emergency response plan and assemble a project team
An emergency response plan outlines how your organisation will respond and engage with key stakeholders if an emergency occurs. Your emergency response plan should identify and address risks to the safety of your employees, your organisation’s reputation, and how the plan will be adapted in different scenarios.
Once a plan is prepared, you need to assemble a crisis response team. Your crisis response team should include key people from across your business, including marketing and communications, IT, finance, HR and facilities and office management. Each person in your team has a critical role to play in ensuring their part of the business continues to operate smoothly and can adapt quickly if necessary. You may also consider external advisors to assist with your emergency response such as public relations and media experts, business continuity and improvement experts, financial advisers and accountants and solicitors.
Understandably, your emergency response plan may not address the exact crisis scenario your organisation is facing. However, your project team should be able to provide input on how the plan should be tailored based on previous testing of the plan and specific business risks. At this stage, your organisation needs to:
- Assign key roles to your project team
- Prepare a communications strategy for key messages to management, staff, customers, industry partners, suppliers, media and other relevant stakeholders
- Create a register and protocol for tracking and monitoring current and emerging risks
Consider your people
People are one of the most important resources of an organisation. Therefore, it’s critical to manage the potential impact on them and other key stakeholders in an unfolding crisis. Firstly, and this will form part of your organisation’s communications strategy, you need key messages that will inform your employees that will reduce possible feelings of panic or instability.
Communicate with your employees how their work arrangements may change as a result of the crisis and think about potential FAQs ahead of time to ensure your internal communications are clear. If you know that your people will need additional resources to work remotely, then action should be taken to prepare for this immediately. For example, work with the IT team to ensure you have the technology and tools available for continued productivity. Additionally, think about how you will effectively connect with your staff to boost their morale and help keep them productive and efficient in their roles during this time.
If essential services such as schools and public transport aren’t operational due to the crisis, you need to consider how this may impact your employees. You may need to provide more flexibility, particularly for parents, in how people manage their workloads. In the case where essential services aren’t operational or are significantly reduced, make sure you have adjusted your travel, meetings and events policies to keep your employees safe.
How you resource your organisation may be influenced by macro-economic events, changing the functionality of your organisation. Considerations should be made on how adjustments to headcount may need to be made in order to get through challenging times and how the organisation will emerge with strength after the crisis event.
Workforce planning considerations include:
- Evaluate and confirm minimum personnel requirements and key dependencies for operations
- Confirm that back-up, crossed trained personnel are ready and able to assist
- How will the organisation rapidly adapt headcount to meet changes in business conditions?
- Assess whether non-dependent staff should take annual and long service leave or as a last resort, leave without pay
- Assess the legal and financial impact of staffing changes
- Plan how the business will rapidly recover operations and potentially increase headcount again when the crisis subsides
Consider your customers and supply chain
In times of uncertainty, businesses are often internally focused and fail to anticipate and prepare for significant disruption to their customers and suppliers. To avoid potentially devastating impacts on the business the below two questions should be asked:
- How will your customers and suppliers be impacted by the crisis?
- How will this impact your operations?
Continue serving your customers
Proactively assess how the business will respond to impacts on customers by modelling and assessing your business’s position as though one of your top ten competitors has gone out of business. Further, if you’re unable to deliver products and services using your usual methods then a plan should be established as to how processes can be adapted to ensure customers continue to be served.
You may face a situation where demand for your products or services spike or plummet due to a crisis. In this instance plans should be made to ensure the business is flexible enough to respond to and meet increased or lowered demand.
Risks associated with your supply chain
Recent events have shown the world how risky it can be to have most, or all, of your supply chain concentrated in one location. Consider how the supply chain could be spread by engaging alternate suppliers spread across several locations. Your organisation should also address how you will communicate with suppliers during a crisis, which will form part of the business’s key messages in the emergency response plan.
Bolster financial stability: Critical considerations to crisis response
Financial stability plays a critical role in a business’s ability to respond to a crisis. Organisational stability is highly dependent on the three steps covered above – having an emergency response plan and project team, effectively managing your people and effectively managing your customers and supply chain.
Further considerations to bolster your organisation’s financial stability centre around:
- Assessing cash reserves
- Managing creditors
- Managing debtors
- Cash flow forecasting
- Cash flow management post-crisis
Business owners need to assess whether they have adequate cash reserves to weather a crisis. These reserves should cover fixed expenses for at least the next three to six, ideally twelve, months. If a business doesn’t have adequate cash reserves, check what can access through government grants and support or financiers.
As you consider cash reserves, you will likely identify your biggest creditors, if they haven’t already. If the business can’t meet its financial obligations to creditors, management must be proactive and open the lines of communication with suppliers and other creditors, such as a bank, to discuss relief from repayments during the crisis. However, remember that interest is likely to still be capitalised on loans even if the business pauses repayments. This could result in a longer loan term or higher repayments when loan payments start again.
Effective debtor management is always critical, but it’s increasingly important in a crisis. If it’s suitable for your business, consider asking customers for cash on delivery or early payment of outstanding invoices. Businesses could also offer slight discounts for early payment, which may strengthen cash flow.
Cash flow forecasting
Your business will need a three-way cash flow forecast for the next three, six and twelve months to determine its financial position based on different market conditions. Consider the impact of the different scenarios and how plan how the business would respond. For example, think about what your cash flow for the next six months would look like if revenue stopped due to a forced business shutdown or lack of supply. Consider how the business would respond. Would you need to adjust your headcount, or significantly change your business model?
A three-way cash flow forecast also provides a basis for setting key performance indicators, so you know exactly what numbers the business needs to hit for continued strength. This will also impact how your business operates when the crisis is over.
Cash flow management post-crisis
The decisions the business makes throughout the crisis will impact its employees and finances once the crisis has passed. Make sure no short-sighted changes are being made to the workforce or finances through cost-cutting and control measures that may make it more difficult to scale up operations again post-crisis. Further, if your business needs to make significant cuts to its workforce and costs, assess the potential for revenue loss of the business can’t meet market demand when the business environment is stronger again.
Actions for business leaders: Stabilise and defend during a crisis
Strong and authentic leadership is critical in a crisis. Leaders need to demonstrate they understand the challenges all the organisation’s stakeholders are facing, especially its people. As outlined above, business leaders will be overseeing and providing leadership on the whole organisation’s response, which will cover the following five steps:
- Review or develop the current emergency response plan and form an emergency response team.
- Develop a communication plans to management, your people, customers, suppliers and other key stakeholders.
- Consider the impact of the crisis on people and technology requirements, including impact on recovery.
- Enact a customer and supply chain plan that can respond to rapid demand change and spread supply risk to reduce supplier dependence.
- Plan and understand potential cash flow scenarios, including impacts of changes to supply and demand, employee arrangements and bank and government support available.
Be proactive and prepared
Being proactive and prepared for a crisis gives businesses, its people and its leaders the confidence needed to be resilient when times are uncertain. Having the right plans in place and proactively considering how the business will respond in different scenarios will help management learn and grow from challenges, contributing to its growing strength. It is the businesses that continue to be proactive, agile and future-focused that can get through challenging times and come out the other side stronger than ever.
Please reach out to your Pitcher Partners representative if you would like assistance stabilising your business or if you are interested in finding out more about business improvement solutions that will suit your organisation.