The Importance of Business Agility and Innovation for the Coming Recession
Businesses who have put a contingency plan in place to sustain the coming economic downturn can come out the other side thriving.
As many countries face the highest inflation and interest rates in years, business owners have had to lay off staff, close offices and stores, and owners are now facing a potentially deep recession. These employers now face the daunting task of making major and swift shifts across their businesses to combat the slowdown, keep employees working, and find ways for customers and clients to still make purchases. It is in times like these that businesses who have put a contingency plan in place to survive the downturn can come out the other side thriving. For companies that do not have a plan or have an outdated strategy, we have highlighted some of the key areas that require attention in order to sustain business during an economic slowdown.
To start, companies need to assign incident management roles, and have these team leaders prepare scenario plans that are specific to the most detrimental impacts of a slowing economy. These leaders need to concentrate on how to effectively communicate internally, as well as with clients. Identifying how to minimize the risk of supply chain and business disruptions will lower the threats a company faces, and will allow the leaders to focus on how to reposition the company to achieve success now and after the downturn is over.
Next, company leaders need to focus on digital transformations, as problems will arise operationally with less employees than before to implement solutions. Examples of such problems include gaps in workforce planning, IT, and operational infrastructure. To combat the slowdown in revenue and profitability, leaders need to update all forecasts and models in anticipation of a recession. Upper management and all employees need to work together to identify solutions through scenario planning, and create new models internally that can be built on from company playbooks during past pandemics.
Tax considerations also need to be made, especially for global companies. Analyses need to be conducted to identify the tax impact, prepare an analysis of the firm’s global operational structure and presence, and identify solutions to minimize risks to prevent further disruption of business. Currently, such disruptions are being seen in supply chains across the globe, and as layoffs impact companies across the world, operational problems are likely to increase dramatically.
Company leaders need to analyze alternative supply chain scenarios and to be prepared to make changes as the virus continues to spread throughout the globe. To help minimize the time it would take to make changes within the supply chain, leaders should pre-approve substitutions such as for raw materials. Leaders will also have to consider pricing strategies depending on the customer’s geographic location and the changes in the local economy.
During a recession, especially one accompanied by higher interest rates, liquidity is of utmost importance. Heavily debt-laden companies should avoid increasing their exposure, and enforce more stringent financial ratios. Weekly reviews may need to be changed to daily reviews to keep up with the rapid changes many companies will experience. Models should be prepared to identify the future impact on capital resources and liquidity, to prepare for any new issues that may be on the horizon.
While the financial impact of layoffs on employees and their families can be harsh, it is vital for owners to treat their businesses with care to avoid a sustained decline in business. Your employees want to keep their jobs and you want to grow the business – make sure you have identified what issues can blindside you in the coming months and determine the solution.
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