As economists debate whether COVID-19 is a “black swan” event, business owners should be proactive in preserving cash flow and preparing for future uncertainty. We still don’t know the scale of the impact of COVID-19 on the global economy. However, business owners should be stepping back to stabilise, rise to their current challenges or use them as opportunities to pivot in new directions to survive. In the long-term, businesses that prioritise a resilience strategy addressing the opportunity and risk in potential future crises–whether economic, health or climate-related–are positioned to succeed.
Assess and Optimise Your Cash Flow
In the face of a global pandemic and impending recession, businesses now should be stepping back to stabilise their cash flow. Since a global crisis like COVID-19 can affect every aspect of your business, responding requires a holistic outlook. Rather than just protecting your current business model, focus on the bigger picture by adopting a growth mindset. Agility, unity, and an eye for opportunity are what your executive leadership team needs in order to adapt to new demands.
First, run a financial stress test. Assess the financial impact you face from the crisis, such as additional unexpected costs or losses, review your value chain and the tax position of your business. With a clear view of the impact, examine any disruptions in your supply chain or at any part of your cash flow. Define obstacles currently thwarting cash flow and develop a strategic response to optimise cash availability. Seize any opportunities to pivot to more stable or lucrative directions that ensure continuous cash flow. For example, retail businesses that quickly shifted all their efforts to e-commerce sales fared better during the coronavirus pandemic.
Embrace flexible working
Businesses who moved quickly to adopting remote working were able to weather the lockdowns better than those requiring employees to commute and work in an office. Having a virtual workforce prevents productivity loss in a lockdown scenario, and remote workers are shown to be more productive than in-house staff. One strategy for making your workforce adaptive is to shift your employees to working remotely. As our global survey of business leaders identified, business leaders are exploring more flexible working arrangements, creating avenues that enable their staff to work from home when necessary.
Optimise Your Supply Chain for Agility
COVID-19 has demonstrated how easily the global supply chain can become disrupted. As companies continue to adjust after recent lockdowns around the world, they should optimise their supply chains not just for their bottom line but also for adaptivity. Let’s look at some of the major strategies companies are adopting:
Building Redundancy
Another strategy is to build redundancy in your supply chain. Supply chain optimisation previously involved slimming down the supply chain, with larger and fewer factories, warehouses and distribution centres. Increasingly, however, companies are multiplying these centres and putting them in more local areas, making the supply chain as a whole less vulnerable. Breaking up the supply chain and adding redundancy also makes it more agile because there are more actors and locations that can be mobilised when a change of direction is needed or when part of the supply chain is compensated.
Increasing Agility
A resilient supply chain is ready for change at any minute. Businesses must decide what potential disruptions to be ready for and how to best respond to them. For futures you can predict, such as seasonal fluctuations, it’s easy to rely on data analytics. Unknown futures, however, require learning from the past and thinking ahead with the big picture in mind.
Executives should meet to agree on the major potential scenarios that could threaten their supply chain, and the hypothetical impact each would have on their bottom line. They can then identify current deficiencies that would bottleneck their supply chain if any of these potential futures became real. Finally, businesses must develop and implement resilience strategies to shore up these deficiencies and increase supply chain agility.
Creating Flexible Responses to Demand Changes
COVID-19 showed us that customer demand for certain products can unexpectedly skyrocket in the event of a global crisis. Car manufacturers are now manufacturing masks because of the global shift in consumer needs. Agile companies can effectively increase their supply chain velocity when it’s necessary. Develop strategies for increasing your supply chain’s capacity to meet demand, whether it requires investing in automation technology or creating a framework for tapping local couriers.
Business Resilience in Turbulent Economic Times
Being part of a tumultuous, uncertain business environment requires continuously monitoring threats to your cash flow, embracing new workforce models, as well as planning ahead with a resilience strategy. In any global crisis, a handful of businesses seem to blossom despite the majority being set back. Global events and their repercussions present new opportunities that only the most well-informed leaders seize. Executive teams prepared to make quick decisions and react in unity can better mobilise each team in the company to respond strategically.