As countries across the world take unprecedented measures to control the COVID-19 virus, businesses have fired up their crisis management and contingency plans. However, the crisis has a degree of severity, velocity and uncertainty which transcends many of the scenarios that were previously envisaged. For some sectors the challenges are literally about survival, for others they mean maintaining operational continuity, and for still others they involve responding to sudden huge increases in demand.
CEOs and leaders of businesses have a crucial role to play in helping the world get through this crisis, and the decisions they are taking today, usually from their homes, connected digitally to their teams, will have a major impact on the future.
While every situation is different, here are some effective tactics you can employ to steer your company back to black.
Force yourself to criticize your own plan: The biggest thing you can do to avoid distress is periodically review your business plans. When you’re creating them, whether at the beginning of the year or the start of a three-year cycle, build in some trigger points.
Such trigger points should be oriented both to operational and market performance as well as to basic financial metrics and cash flow. Look at where you are as a company using basic financial and cash milestones, and then look at where you are with respect to your industry and competitors.
If you’re not moving with the rest of the industry (or not outpacing it, if the industry is struggling), then your plan may be obsolete. And don’t forget to look back at your performance over past cycles to identify any trends. If you keep missing performance targets, ask why.
Communicate with stakeholders: While good communication is always important in business, it’s essential in a crisis. What you say and, just as importantly, what you don’t say, can seal your destiny. So, start talking, fast, providing updates on a regular basis.
What should you say? Our best advice: be honest and keep the story consistent, whether you’re telling it to staff or shareholders. This will help rebuild trust and increase engagement.
Focus on cash and cash returns: In the midst of a financial crisis, stress levels soar and, as a result, common sense can fall by the wayside. It’s easy to get lost in a haze of complex metrics such as earnings before tax and interest (EBIT) and return on investment. To shine a light through the fog you need to go back to basics and turn your attention to one thing only: your cash flow.
This means not only keeping a close eye on your bank balance but also creating mid and long-term forecasts so you know what’s coming. Once you simplify your finances in this way, a course of action will become clearer.
From crisis to growth: When you’ve reached crisis point, how you handle things can make all the difference. By taking smart, swift action and managing the situation with confidence, you can lead your company out of the red and into a new profitable period of business.