6 topics to include in contingency planning during a slowdown
Facing the prospect of a slower economy in 2023, many leaders are placing cost rationalisation and crisis preparedness at the top of their boardroom agenda’s. Arthur Mansourian, a management consultant at NMS Consulting, outlines six business areas that should be part of any slowdown-focused strategy and contingency plan.
Scenario planning and commercials
To combat the slowdown in revenue and profitability, leaders need to update all forecasts and models in anticipation of a downturn. 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.
Liquidity
During a slowdown or even 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.
Incident management
To protect the business from risks and threats incident management is key. 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.
Digital transformation
Despite a spending bite, company leaders should continue to focus on digital transformation in today’s rapidly digitising economy and society.
In addition, leaders should plan for problems with may arise operationally with less employees than before to implement solutions. Examples of such problems include gaps in workforce planning, IT, and operational infrastructure.
Supply chain
Company leaders need to analyze alternative supply chain scenarios and to be prepared to make changes as disruptions may occur. To help minimize the time it takes to make changes within the supply chain, leaders should pre-approve substitutions such as for raw materials.
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.
Tax implications
Tax considerations also need to be made, especially for global companies. Analyses need to be conducted to identify the tax impact, prepare an overview of the firm’s global operational structure and presence, and identify solutions to minimize tax risks and impacts.
