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COVID-19: Taking Action & Gaining Control in Times of Extreme Crisis

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By Tony Fareed, Managing Partner of 360accel

Our sense of normalcy is out the window and our lives seem to be changing daily, if not hourly. During times like these, business leaders will rightly turn their focus toward the health and safety of their families, friends, employees, partners, and broader communities.

For those of us who regularly watch the financial news networks, we’ve seen a daily onslaught of increasingly bad news that is impacting nearly every industry and the global economy. Organizations of all types and sizes are scrambling to respond to these unprecedented conditions by implementing business continuity plans.

Senior management teams are doing their best to manage through the unknowns and take appropriate steps to stabilize their businesses. Strong relationships with key partners, customers, bankers, and advisors are proving to be invaluable for many businesses as they work through these tough times.

Unfortunately, none of us have a crystal ball that provides clarity on important questions:

·       How long will this crisis last?

·       What will the “new normal” be on the other side of the crisis?

·       What short, medium, and long-term impacts will this have on my business?

·       Will we have sufficient cash flow and access to capital to sustain the business during the crisis?

The good news is that, at some point, COVID-19 will eventually be under control and economic activity will begin to improve. Unfortunately, some businesses may not make it through the crisis, but others will stay afloat by effectively reacting to the changing economic conditions.

Given the environment, some business leaders may be lulled into a “wait-and-see” mode, finding it difficult to do anything beyond reacting to daily pressures. But even in these hectic times, there are certain actions that management teams can efficiently undertake to be better equipped to make tough decisions during the likely treacherous road ahead.

Take Action / Gain Control

As you work to keep your business functioning, allocating time and resources to plan for the journey to the “new normal” may not be on your radar screen. However, prioritizing such a plan can help define likely scenarios and identify new strategies and tactics to mitigate risks and pursue potential opportunities.

Here are five actions you can remotely take with your team to formulate flexible planning, which could help navigate challenges during the coming weeks and months. If you haven’t already subscribed to a video collaboration tool, such as GoToMeeting or Zoom, go sign up!

1.       Define Likely Scenarios (Possibilities, Not Predictions): Use a 4-quadrant scenario analysis technique to define four unique scenarios that can be independently analyzed. Plot a pair of the most relevant uncertainties (one included on a horizontal line, the other on an intersecting vertical line). For example, manufacturers may want to apply low and high ranges for each of these two uncertainties: (1) access to goods, resources, and supply chain and (2) demand for their product(s). Another pair might be (1) access to adequate cash flow and capital and (2) access to a healthy workforce. Try different uncertainties to find the most appropriate pair for your business’ current situation.

 

2.       Ecosystem Analysis: Drill down on how each of the four scenario quadrants might impact your business and key market participants within your business’ ecosystem, such as suppliers, distributors, end-customers, competitors, lenders, regulators, etc. In addition to identifying potential cash flow related issues, this analysis can highlight areas for bolstered risk mitigation, as well as potential opportunities (e.g., new strategic partnerships, M&A, divestment, new products/services, etc.).

 

3.       Self-Assess / Team Alignment:  Put together a short 360° business self-assessment (i.e., a list of the most relevant aspects related to your business). Have select team members rank each item using a 3-point scale (e.g., weak/stable/strong) and provide short comments. These assessments (and perhaps more importantly, the team discussions around the assessments) should strengthen team alignment and uncover gaps and ideas that you may not be considering.

 

4.       Cash Flow Analysis: No doubt you have already started this analysis – consider bolstering what you have already done. Organize and analyze your historical performance and financial data as a basis to build a dynamic financial model with a variety of key variables/drivers that can be changed. This type of modeling tool can be used on an ongoing basis to quickly understand potential quantitative impacts under different scenarios and help you make informed decisions.

 

5.       Phone Early / Phone Often: Keep in touch with your bankers, customers, partners, advisors, and yes, consider reaching out to your competitors and other market participants. Information and the ability to collaborate with others will be invaluable.

Time and resources are in short supply, so the analyses and planning don’t need to be overly complex – keep it simple and stay focused on what you are trying to accomplish. While this work won’t change the powerful forces that are out of your control, it should empower you with flexible planning and the ability to make quicker, better informed decisions.  Don’t lose time – leverage your team and start laying the groundwork to take action where you can.

360accel is a specialized consulting platform with deep capabilities to help organizations anticipate and address risks, build stronger businesses, create value, and prepare for executing transaction/exit processes. Please contact us at info@360accel.com.

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