Resilience in business is the same as an individual having the ability to use one’s skills to bounce back or recover quickly after facing difficulties. Indeed, some businesses have shown their ability to recover from previous crises and come out rather stronger. Moreover, a company that is a “going concern” can ensure survival despite external or internal struggles.
Check out our previous article on Is Your Business a Going Concern amid Crisis? to learn more.
In light of recent events, particularly the COVID-19 pandemic, it has become a challenge to start a new business, let alone to continue running one. How can your business fare through tough times and be more resilient? Find out!
The first step to business resilience: getting back on your feet
Realistically viewing current options as effectively and quickly as possible is key to “getting back on your feet”. Moreover, the first step in knowing your resilience in business is to assess your company’s financial situation.
The present COVID-19 global recession has been depleting most companies of their resources mostly to sustain individuals during the prolonged quarantine and lockdown, one way or another. Thus, being a separate entity from its owners, a business must quickly stabilize its cash and liquidity to be able to survive. Some ways to do it include:
- Producing additional capital from investors or the owners;
- Liquidating some assets and investments; and
- Borrowing additional funds for expansion.
To turn things around more quickly, one must not dwell anymore on “what might have been” or “what was”, but rather “what is”. Is the enterprise liquid enough for current and future operations? This question alone can trigger opportunities for strategic, operational, organizational, and financial change; given the right motivation to perform better as a company. Understand each change that will be taken into consideration as these are your “options”: the risks, costs, opportunity costs, and contingencies when those options are at a disadvantage. Hence, these are some of the additional inputs that should come with brainstorming.
Resilience against depleting financial resources
To deal with financial difficulties, the company must first understand the needs of borrowers, lenders, and shareholders by establishing communication with them as stakeholders. This roughly translates to being able to reach out to the people who can actually provide the company with more money:
- Borrowers – use company money and in return pays interest income.
- Lenders – incur debt from them for operations, expansion, etc., in exchange for the cost of borrowing or interest expense.
- Shareholders – provides additional capital from equity investments.
After assessing short-term liquidity requirements, settle with stakeholders just how much the company is able and willing to pay. It is essential to reliably address potential risks to stability. How can this be achieved?
- Appraise the situation and current financial standing and stability of the company.
- Brainstorm options on how to fix the current source of financial weakness.
- Devise a plan to establish what sustainable capital structure is best for the current situation.
- Negotiate and communicate with stakeholders about how they can help and how they can benefit from it in return to keep them engaged in negotiations.
- Mitigate and reconcile all stakeholder’s positions to implement a sustainable capital structure.
- Monitor the company’s progress to ensure its recovery in time.
Changing financial and operational strategies is never easy, but it is worth it for the betterment of the company and its ensured resilience.