Preparing Business to Survive Global Crisis
Finance experts continue to watch anxiously while China engages in a tug-of-war with itself, amidst a decreasing Yuan and stock market crashes. After decades of rapid growth, the expansion of the Chinese economy finally slowed. To fix the problem, China must reduce its hold on the economy while gripping just tightly enough to prevent the Yuan from dropping out of sight.
Some say businesses should brace for a crash worse than the 2008 recession. Others claim things are not as bad as they appear. While these experts agree growth in China slowed, they expect the country to recover without major consequence to the rest of the world.
We’re sharing five tips to prepare businesses to weather a global economic crisis.
Talk About It
People often believe ignoring the elephant in the room makes it eventually go away. To ensure everyone knows of the danger of a potential recession, and prepares for it – talk about it. This allows managers to answer any questions shareholders, clients, and employees may have while providing the opportunity to reassure key players before panic strikes and hurtful rumors spread.
Hold on to Savings and Capital
Reinvesting ensures long-term growth in a thriving market. But when preparing for an economic struggle, businesses should focus more on maintaining establishments, rather than creating new ones, or expanding in other ways. Holding on to savings and liquid assets ensures the company can still pay its bills, even if it doesn’t make a profit. These bills include not just loans and utilities, but payroll, and advertising costs.
Become more Efficient
Many companies believe that cutting costs means laying off staff and closing down locations. However, once a company takes this route, it is very difficult to bounce back. Companies lose employees’ trust, gain bad publicity, and trigger stress and panic reactions in the remaining employees. This often serves to make workers less productive.
Rather than lay off workers, companies can pursue other initiatives like investing in renewable energy sources. Supplementing regular power with windmills or solar energy ensuring when oil prices skyrocket – as often happens during a recession – the company suffers little from this change.
Companies can also allow workers to telecommute, cutting down on transportation costs, and allowing the opportunity to downsize to a smaller building, or rent some office space and increase income. Other initiatives include outsourcing more work to freelancers, and automating processes so employees can take on other job tasks and roles, without needing to hire new people.
Diversify Revenue Streams
There’s no telling what industry or nation might trigger the next recession, so diversify as much as possible. Don’t rely too heavily on any one product or service in the business. For instance, if a company sells bottled water and the next crisis comes because of a water shortage, the company could benefit by putting water filters on the market, in addition to regular bottled water.
Have a Backup Plan
If all else fails, have a plan to execute the last resort strategies. What branches will you shut down first? What positions will you make redundant? Will employees respond better to job sharing initiatives, so everyone maintains a reduced income? What assets will you sell? Will you have to shut down the business? If yes, for how long?
Create a plan that answers these questions, and provides a clear course of action. At the time of execution, managers may need to modify it based on how the situation manifests. However, having a plan in place gives peace of mind. Depending on the plan and the organizational culture, the company may also benefit by sharing their plan with key players in the business, ensuring everyone is aware of the plan, and what role they will play.
While there is no sure way to recession-proof any business, these proactive measures provide protection for businesses helping them weather difficult financial times.