Business resilience -  scenario planning and strategic reviews

Alistair Black

Alistair Black

Head of Consulting and Engineering & Manufacturing

Many businesses that have been shut down at some point during lockdown have now restarted operations. But many are finding the business environment has changed radically: highly volatile demand levels, new ways of operating and interacting with customers and suppliers and increased health & safety measures are just some of the challenges that companies are facing.

It is generally accepted that we are entering a severe recession, and whilst there are expectations of a strong bounce-back, the next 12-24 months will present a serious test of business resilience.

So, what should companies focus on to become more resilient and “build back better”?

1. Protect the core of the business

The most critical step is to establish a stable foundation to build from by ensuring your business is financially self-sustaining. Analyse the customer demand levels that your business anticipates over the next 6-12 months and restructure your cost base such that it is aligned with anticipated demand.

This is of course much easier said than done, especially with so much uncertainty in the market at present. We would advocate pulling together at least three demand-led scenarios - a base case, a negative outlook and a positive outlook. This will provide a range of income expectations. Then evaluate your existing resources and costs with the objective of maintaining sufficient capacity to meet the upper end of demand predictions but achieving at least break-even at the lower end demand predictions. Put the effort into developing a dynamic forecasting model that will allow you to test different scenarios, both in terms of profitability and cash flow, and use this to create and test action plans that you can implement as the outlook becomes clearer. It will also help you identify any potential cash pinch-points so that you can address these proactively.

2. Critically evaluate products / services and markets

As companies consider what the future might look like, it is a good opportunity to evaluate the products and services that the company provides and the markets, customer segments and so on, that it serves to identify what the past performance has been and outlook for each is. As they grow, many companies lose sight of which products or markets create value and which don’t. The current disruption has given rise to new business opportunities too, with agile businesses introducing new services to meet changes in customer demand. This is the ideal opportunity to take a step back and re-evaluate your strategy and business model: what type of business do you want to be, what markets you want to focus on and what profile of customers you are targeting. Then make plans to align your resources to meet the requirements and expectations of these customers and markets.

3. Focus on sales & business development

The fight for business has always been tough, but whilst demand levels remain subdued, your ability to identify and convert good business opportunities (see point 2 above) will be vital in rebuilding your revenues.

Evaluate the effectiveness of your sales and business development processes. Do you have a well-defined process? Do you have accurate data to monitor how effective it is? What is the size of your opportunity pipeline – increasing or decreasing? What is your conversion rate? Why are you losing potential deals? Does the data you collect provide you with the insight needed to plan your operational and cash resource requirements?

This may well be the most important area for investment in the near-term.

4. Look everywhere for profit improvement opportunities

There is likely to be downward price pressure in many markets, so look for opportunities lie to take cost out of your products or services and identify opportunities to provide more value-add. Develop a detailed profit improvement plan across all areas of the business. Look at productivity and waste reduction opportunities, organisational structure improvements, digitisation and automation initiatives and back office efficiency. Carry out a root and branch review of your supply chain and find out how to work more efficiently with them.

Now more than ever is the opportunity to build “win-win” relationships with customers and suppliers.  

5. Business Continuity

The worst thing that could happen in the business world has just happened! How did your Business Continuity Plan hold up?

Business Continuity plans are often seen as expensive and unnecessary and something that only large businesses have the time and resource to develop. At a time when companies are looking for ways to reduce expenditure, this may not seem like a priority. But if Covid-19 has done anything positive, it has illustrated how susceptible our businesses are to Black Swan events and whilst it may seem like locking the door after the horse has bolted, our view is that it is never too late to act. We can only hope that the current crisis is a once-in-a-lifetime event, but who knows what else is lying around the corner. How prepared will your organisation be?

Every business in every sector will need to find its own path out of the crisis, and unfortunately some businesses will not survive. Use this disruption as a catalyst to build resilience in all areas and an opportunity to reshape your business so that it can thrive in the new normal. It may be hard to see, but with strong management, good decision-making and a perhaps bit of luck, many businesses will emerge from this crisis in even better shape than they were before.

We’re here to help

Our Business Resilience team are on hand to help, whatever stage your business is at emerging from lockdown. Get in touch with a member of our team now, for an initial chat