Some people might rightfully call this a crisis. It is an event that causes a massive shift in one’s business model.
The people at Hardesty LLC, an Irvine, Calif.-based executive services firm said the best time to overcome a financial crisis is before there is one.
Having a reliable sense of your future cash-flow and having a strategic plan in place helps to manage or even avoid any future problem.
Karl Hardesty, CEO, offers the following steps any organization should implement to prevent or overcome a crisis.
• Establish a communications plan. Every organization has a chain of command, but in a crisis, the rules change. Assign a spokesperson to speak with media calling with sensitive questions. Make certain someone is ready to speak for the management team when investors come knocking, and someone is responsible for contacting customers and vendors.
• Develop a 13-week cash flow. The ability to forecast, monitor and perform in the short term can establish the foundation for a positive outcome during any financial crisis. A 13-week cash flow is appealing because it provides visibility into when cash will come in and what order obligations need to be addressed. Knowing your cash flow situation can help you get ahead of any issues before they become problems.
• Set up a cost reduction plan. Developing a plan after you notice the cash flow shortfall means it’s already too late. Create a line-item specific phased cost reduction plan that can be executed quickly.
• Encourage customers to pay faster. A payment acceleration plan can boost cash flow immediately.
• Keep your reorganization options open. Sometimes, cash flow issues unveil deeper problems in your business, and a reorganization becomes necessary. Perhaps no one is accountable for business performance. Maybe your structure drives up payroll costs even when revenue generation is at a standstill. It may be best to bring in outside management with experience in your industry to allow them to evaluate cost structure versus incoming cash.
Meanwhile companies are still behind in leveraging social media as a crucial resource, according to the new Business Continuity Insights Survey by PwC US.
“We are seeing more and more companies using BCM to address items in their risk portfolio, and are spending more time integrating BCM into their enterprise risk management program, versus seeing it as an insurance exercise or IT responsibility,” said Phil Samson, principal in PwC’s Risk Assurance practice and the firm’s Business Continuity Management service leader.
“As they’re starting to think about how to improve crisis communications elements in their BCM programs, we’re finding that some have started to delve into the social media sphere. Yet, the majority is still hesitant about utilizing social media as a crisis management tool.”
According to PwC’s survey, more than half of the respondents (57%) do not officially use social media as a crisis management resource. For companies that have begun integrating social media into their crisis management efforts, Facebook and Twitter cited the most often as the tools being used. But not all are seeing improvement in their capabilities.
“There is some uncertainty around adopting social media as companies are weighing the possible risks and legal complications, and are not seeing how it can be used to help expedite communications during a crisis,” continued Samson.
“As social media’s use in an organization becomes more pervasive and management grows more comfortable with its use, BCM programs will naturally begin to adopt social media for internal and external crisis communications. We’re telling our clients that they must first look through their crisis communication plan for ways to use social media as an effective communication channel to employees, key third parties, customers and stakeholders. Then, they should look at the more likely crisis and risk scenarios and determine if social media could be used to facilitate crisis identification, internal and external communications, and recovery coordination efforts.”
The majority of PwC’s survey respondents highlighted that documenting their BCM plans have become more pragmatic and user friendly, allowing more flexibility into responsiveness. “Companies are now starting to see that they no longer have to grasp for new ways to structure their BCM programs to get leadership buy-in. By showing the leadership the various enterprise-wide negative impacts of the more likely interruption scenarios, management will engage in moving the BCM program forward,” said Samson.
There are firms looking at how to make crisis management plans much more flexible and capable of handling longer lasting crisis events, Sampson said. “Further, the increased emphasis on risk management as an organization-wide initiative has continued to drive collateral improvements within BCM. Management is beginning to align BCM to broader organizational risk initiatives, as well as observing the benefits of imbedding a 'culture’ of continuity and resiliency within everyday business processes.”