Three things in the short term to anticipate, re-plan, communicate effectively, and ultimately, ride out the storm.
Crises are never straightforward, and COVID-19 is proving particularly complex. As such, the steps we’ve outlined here do not make a single process, but a repeatable cycle of activity. As new information appears, reassessing, reforecasting, and adjusting communications are paramount.
- Assess Risks: The first step to establishing control is to identify the key risk areas within your organization. Risk exposures will differ from business to business and from sector to sector, but the vast majority will experience some degree of revenue, supply chain, or workforce disruption.
- Realistically forecast: Once key risks have been identified, your business needs to ask a number of important financial questions, which can only be answered with the development of a detailed cash flow forecast that can shed light on liquidity and make it easier to map out options.
- Open, honest dialogue with stakeholders: Once the risks posed by COVID-19 have been identified and mitigation plans established, it is essential to act swiftly and adopt a "no surprises" approach to stakeholders. Honest, open, consistent, and regular communication will reassure stakeholders—both internally and externally—that your business is under control and that proactive steps are being taken to mitigate the risks. Uncertainty can be one of the most disruptive influences on a business at the best of times. In a crisis, this is greatly exacerbated, and there is almost no such thing as too much communication.
Crises bring focus and applying the simple approach above will help you establish a "cash culture" longer-term, which is an essential ingredient in the ongoing resilience of a business. A more agile "cash culture" may well be forged in the crucible of a crisis, but it should be there to stay.
We identify the key elements to creating a cash culture, in addition to expanding on the simple approach above.