How to prepare contigency plans for a possible downturn

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There were two steps corporations had to take to succeed both today and in the future. The first, already covered, is to sweep out value destroying and limiting practices. The second is to prepare contingency plans for a possible economic downturn.

During economic downturns two critical things happen: cash flow diminishes precipitously and decision-making times shrink dramatically. In the absence of a contingency plan, incorrect decisions often go unchallenged and become integrated into strategies, leading to their magnification over time. Like the proverbial butterfly that flaps its wings in one part of the world and creates a storm in another, this can have a devastating impact on already dwindling cash flow and a company’s survival prospects.

The key to success is to have a plan that bullet-proofs your cash flow and enables you to use your superior cash flow to ‘invest against the tide’ and profit from your competitors’ weaknesses. This will allow you to emerge in a stronger position after the ‘storm’. Indeed the process of preparing a plan – including analysing and correction the relative vulnerabilities of your business units’ cash flows to different market scenarios – will benefit your business in a number of ways regardless of whether there is a downtown or not. It will identify fundamental weaknesses, foster a more risk-aware culture and focus managers’ minds on operating in extreme conditions, often stimulating creative new ideas. […]

Read full article via bcg.perspectives – How Today’s Top Corporations Can Generate Value Tomorrow.

 

About

Jim Woods is president of The Jim Woods Group. A management consulting firm. Go here to see his work www.jimwoodsgroup.com. He advises and speaks to organizations large and small on how to increase top line growth in times of uncertainty and complexity. Some of his speaking and consulting clients include: U.S. Army, MITRE Corporation, Pitney Bowes, Whirlpool, and 3M. See more at his website www.jimwoodsgroup.com.

Posted in Entrepreneurship

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