It’s barely been over few weeks on this pandemic crisis and we already have an economic disaster of still unquantified proportions.
Despite these difficulties, here comes a positive message: we can and we must now take all necessary and due measures to survive the impact this crisis is having in our companies. We will come back out of this stronger. Further, we will also be better prepared for whatever economical situation comes after this.
Here below you will find what I have seen, in my experience, that works in a crisis. It will also help you position your company in face of the envisaging economical environment.
SURVIVING THE PANDEMIC CRISIS
I. Revisit your company’s goals
First of all, revisit the current year goals. Should they still be the same? Should they change to other goals in light of this crisis? Should you modify them? Are we sure we still want to head in the same direction as we chose at the beginning of this year (or end of last year)?
Your answers will take into account the data and information you know so far. I understand this data and information is constantly changing, but this is what we have. We can only work with what we have, except David Copperfield. Take notes of your thoughts, what you are going to do and what you will change and why. Further down you will understand the reason for this tip. Use the many available tools to be more efficient (e.g.: Evernote). By applying these steps regularly you will help your company navigate through this challenge on an ongoing basis.
My case as example: one of my goals for this year was to take on a project defending a company’s model of corporate governance in front of Spanish tribunals. It was linked to the launch in Spain by Almuzara publisher, of my book, a guidance on implementing a model of corporate governance to help companies mitigate the impact of a wrongdoing been committed by an employee or senior executive. Guía del buen gobierno corporativo
This crisis, however, has called a halt to the tribunals processes and trials. Even in the best case scenario, the judicial system will resume full steam well after the summer, most likely October. I better move this goal to next year.
What am I going to do in the meantime? How can I help companies now? I see that this crisis is resulting in many companies struggling financially. I have helped companies receive funds from investors in the past. These funds can come via equity, convertible loans, or it can also involve the sale of the company. I can help on this now. This is my goal at this moment.
Whilst my case has meant a total change of goals, your company situation may not necessarily require such a total change.
Revisiting your company’s goals take some minutes. It is the first step as this will give you focus. Having a clear focus is more critical now than ever.
II. Assess the risks
Secondly, you run a risk assessment on the revisited goals. The aim of this asessment is to list down all the risks that can avoid reaching the revisited goals. By risk I mean the possibility of having a danger occurring that avoids reaching the goal. For each of the risks, you evaluate their probability of occurrence (from 1 low to 4 high) and their impact if occurring, (again from 1 low to 4 high). You then multiply both, probability and impact, for each risk. The resulting number will help you classify the importance of each risk. You can do this in a excel file to get a helpful graphic view.
In my case, my risks are:
- Risk #1: judicial system resuming activity earlier than expected and I am reached out to help defend a compay’s model of corporate governance in front of tribunals (this will make me rethink as to whether I want to continue with the revisited goal)
- Risk #2: I don’t find investors
- Risk #3: I don’t find companies that need financing or funding
Risk #1: probability 1, (as explained above very low likelihood), impact 3 (as above, if it occurs, and judicial system resumes earlier and I am reached out to help, I may need to reconsider whether to attend this goal instead of other goals, for example), so total: 3×1=3
Risk #2: probability 2, impact 4, so total: 2×4=8 – the impact of not finding companies that may need funding or financing will be high but I expect a lower probability of this occurrence.
Risk#3: probability 3, impact 4, so total: 3×4=12 – as above, the impact of not finding investors will be high but in this risk, the probability, in my opinion is a bit higher than Risk#2.
Clearly, I am going to tackle first risk #3.
Running a risk assessment like this takes a short time. It shouldn’t drive you crazy.
III. Actions to mitigate the risks
Thirdly, once the risks and their importance are clear, you then choose measures to mitigate or remove the risks. These measures will involve the daily ways of working. How are you going to communicate these measures to your staff? Do you need to change or modify current policies or issue a new one? Do these measures impact on the ways of working of your staff?
In my example, which measures should I take to minimise or remove the risk#3? I will need to get in touch with investors, so I will need to find out communication channels towards them. Until now, and due to my inital goal, I was heavily investing in communication channels with lawyers and law firms. So now, I have to change all these channels for different ones. How can I find out about these new channels? Further, now I will have to invest in online tools to communicate. Fortunately, there are many of them and they offer free basic features.
What happens if circumstances change again? It seems this is the new norm now. This is when you take your notes on the reasons to change or not to change your goals, as I explained above, and you revisit again your goals under the new circumstances, but knowing the reasons you had before to change or not to change.
An example: a colleague of mine has a company in Spain whose goal this year was to increase sales by 50%. Due to this crisis, the company has lost 90% of the clients and the funds an investor was about to transfer. So my colleague changed goal immediately to a new one: survive this crisis. The risk assessment resulted in a key risk of running out of cash in the short term (that was the most importat risk as you can imagine, probability high, impact high), and the risk of difficulties recovering the clients quickly (probability 3, impact 4).
The company managed to secure a bank loan that provides the cash needed for the coming three months. Then, this company has looked for business partners in Latam to develop the business. Latam is still having economic activity ongoing and the same language helps. My colleague expects that these busines partners could bring leads quickly and that these leads will quickly convert into orders. The business partners have been carefully chosen for this with a vey appealing package.
What could happen if Latam circumstances change? E.g.: massive lock-down. These business partners will be unable to bring any lead and this will impact the survival of this company. As my colleague has noted down the reasons of choosing Latam to develop in that market, she can then change as soon as she perceives any negative change in Latam economical circumstances.
Noting down the reasons is a simple recommendation in the light of the excessive areas we need to focus on.
And, what happens if this company of my colleague finally receives the funds from the investors? First, as at the beginning of this blog, you revisit your goals again. The goal of surviving the crisis would be achieved them by receiving the funds. So this colleague of mine would focus on recovering sales and increasing them. Secondly, you run the risk assessment on this new goal. Under this new goal, the main risks would be:
- difficulties on getting back former clients: probability 3, impact 4=12
- difficulties finding new markets: probability 2, impact 4=8
- product unhelpful for clients under this crisis: probability 4, impact 4=16
So this company would focus on the product now. So they did. They have managed to find a feature or characteristic of this product that makes this product very helpful to medium and large companies under this current crisis. Thanks to this, this company now will be able to get back former clients and increase sales.
SURVIVING THIS PANDEMIC CRISIS…..WITH FOCUS AND STRATEGY
I am explaining all this because following these steps in this order will quickly help you get out of this crisis and get ready for whatever comes next. You focus on the goals, and you have always clear that your focus is the right one, and then with the risk assessment you build your strategy, your plan.
The next steps once you focus and have your plan, is to review the daily ways of working to assess whether these ways need changing or not in relation to your plan. If they need to change, what measures are needed? This is translating your strategy into tactics, daily little plans linked to the bigger one. This is the most difficult bit for all companies, regardless of their size and resources. This will be part of another blog. In the meantime, practice these steps so you get used to them easily.
Just a final comment: all that I have explained above is good corporate governance. Many people think of it as bureaucratic, tedious, useless…hope that after my explanation you consider changing your view on it. Besides, Blackrock boss and Warren Buffet are now taking account ESG factors (Environment, Social and Governance) when deciding where to invest. They are not the only ones.