Making It All Make 'Cents'

10 Actions to Mitigate Financial Crisis

We are all suffering significant disruptions in what has been "business as usual" for the past 50 years or more. With such a substantial disruption to operations, supply chains, and cash flow, many businesses have shifted to survival mode. However, in times of crisis, it's essential that we learn to adapt at a rigorous pace. We thought that Dr. Michael J. Ryan from the World Health Organization shared the perfect business lesson in his March 13th, 2020 COVID-19 press briefing:

"If you need to be right before you move, you will never win. Perfection is the enemy of the good when it comes to emergency management. Speed trumps perfection. And the problem in society we have at the moment is everyone is afraid of making a mistake. Everyone is afraid of the consequence of error. Still, the greatest error is not to move; the greatest error is to be paralyzed by the fear of failure."

Given the fast-changing nature of this pandemic, our team compiled ten early actions that you should consider taking to mitigate your risk and adapt to this new environment.

Wear Your Heart on Your Sleeve

In times of crisis, we can often forget to look past our own needs. Consider that your customers are also suffering. Take inspiration from world leaders in continuous improvement like Toyota, who have responded to disasters in the past by never losing focus on their customers and front line workforce. Stay connected with your clients, not at just a business level but on a personal level as well. Ask about the people first and the business second. Use this economic tragedy as a platform to show the true colors of your company. Give your team the latitude to do what should be done to let others know that you care.

Reevaluate the Efficiency of Current Initiatives

Develop a cross-functional and multi-disciplinary team to assess all ongoing and planned capital initiatives, and provide the team with an aggressive timeline to report back (48 hours maximum). When forming this team, ensure that you are including team members, regardless of seniority or rank, who are directly working on the project. Their perspective and knowledge of what is happening "on the ground" will be critical as your team evaluates plans to continue or suspend capital projects. During times of uncertainty, businesses should drastically improve the efficiency of projects and initiatives to guard cash flow against the current conditions.

Review Cash Flow Forecast According to Current Revenue Trend 

You should expect a shortfall in cash flow and revise forecasts accordingly. Focus on the data that you do have and focus your accuracy on the current week and next week. Spend the majority of your time focusing on what you can control over the next 30 days to 90 days. If you are expending talent and resources building six-month plans and forecasts, consider that the focus may be better-applied to the current state.

Communicate the Need for Financial Spending Reduction

Open and transparent communication with your organization is critical. Ensure that you align your leaders to reduce spending, but ensure that the execution is appropriate. One rogue leader who begins slashing expenditure and laying people off could send our organization into a spiral of panic. Ask every member of your staff to determine the areas in which fiscal spending can be reduced. Ensure your team that this is for the greater good and that every idea is welcome! Be transparent that furloughing employees and layoffs are a last resort that we want to avoid totally. Challenge your team to push the boundaries and challenge the paradigm to find ways to save. This is the perfect opportunity to introduce a Daily KAIZEN™ routine into your business and leverage the power of structured problem solving and solution-oriented business development.

Review Insurance Policies

Disruptions caused by weather, delays, regulation changes, damage incurred during transport, and natural causes are often covered under insurance policies. Manufacturing and distribution companies, in particular, should review insurance coverage, expect delays, and prepare for worst-case scenarios. You may be in a better situation than you anticipated, but you should act quickly to avoid the backlog of claims that are sure to be filed.

Implement a Continuity of Business Plan

This is a critical step that must be done to stabilize your business. Your leadership team should immediately build a continuity of business plan and get it deployed quickly. The plan should be reviewed and updated daily by an assigned team to ensure that its integrity is maintained and that the plan continues to develop and evolve as the situation progresses. Perfection is the enemy in this scenario; this should not follow a process like the annual shareholders' report. Your first draft should be developed within a day and then evolve every day toward a more robust plan. Also, keep in mind that if the only people aware of the continuity plan are in the room, the plan will be a failure. You must communicate the strategy and be receptive to questions and feedback.

Introducing concepts like "Strat To Action" and Mission Control Rooms can significantly improve communication and response times to the ever-evolving situations at hand. Regularly reviewing and reprioritizing efforts using a plan, do, check, act (PDCA) model will assist you with this. With business slowed or at a standstill, take this opportunity to connect with and update your team daily. Set an agenda and time, request that all employees join, and execute a daily update without fail. In an abnormal situation, this will bring a sense of routine to your team while offering reassurance in an uncertain world.

Seek Out Short-Term Government Funding and Assistance

Look to federal and regional support and relief programs in place to assist with business needs. Leverage local resources like community banks, credit unions, and other locally-based financial resources that may have more flexibility and quicker responses to your needs. Across the United States and Canada, wage subsidies, tax deferments, and credit programs have been announced and continue to evolve, so check in on these programs every week. 

Be Transparent Regardless of the Hardships

As the founder of Kaizen Institute, Masaaki Imia, would say "Seek the wisdom of ten people rather than the knowledge of one." It is ok not to know all the answers, but we must be transparent with our teams. If jobs are at stake, it is better to be clear upfront and provide the team with updates and timelines than to provide false hope then blindside them with a layoff or shutdown. Research shows that if groups are involved in conversations about tough decisions, the response and resiliency of the teams is far better than those who were surprised.

Explore New Mediums of Generating Revenue 

Look intensely at your current workflow, develop think tank groups, and challenge them to seek out innovation for your business. Since the international declaration of a public health emergency, digital networks have proven to be exceptionally valuable in keeping friends, families, and communities connected across the globe. Businesses should consider leveraging digital tools to engage consumers virtually to drive revenue.

Prepare for Recovery

While planning for business continuity, if things don't improve, consider assigning a team to think and plan for the best-case scenario aggressively. Astute leaders know it's never too early to plan, and that starts with keeping informed of signs of improvement. If you can begin developing recovery and post-recovery strategies, you will recover at an exponentially higher rate than that of your peers who only planned for the worst.

Remember, there is no simple formula for surviving a financial crisis. Overreacting, underreacting, and doing nothing are all critical mistakes that will cost you in the future. To refer back to the wisdom of Dr. Ryan, "The lessons I've learned after so many Ebola outbreaks in my career are to be fast. Have no regrets. You must be the first mover. The virus will always get you if you don't move quickly. And you need to be prepared." Undoubtedly, many factors will influence the survival of your business but know that we are all in this together and #WeWillPrevail.

If we can be of any assistance to you during this time, please do not hesitate to reach out to our team. We are here for you 24/7 and our thoughts are with you.

~ Kaizen Institute North America Team

See the interview with Dr. Ryan by clicking this link.