Recession Proof Your Business

This is the first post in a series focusing on ways to enhance and protect any business.

With volatility back in the markets and talks of slowing global growth, many business executives are asking the question: “How will my company fare during a recession, and are there ways we can actually thrive instead of just survive during a downturn?” When GDP growth is as strong as it has been over the past few years, it is very easy to sit back and let complacency set in. However, this is precisely the time when businesses should be concentrating their resources on establishing strong risk management practices, training their employees, and building more efficient processes. During economic times like these, any manager would be wise to heed the old proverb of “Making hay while the sun shines”.

  • Stress Testing

    After the “Great Recession” in 2008, banking underwent major regulation overhauls, including developing robust contingency funding plans and the now-famous stress testing. Companies outside of the banking sector may not be required by law to do these, but the ones that take the time to develop a solid Enterprise Risk Management plan will create a competitive advantage by limiting disruptions and making better management decisions. There are many ways to plan in case of emergencies in all areas of the business. For example, a business should create a back-up plan for unexpected cash flow needs or if a source of capital dries up. If a company can develop alternative sources of capital or financing before the need arises, they are more likely to not ever need it. “Stress testing” your business is a valuable exercise as well. For example, a company that sells products to retail stores should model the effects on income and liquidity that a loss of a major account could have on the business. Having a true understanding of the key accounts driving the business and their projected impact helps companies prioritize relationships, as well as helps them realize where there are opportunities to diversify. Developing contingency plans also helps companies make more strategic and rational decisions in the case of lost business.

  • Talent Development

    According to the Association for Talent Development, companies that develop comprehensive training programs have 218% higher income per employee than companies with informal training. Even better, these companies also enjoy a 24% higher profit margin. Investing in employees clearly pays big dividends and leads to high employee retention, but sometimes the resources are not available to develop effective training programs. In the current tight labor market, it is extremely important to ensure that employees are given the resources and training needed to do a good job, or they could be recruited away by companies that will. Developing a strong strategy around employee development is a crucial aspect of a successful business, leading to higher retention as well as a more profitable company.

  • Process Mapping

    There has never been a better or cheaper time for any sized business to develop resiliency in their processes. With advanced technology so accessible and user-friendly, mapping processes is a cheap and easy way to standardize operations. Not only is it a best business practice to have all operational processes documented and standardized, it also helps reveal any inefficiencies or bottlenecks in the process. Operational efficiency then leads to higher quality products and services, as well as having the ability to free up employees to work on other tasks vital to growing the business. Many times, businesses are too close to the process to be able to effectively map it, making process replication nearly impossible.

While focusing on growth is extremely important for companies, there comes a point when it is vital to enhance and protect the business that has already been built. While the economy is strong is the best time to look back and ensure that processes, risk, and people are being managed properly. Taking the time and resources to take these proactive steps now will ensure that the next time a recession occurs, your business will be ready.