With the economic landscape continuing to shift, Sean Moran, insolvency partner at Sheffield law firm Shakespeare Martineau, discusses how businesses can enhance their durability to navigate turbulent times.
In the first six months of 2023, Yorkshire businesses accounted for 10% of UK administrations, the fourth highest region in the country – making it clear there is a need for proactive measures to ensure durability, especially during an era marked by unexpected upheavals and unprecedented challenges.
Despite weathering the Covid-19 storm and, in many cases, emerging stronger from the pandemic, surging energy prices, high interest rates, supply chain disruptions, inflation and the cost-of-living crises are plaguing businesses up and down the country.
“These factors can significantly impact cash flow, operational efficiency and overall stability.”
Five key steps to ensure your business remains viable in turbulent times:
- Focus on cash flow: the importance of accurate forecasting
- Manage your debtors carefully
- Review existing and ongoing liabilities to suppliers
- Manage stock carefully
- Ensure regular dialogue with key stakeholders: seeking financial support or forbearance where necessary
Protecting against risks and recognising the warning signs
The cornerstone of business durability lies in the ability to adapt swiftly to changing circumstances. The environment demands businesses remain agile and flexible, capable of pivoting their operations, products or services in response to shifting market dynamics. Forward-thinking businesses are proactive, fostering a culture of innovation and openness to change, where employees at all levels are empowered to contribute ideas and insights.
It is vital businesses are not caught out by issues arising in their own supply chain and must remain vigilant for red flags that could indicate a problem with customers or suppliers. These include failing to meet debt obligations or deliver on commitments to customers and suppliers, sudden management changes, and negative market information. Additionally, tracking legal filings and notices can provide insights into a company’s financial health.
Durability and resilience
Embracing durability means proactively identifying and managing risks. Companies should conduct thorough risk assessments and develop comprehensive contingency plans. This includes diversifying supply chains, building cash reserves and leveraging technology for efficient remote operations. By having a well-rounded risk management strategy, businesses can mitigate potential disruptions.
“Durability stems from a deep understanding of customer needs and preferences.”
Engaging with customers on a regular basis and incorporating their feedback into decision-making processes can help businesses tailor their offerings to match evolving demands. Customer loyalty is a crucial buffer during tough times.
Technology and leadership
Technological advancement is a key driver of durability. Companies that integrate digital solutions into their operations are better equipped to navigate remote work scenarios, tap into global markets and streamline processes. The pandemic highlighted the importance of technology in maintaining business continuity – from e-commerce platforms to virtual collaboration tools.
Resilient leaders communicate transparently, inspire their teams and make tough decisions with empathy, ensuring employees remain aligned with company goals.
Navigating a way forward
Implementing risk-mitigation measures are the first step to navigating crises. However, it is important not to ignore any warning signs – seeking professional advice can open up more options. Taking a proactive approach to address underlying issues will allow businesses to better navigating the tough trading conditions and increase their chance of survival.
To hear some real-life examples of how businesses across the region built durability throughout the pandemic years, read here.