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Strength Test: How Can Business Withstand a Crisis

18 September 2020

Strength Test: How Can Business Withstand a Crisis

In the midst of a crisis the decline in profits of a company is an obvious scenario. The business environment is unpredictable and dynamic. Changes in the world economy, evolution of technology, changes in the market test business for strength. The pandemic crisis is a clear example of systemic stress.

 

Resilience of a company is its capacity to withstand shocks, to adapt, to restore its functionality and to earn under new conditions.

 

Why Companies Do Not Withstand a Crisis

 

The goal of any business is to get the maximum profit, and, preferably, immediate benefits. Companies focus on implementing annual and quarterly plans, but developing resilience requires dealing with the consequences of the unknown and the unpredictable.

 

A company should not be perceived as a separate island but as a part of a large system. You need to consider economic and social relations with counterparties, partners and customers. The strength of a separate company means little if its supply chain or customer base is injured. Many companies use risk management tools, but they take into account only specific known risks and often look at the picture narrowly.

 

Philosophy of Resilience in Business

 

Companies that adhere to the principles of resilience have advantages.

 

They better understand the threats. The ability to think and make plans a few steps ahead helps reduce the surprise factor.

 

Counter-example: COVID-19 caught many by surprise, and companies adapted late, losing time and money. Knowing the threats and thinking of solutions in advance will save you time.

 

They endure the peak of stress more productively. When companies are ready for challenges, they know what to expect and withstand shocks easier. In addition, they focus on mitigation actions rather than panic and planning of an emergency exit from the situation.

 

They recover faster. When you know the threats, you assume options and solutions. Readiness helps overcome shocks faster and take measures to return to the previous level of effectiveness.

 

Does this affect the profits of the company? Yes, it does. The crisis phase can reduce the profits of all enterprises without exception. But the faster you recover and adapt, the less you lose.

 

How to Become a Resilient Company

 

Crises = changes. For example, the crisis of the COVID-19 pandemic caused the need to rethink business models, to change approaches.

 

Follow these guidelines to improve your indicators:

 

1. Search for benefits and opportunities. Actions that aim at reducing harm, risk, or at the recovery are a great solution. But an even better solution would be to benefit from an unfavorable situation.

For example, during the quarantine period it was a great solution for local businesses to introduce online sales or delivery. Adapt to new realia.

 

2. Look at things on a large scale. On the one hand, the crisis requires new operational solutions. But on the other hand, the fall of competitors and the new needs create new opportunities.

 

3. Collegial work. Resilience presupposes looking at the business and the situation comprehensively, in their relation to customers, partners and counterparties. To understand how the crisis will affect and what benefits can be obtained, you need systematic thinking, solutions. Communication with consumers, employees, business partners will help look at things from a new angle, get new ideas and come up with non-obvious solutions.

 

4. Encourage creativity. Resilience depends on new and alternative ways of reacting, which depend on the ability to look at things with a fresh eye. An employee’s extraordinary idea can be a great solution for a company.

 

5. Changes are necessary. The basis for everything is a change, not stability, and this is important to understand. Changes would come sooner or later, and the crisis is a great opportunity to do so now. Take changes for granted.

 

6. Do not forget to be grateful to customers, colleagues, suppliers and partners. Gratitude in times of difficulty helps maintain mental health and improves the overall mood in the company. The people you work with have sacrificed a lot during this time to keep the business afloat. Remind them of the value of their efforts.

 

In the modern world instant effectiveness is ordinary, but we see lasting results and strength far less. Of all the ideas, startups, small and large companies, only a small percentage has been afloat and thriving for years.

 

Resilient companies are more likely to foresee the scenario development, to recover and adapt faster. It is not just about using new tools, it is about changing your approach to business.

 

According to the materials of Martin Reeves and Kevin Whitaker, BCG Henderson Institute

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