The world is facing an unprecedented situation. Of course, no one would have known that, after two months of steady growth, 2020 will also bring a devastating pandemic in the entire world. While all efforts rightly have the focus on protecting the health of the people, business owners and Financial Managers are worried about the impact the crisis has on their business. Their primary focus is to create effective financial planning for what’s next. Besides the responsibility to provide for themselves and their families, these key executives have a huge responsibility for their employees and consumers.
In this article, we want to talk about how this global situation is causing extensive challenges for businesses, mainly on the financial part, and give them useful information and advice on how to get over it without a devastating impact on the bottom line of their company, through the use of effective financial planning tools.
There is no doubt that financial management during these times was highly affected. Looking at the numbers, we can understand the gravity of the situation. Let’s take a look at one of the most critical sectors on the globe – industrial production. China, the first affected country by the current crisis, has experienced a drop down by 13.5% in the first two months of the year, causing disruptive financial consequences for the companies in this area.
But what started as a series of stops in business activity, quickly cascaded through the economy and morphed into a full-blown shock impeding supply and demand. This impact was visible early February first on the industrial production and then on the retail sales in China, and it is slowly spreading on a global scale.
But not only industrial production and retail are highly hit by this global crisis. Looking at the stocks markets values, we can understand that most sectors have something to lose.
The impact of the current crisis is undeniable. We can continue by highlighting the shocking numbers about the financial implications for businesses, but that’s not our goal. Still, in such conditions, what could help companies to be better prepared and respond quickly to the volatile market?
In challenging times, even the most profitable business can swiftly become unsustainable if cash controls are weak, and visibility over cash is limited. Therefore, companies must adapt, re-budget, and have control over their costs in an early stage of a crisis in order to mitigate the potential negative impact.
According to a recent McKinsey & Company analysis, the financial distress that companies are experiencing is very high at this moment. But to be able to get back to normal, there are some simple steps to follow, both on an organizational level and also financially.
Altogether, these five phases represent the imperative of the current context: the battle against the crisis is one that business executives need to dominate in order for them to stabilize their companies economically and socially. The good news is that these leaders can fasten this process through the use of technology and its data analytics capabilities.
Most business leaders are on edge these days. They need to analyze the present situation fast, identify insights, plan for the future. This may not sound like a laborious process, but when the present is extremely volatile, and the variables change daily, then we have, indeed, some real challenges.
However, some technology solutions that ensure all-in-one planning, reporting, and consolidation can come in handy in such conditions. Therefore, business leaders can now plan for today to be able to surpass the crisis without affecting the business’s financial safety, but also for the future, as there is also a light at the end of the tunnel.
The tool we’ve been working with for the past years has shown tremendous benefits during uncertain conditions for both our partners and us. Here are some things that we find to be critical in the decision-making process, mainly during a crisis:
Understanding the immediate challenges to the economy posed by this pandemic, and how this will affect the financial status of any business, will help executives better imagine the future. Through scenario modeling, predictive analytics, and similar technologies, companies will continue to make the right decisions for themselves and their customers.
We’ll be discussing this topic in our next webinar – eRound Table – Financial Planning for uncertain situations. Join the discussion and let’s support each other during these difficult times.