Uncertainty is a part of business life. While there are techniques for planning the unknown and for anticipating risks, they seem to be absent in many companies, of very diverse sizes, even though they will have to deal with the impact of the coronavirus epidemic on their activities.

The current challenges

Beyond the crisis linked to the pandemic, businesses have now entered a period where commercial uncertainties are numerous and tensions are unpredictable.

Therefore, it has become necessary for business leaders to develop formal planning to anticipate events and deal with the sudden drop in the order book and cash flow difficulties.

VISCONTI Partners' three-step approach

At VISCONTI Partners, we have experimented with a three-step approach to dealing with financial emergencies.

First Step: Data and Contingency Analysis

The first step involves the company's information system and how it processes data on the likely course of future events.

Management should examine in detail all the contingencies that concern them, in order to be able to understand in advance their financial implications for identification and plan for a rapid and structured response.

This requires an ability to analyze beyond normal forecasting procedures.

Step Two: Preparing Alternative Resources

The second step is the preparation of an inventory of alternative resources open to a company to deal with an unexpected cash flow deficit.

Resources will include instant and tradable reserves, reallocation of some budgets and the liquidation of unused assets, deferral of non-productive expenses, outsourcing, staff reduction, etc.

Step Three: Formulation of an adaptive strategy

The third step — the most difficult — is the formulation of a strategy for dealing with the unknown.

This requires some judgments about the size and distribution of resources and in particular about the sequence in which they will be used as contingent needs arise. It is obvious that the strategy must be adapted to the unexpected and to the circumstances of the business.

A good strategy will therefore seek to plan a rapid response capacity when the need is sudden and urgent or when it is essential to save time to allow resources to be reallocated.