Unless you’re living off the grid on a desert island, you may have heard talk of a coming recession. It’s not a matter of if, it’s a matter of when. After all, it’s part of the lifecycle of our economy…
“Main Street has it right: Even as the debate about “when” continues among economic forecasters, companies should begin to prepare themselves for the next recession. To assure some measure of resiliency, they should start now to assess the degree of exposure they have to slowdown, identify initiatives that can help to mitigate the exposure, and establish a “nerve center” to monitor progress on those initiatives”.
How do you ensure you’re prepared for both challenges and opportunities?
First off, it’s helpful to recognize that a recession is a part of our economic landscape. Once you take the “sting” out of it, you might be more willing to confront the reality. Evidence suggests that companies who are willing to proactively plan and make adjustments ahead of a recession are more likely to be resilient and come out ahead in the long run.
The practices shared here can apply whether you’re running a large company, a sole proprietorship, or your household.
Practice Scenario Planning. Companies that were resilient through recessions anticipated a variety of potential changes to the market by evaluating and planning for different scenarios – both positive and negative. Questions to consider: Where will your market slow down? What will you do in response? What new opportunities might open up and how will you position yourself to be ready for them? Scenario planning can be an invaluable tool for anticipating and solving potential future problems. Equally important, it helps manage fear. And managing fear during uncertain times is critically important.
Know and consider your financial position. According to HBR, companies that did well during and after a recession had less exposure and had strategically managed/restructured debt. Individual financial advisors I’ve spoken with have suggested keeping cash/credit available both for the unexpected and to take advantage of investing opportunities that often come along with a recession. What actions could you take now to better prepare yourself for the unexpected and new opportunities?
Consider a balanced approach. Companies that fared worst during recessions were those that took the reactionary cost cutting position. When you take the time now scenario plan and tend to your finances, it may put you in a position to take a more balanced approach to addressing a recession. The Heath brothers, in their book Decisive, found that companies who were most resilient during difficult times took the opportunity to balance cost cutting in some areas while investing in others.
Ultimately, the lesson is that those who are willing to address, anticipate, and plan for a recession will likely be more confident, more prepared, and are ready to come out ahead.
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