Four ways to build financial resilience through COVID-19
There are a number of critical steps leaders should adopt to build strategic and financial resilience into their organisations through COVID-19
COVID-19 has already forced many businesses into creativity and crisis innovation. Several distilleries are today pumping out hand sanitiser instead of gin, Stagekings moved from designing massive stages for celebrities to now supplying home-office furniture and Ned’s Heads pivoted from luxury speakers to face shields to meet COVID-19 shortages.
Lali Wiratunga is the National Manager of Westpac’s Davidson Institute, an online platform designed to help build Australians’ financial confidence. He says one thing is sure for leaders of Australia’s businesses: those that can respond and adapt to the crisis are more likely to be ready to serve their customers in a post-COVID-19 world.
“Having a plan in place can be an effective way to help your organisation do just that,” says the AGSM @ UNSW Business School MBA (Executive) graduate and alumnus.
“Showing your employees you have a plan for how you’ll work through various eventualities, such as changes to cash flow or disruptions to operations, may help ensure they’re ready to deal with whatever comes next.”
1. Consider whether your business should pivot
To adapt, CEOs and their organisations must consider whether their business should pivot. “It’s inspiring to know that some of Australia’s entrepreneurs are finding ways to thrive and help add value back to the community,” says Mr Wiratunga.
But such pivots, large or small, should emerge from a clear understanding of what is working and what is not. “A strategic pivot is all about turning toward opportunities that your organisation can be positioned to address,” explains Mr Wiratunga.
To ensure your business pivots in the right direction, Mr Wiratunga suggests utilising data and insights as a guide to help decide whether it’s the right time to pivot (or to pivot at all). As part of this process, businesses should consider what products, technologies, processes, and services are currently being offered and any adjacencies that customers may need, he says.
"A strategic pivot is all about turning toward opportunities that your organisation can be positioned to address"Lali Wiratunga, National Manager of the Davidson Institute
“Think about what problems or pain points customers are facing, that you or others aren’t yet addressing, and how best – with the resources available – might your organisation reimagine current services and add to them to bring greater value to the end customer,” he adds.
As a starting point, Mr Wiratunga suggests going through a Davidson Institute Innovation Toolkit, which includes guidance on gathering customer insights using customer profiles, stories and journey mapping.
2. Improve financial literacy and manage costs
Business owners today find themselves in a volatile, uncertain, complex and ambiguous world. Here, financial literacy is key to increasing financial capability and resilience – something the Davidson Institute champions, says Mr Wiratunga.
“Small businesses, by changing the way they operate, have taken steps to address gaps in their business cash flow – demonstrating their resilience and enabling them to remain financially confident,” says Mr Wiratunga.
He explains there are seven key considerations for businesses looking to improve cash flow, cost management and profitability during the pandemic:
1. Understand your current financial position: Armed with that knowledge, you are better able to make information led decisions about your operations.
2. Manage capital expenses: If you can pivot your business strategy or create a future competitive advantage, you could use this time to accelerate capital investment in new equipment. Otherwise, it may be worth considering delaying any investments in capital equipment until the current situation improves.
3. Reduce your overheads: Consider if your costs can be structured differently or whether more costs can be variable
4. Manage your stock and inventory: Consider if your expenses can be structured differently or whether more costs can be variable.
5. Manage your creditors: Consider contacting your creditors, including your suppliers and landlord, and asking for payment extensions.
6. Manage your debtors: If your debtors, including tenants, are experiencing cash flow difficulties themselves, consider negotiating periodic payments.
7. Review your strategy and adapt: Consider pivoting your business strategy to serve a different market which your equipment and people can quickly adapt to.
“While most organisations during these challenging times have been focussed on survival, the clever ones are also focusing on innovation and growth"Dr Jeffrey Tobias, Adjunct Professor, UNSW Business School
3. View your business from the eyes of the customer
COVID-19 has made it difficult for startups to raise money. Many of the startups that are dependent for example on travel, retail or restaurant businesses, are effectively either dying or dead, says Dr Jeffrey Tobias, Adjunct Professor and Fellow at AGSM @ UNSW Business School.
As the founder of The Strategy Group, Dr Tobias works with organisations to improve customer and employee experience and increase revenue growth by transforming the way they operate. “While most organisations during these challenging times have been focussed on survival, the clever ones are also focusing on innovation and growth,” he says.
“It took some time for larger organisations to recover from the GFC – they spent a lot of time on cost-cutting because that’s what they needed to do to survive. We are seeing that now with some of the large professional services firms, as well as with companies such as Qantas and Virgin that have laid off thousands of people,” he continues.
“However, organisations large and small are also looking at ways to grow within the confines of COVID-19 today, with an eye on the future”. So one of the critical considerations for businesses today should be to reassess the value they deliver through the eyes of the customer: what do customers value right now and where are the opportunities post-COVID-19?
4. Decide what you can do internally
Organisations should also focus on what they can do internally. For example, companies may look to corporate entrepreneurship, allowing employees to act like entrepreneurs within an organisation. “Ideating internally and building a culture of innovation that encourages experimentation, agility and curiosity will help organisations become more agile and adaptive, delivering meaningful value to the customer,” says Dr Tobias.
New and successful business models are born through creativity, imagination and experimentation, so employees must be encouraged to think and act differently. Intrapreneurship (behaving like an entrepreneur while working within an organisation) can therefore be a useful tool for employees to engage in generating new ideas.
“This is vital because you need to be encouraging employees to think differently and rapidly experiment, even when they may fail,” he says.
“The traditional executive team that sits around the boardroom table, pontificating about what they should do, doesn’t work anymore,” he adds. Instead, good ideas are born from getting out of the building and bringing value to the customer, coupled with a culture of innovation.
Organisations that encourage employee innovation, permitting them to develop new ways of working and new business models that can be rapidly tested, are likely to emerge stronger than ever before from COVID-19.
For more information, contact Adjunct Professor and Fellow at AGSM @ UNSW Business School Dr Jeffery Tobias. More information can also be found by visiting Westpac’s financial education experts the Davidson Institute.