Strategies for Financial Risk and Resilience for Businesses in a Challenging Economy (Part 1)

"The pandemic had a transformative effect in shaping the global economy. After the pandemic, countries and businesses saw this as an opportunity for economic growth and to rebuild better. Today market volatility, energy prices and the Ukraine war have worsened these challenges. Consequently, most business leaders are facing significant economic challenges and are making tough decisions that are impacting families and businesses ."

BIGGEST CHALLENGES FACING THE GLOBAL ECONOMY

Economic Downturn

• Many nations have implemented recovery measures to mitigate the economic downturn from the pandemic and many more like the UK, the US and China are using this as an opportunity to build back their economies better.
• Recovery however is now more uncertain with the looming recession brought about by inflation, rising energy prices and the war in Ukraine. This tenuous recovery process would be severely undermined by another wave of Covid-19 should this risk occur.
• In China growth slowed with the government re-imposing tough limitations as a result of the epidemic. Furthermore, the real estate crisis hurt the economy with several repercussions. China is now open for business but recovery will be a long process.

Increasing debt burden

• The significant rise in national debt is a second effect of the pandemic and the recovery strategies put in place. This is a real issue for developing nations, due to the temporary suspension of debt payments.
• Governments are not the only entities left with enormous debts. The private sector e.g., commercial real estate and other businesses in the service sector, such as tourism, culture, and aviation have been impacted.
• Disruption to global supply chains, and increasing raw material costs have impacted businesses while families are burdened with rising energy bills, living expenses and increasing costs of goods and services.

MAIN CHALLENGES FOR MOST BUSINESSES

Evidence from 2022 Business Insights and Survey Results

• From the Business Insights and Conditions Survey (BICS) for the period 20 September to 2 October 2022 the chart result above, rising energy prices remain the most concerning indicator for businesses.
• Businesses that had not permanently ceased operations were questioned about their top business concerns as they looked ahead to October 2022.
• In October 2022, more than two-thirds of businesses (70%) said they were concerned, and this number rose to 83%, for companies with 10 or more employees.
• 90% of all businesses of all sizes reported some level of concern in the hospitality, lodging and food service activities sector.
• The majority of survey results were submitted before the 23rd of September 2022 financial statement and before the chancellor's budget statement on 17 November 2022.

IMPACT OF GEOPOLITICAL PRESSURES ON GLOBAL GOALS

Impact of Pressures on Global Development Goals

• Undoubtedly as businesses struggle to stay afloat, there is likely to be a lag in funding for decarbonisation and sustainable development goals. However, it is critical for businesses to maintain their environmental pledges and contributions toward global sustainable development goals if they are to be viable and resilient in the long term.
• An example is (SDG) 8 - Decent Work and Economic Growth which is a key goal at CFBL Consulting. We believe that a sustainable strategy must be embedded within financial decision-making, and business operations and that infrastructure investment business cases must ensure that strategy is aligned with a business's key global goals.
• This focus will drive economic growth and enable businesses to take advantage of opportunities to build a more resilient and greener society. These need to be governed by statutory financial and non-financial reporting and reliable data to minimise greenwashing.

?"Geopolitical tensions represent additional significant concerns. The first situation that comes to mind is currently the conflict between Russia and Ukraine. The war plus the sanctions imposed have hurt the area, as well - Europe and the global economy. The effect of the pandemic and war has undoubtedly contributed to the impending recession."

The Impact of Geopolitical Tensions and Fiscal Policies on the Economy

• Higher costs are correlated with commodity scarcity due to supply chain disruptions. The American Federal Reserve is tightening monetary policy in response to inflationary pressure and has stated that a rate increase, the first since December 2018, is anticipated in March.
• Therefore, it could become more challenging for vulnerable businesses and nations to enter the credit market. The European Central Bank has similarly been increasing interest rates and has done so for the first time in 11 years, as shown in the graph.
• The ongoing economic disputes between China and the USA over semiconductors are another source of tension in Asia, and this is in addition to the military issues surrounding Taiwan.
• The United States has imposed restrictions on the sector, sometimes at the expense of its technology and industries to halt Chinese technological advancement to preserve its national security.
• Another difficulty for the world economy is inflation, which has partly been brought on by persistent supply chain issues and increasing demand as a result of the economic recovery in the post-Covid era.

"Businesses can leverage technology to develop a more resilient supply chain network. This will allow visibility into operations by enabling businesses to optimise their procedures and logistics. The connectivity and visibility in real-time will create a more resilient supply chain network."

PHASES IN A BUSINESS CONTINUITY PLAN

Three Phases to Building Business Resilience: Survive, Recover, and Thrive

• Survive: These are businesses that have been most impacted by the recession and are doing what it takes to survive and continue to operate. These businesses are suffering from a major decline in sales, notable employee, and expense cutbacks, or possibly a significant loss of business that is endangering their survival.
• Recover: Businesses in this phase are responding to financial disruptions by using existing systems or implementing new strategies to deal with the unexpected. At this point, businesses can start to use their resilience to mitigate and restore what went wrong during the initial loss of business.
• Thrive: Businesses that are in the thrive phase are leveraging opportunities and preparing for growth. They are currently integrating components that will advance their business and help them become more adaptable and resilient to the ever-changing global business environment.

WHAT IS BUSINESS RESILIENCE?

Business resilience is the capacity for a company to quickly adjust to changes in the environment while continuing ongoing operations, protecting people, assets, and the overall value of its brand. Business resilience goes beyond disaster recovery (DR) and business continuity by providing post-disaster methods to reduce vulnerabilities, prevent expensive downtime, and keep operations running in the face of additional, unforeseen breaches.

Business resilience, operational resilience, cyber resilience, and supply chain resilience are a few examples of the diverse components of business resilience. The term's widespread use demonstrates how significant resilience has grown to be for governments, businesses, and several organisations.

A business resilience plan's most crucial component is its definition of the business's final state once all recovery plans and resumption of activities have been completed. Once activities have resumed, it is simple to declare that a company has recovered from an incident, but that does not imply that it has a robust resilient strategy in place. A business must ultimately decide on what its ideal state should be after an incident. It must decide what it defines as a resilient state and what is needed as a business for it to accomplish this.

"Business resilience is vital today and no incident has more dramatically illustrated this than the COVID-19 pandemic. 90% of businesses agree on the significance of risk management for business resilience. Survival often depends on it. Not having a resilient business strategy in place reduces the likelihood of remaining a going concern for the sustainable future."

STEPS FOR BUILDING LONG-TERM RESILIENCE

Steps and Best Practices to Build Strategic Resilience

• Obtain management buy-in into strategies to improve risk and resilience
• Start tracking resilience KPIs and reporting them internally.
• Lessen your reliance on extrapolations derived from budgeting and planning.
• Formal risk assessment, control, and governance need to be abandoned by risk functions.
• Determine the business's inherent strengths, and weaknesses. opportunities and threats
• Develop first-line resilience skills, as well as strong team and operational resilience.
• Establish a mechanism for early identification and mitigation of current and emerging risks
• Proactively tracking current and internal and external hazards.
• Integrate risk at an enterprise level, into all aspects of the business
• Discuss resilience in terms that stakeholders and investors understand
• Establish an early-warning system
• Embed resilience within first-line teams

FREQUENTLY ASKED OPEN BOOK QUESTIONS (FAQs)

• How can resilience help with a more successful business? Resilience is best described as a business' ability to generate value sustainably, maintain operational efficiency, and be able to succeed sustainably under challenging economic conditions.
• How do you achieve resilient growth throughout the business cycle? To establish resilience, businesses must concentrate on developing a healthy balanced portfolio and strategies to compete in the market for long-term value creation.
• What is business resilience risk Business resilience is the ability to respond immediately to risks and new opportunities while maintaining essential business activities, and protecting employees, assets, and the reputation of the business.
• What are the four components that comprise business resiliency? These include 1. Risk assessment and business impact analysis 2. Risk mitigation plan development 3. Testing and analysis; and 4. Risk monitoring and program sustainability.
• What are the most critical issues facing global businesses? Rising energy prices market volatility and inflation rate increases.
• Why do you think it is important to aim for a global market? Entering international markets enables companies to expand to new markets and reach a wider customer base
• What suggestions would you provide for adopting global business resilience? Decide on your target markets, and assess the risks and feasibility of the revenue sources.
• How do small businesses contribute to the global economy? Small businesses also contribute to global economic growth by providing 66% of global employment opportunities.
• Is Business Resilience the key to success? The ability to "bounce back" from challenges and setbacks may not be mentioned as frequently as the other qualities, but it is a quality that distinguishes the most successful businesses from others.
• Why is resilience and sustainability important in business? Resilient businesses are those that can innovate and adapt, integrate data and processes, leverage smart technology, and be adaptable enough to overcome obstacles.
• How can resilience help a business distinguish itself from the competition? These resilient qualities assist businesses in differentiating themselves from competitors by creating a long-lasting competitive advantage over competitors in the industry.

THE PROBLEM

I know that 85% of project cost overruns are due to a breakdown of controls while most businesses fail due to poor strategic planning, financial controls and lack of resilience. This is from my experience as an independent cost auditor and consultant backed up by data and evidence from several major infrastructure projects and business case studies.

THE SOLUTION

My proven methodology cuts across people, processes, control systems, and the contract and is a personalised approach that helps project and business leaders achieve their strategic commercial and financial goals for the long term.

"I support leaders on major infrastructure projects and of innovative businesses with their cost assurance strategy. This leverages 25 years of experience as an auditor, and consultant across commercial, finance and project control functions to deliver services below that help increase revenue/value, optimise cost and minimise risks."

OUR SERVICES

Infrastructure Project Services

• Pre-audit review and diagnostics
• Deep dive forensic cost audits
• Project audit team & programme of audits
• Protocols implementation and training
• Multi-disciplinary Steering Group (a CSR initiative)

Other Services

• ESG Finance Protocols, Carbon Cost Audits and Sustainability Strategy and Advisory
• Sustainable Strategic business planning, accounting and x5 year financial statements
• Fintech and Transformation Advisory

HOW CAN CFBL CONSULTING HELP?

CFBL consulting supports leaders on major infrastructure projects with their cost assurance strategy. We help implement a cost-assurance and sustainable strategic business plan. Our infrastructure project services involve independent pre-audit diagnostic and forensic deep-dive final account audits. This includes delivering a rolling programme of audits, a project audit team and cost assurance protocols training internally and for the supply chain.

Our added value involves an initial ESG diagnostic assessment, carbon cost, payroll and ESG audit to prevent or evidence greenwashing, strategic business planning and transformation advisory. This includes practical ESG finance training and decarbonisation investment modelling and business case. We govern and assure ESG and sustainable data and provide sustainable strategy advisory. Our multi-disciplinary steering group for cost assurance and audit comprises experts that are driving industry change and transformation.

CONTACT DETAILS

You can contact me via the phone numbers below or email me to find out how I can help any of your projects or supply chain teams. Alternatively, you can schedule a proposal / walk-through meeting with me in two clicks via https://calendly.com/cecelia-fadipe

T: +44 1737452323

M: +44 7951722554

E: [email protected]

W: www.cfbusinesslinks.com/services