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“We’re in recession. What do I do?”

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Q. “We’re now in recession. What do I do?”

A. The key characteristics of the market at the moment are turbulence and uncertainty. In these conditions, companies must set aside corporate development plans and adopt a strategy of coping. Coping means ensuring business continuity. It is about being and not becoming. It is about arriving at the end of this phase, whenever that may arise, with the capacity to prosper in the calmer times that follow. Committing to a detailed plan it not a viable process for survival. Plans presuppose some conception of the future conditions and deploy resources in the expectation that there will be an orderly progression towards this situation. In turbulent times there is no basis on which such judgements can be validated and therefore no foundation on which detailed plans can be formulated.  Flexibility is key and to build this you must identify and remove rigidity from systems and procedures. You should not resist changes in the expectation or hope that normal conditions will resume because you have committed to a plan that assumes this. You must adapt and be able to do so rapidly.  It is much too early to guess when the turbulence will end or the extent to which economies will contract but there will be an end and economic growth will resume. I suggest that you should formulate two scenarios based on the following; 1.    Optimism

Assume the recession is ‘V’ shaped and that a sustained but slow recovery begins in the US in the fourth quarter of 2009 and reaches the UK in the first quarter 2010.  In the UK, mortgage lending begins to increase slowly in the second quarter 2009 but lending to SMEs remains constrained until first quarter 2010.   2.    Pessimism

Assume economic activity declines throughout 2009 and the first half of 2010, stabilises but remains flat for a year thereafter. UK mortgage lending remains at the current low level until the beginning of 2010 and lending to SMEs remains constrained throughout 2010. Calculate your cash flows based on each of these scenarios and understand the signals in your industry that will suggest which track you are on.  Determine what action you will take if you conclude you are on the pessimistic track. Don’t assume that some recovery in the number of housing transactions will be the green shoot of general recovery. The government can and may engineer this in a manner that detaches it from general economic buoyancy. Coping to ensure business continuity means that it is acceptable during the time of turbulence for you to make only marginal profits or a small loss.  If things get better earlier, then we will all be delighted. But pragmatically, for the next 18 months we are unlikely to have a reliable conception of the condition in which we will emerge or the shape of the markets we will find. If you can cope with this period you are probably going emerge stronger as a business and more skilled as a manager.

Anthony Holmes is an international corporate turnaround specialist  and transitional leadership expert. He has led the revival of seven companies over 15 years, and his 30-year international business career spans strategic consultancy, investment banking and senior corporate management in a diverse range of industries. Holmes is also penning two business books: A Time to Lead, A Time to Manage; and Managing  Through Turbulent Times.

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