How to recession-proof your business

It's just economic science 101: All concern is cyclical, and that's true even when, as seems the case in the new century, the cycles are speed up. Finance executives need to be prepared to meet the challenges of bad times as well as good.

Companies that react rapidly to an adverse market have a good opportunity of preserving profitability. But world-class organizations go beyond that, says The Hackett Group: They purchase disruptive events to get the buy-in they need -- from direction, workers and stakeholders -- to drive transformative change and raise their organization's performance to world-class levels.

The first precedence is to take a close look at G&A mathematical function to identify initiatives that can yield hard-dollar savings. It's all too easy to take your eyes off G&A in an expansive economy, and CFOs' cost-reduction skills may have grown a bit rusty in the last couple of years. Consider increasing investing in shared services operations and globalisation of back-office functions. Next, reappraisal more long-term strategic chance clustering about technology enterprise and simplification of composite processes.

Next up: workings capital. In a down economic system, cash is king. Chances are, hidden pools of liquid are sloshing around your stock list, payables and receivables operations just wait to be tapped. Review your client payment procedure, examine your stock list management scheme, and look for chance to consolidate your spend to earn volume discounts.

globalisation comes into play here, too: it's hard to ignore the benefits of sourcing from low-cost regions, particularly Asia. Be aware, although, that the massive increase of distance and lead times associated with this scheme may consequence in addition in stock list and a more cumbersome supply chain. Seek to build collaborative relationships with your client and provider to gain penetration into "true demand" -- which may diverge considerably from the ordering patterns you receive from your customers.

Now is a good time to fine-tune your enterprise performance management (EPM) systems. Doing so will help you get a handle on the impact of your strategies and the changing business environment on your cost structure.

At many organizations, the financial reporting process is poorly aligned with the business cycles in their markets, Hackett finds; companies in high risk/volatility sectors should be preparing monthly forecasts. EPM can help, and it can also enable companies to make the move to a rolling forecast, a more dynamic forecasting model. EPM-enabled predictive modeling can reduce the potential for bad things to happen.

Finally, make sure your planning and forecasting systems cover the supply chain. Especially in volatile markets, sudden price swings or disruptions in supply systems can impact your cost structures at a moment's notice. Ensure that your procurement function is committed to developing innovative techniques to assess supply chain intelligence and evaluate risks. Strategic sourcing will be a growing corporate imperative for the foreseeable future.

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