Why should SMEs have a contingency plan? Following are the steps to be taken
The crisis caused by the Covid-19 pandemic revealed the lack of strategies and forecasts of SMEs to deal with this kind of abrupt situations and changes. Given the undeniable transformation that businesses and their customer relationships with customers will have, it is essential to develop a contingency plan to ensure the survival of companies.
Large businesses have compared the impact of the pandemic to a natural disaster, such as an earthquake or a hurricane. For these types of events, most organizations have developed continuity plans that have now been adapted to keep the company in business during the health contingency.
Thus, given the changes in the daily operations, SMEs must analyze certain aspects to take the first steps to establish a crisis contingency program:
- Identify the vulnerabilities in company operations
- Establish direct communication with the employees to keep them informed about the difficulties the business may face
- Speed in adjusting to market requirements (extremely important in crises like the one we are experiencing today)
- Analyze the financial standing of the company and contract insurance
- Secure capital reserves if possible to bridge any financing gaps in times of crisis
- Develop alternative means to maintain business continuity (home office, digital channels, home delivery, to name the most important)
- Seek any governmental or private sector support that can contribute to preserve business continuity
Several consulting firms have developed proposals on this matter so that small entrepreneurs can address issues that surface in the current environment. For example, KPMG Spain proposes five key questions that will help with the process of developing a contingency plan:
- How will it affect employees?
- What are the effects on my business model?
- How does it impact the supply chain?
- How does it affect my cash flow?
- What is the impact in the company’s fiscal and legal areas?
There is a word you have surely heard, which many businesses will have to embrace and apply once the most critical aspects of the Covid-19 crisis have been overcome. The word is resilience. For IBM, the technology giant, this concept focuses not only on enduring failure or crises, but on emerging even stronger from these episodes. The new normality the world will experience forces us to rethink our business and consider strategies to ensure successful immediate responses to changes in the environment. Please also take into account that your customers will not be the same after this critical time; quick adaptation to changes is, therefore, essential.