24 THE KNOWLEDGE
STAYING ON TOP IN by Karen Dukes
CHALLENGING CONDITIONS
New figures released by PricewaterhouseCoopers LLP
What is my long term financial position – how significant could
show that the number of corporate insolvencies in the
a loss of revenue be?
second quarter of 2008 actually fell by 3.1% from the
What are my competitors doing and are there opportunities for
first quarter of the year, but were up by 22% on the organic growth in my sector?
same quarter of last year. In total, 3,277 businesses
By reviewing your strategy at this stage, you can ensure you are
across England and Wales entered into insolvency in
well-prepared to manage through.
April, May and June of this year. However, even
though this number is down on the previous quarter, The second area to consider is finance. When times are hard, cash
when taking into account seasonal trends, this figure
is king. Commentators suggest that the companies who emerged
is still at a 5 year high. But is this national 5 year high
from the last recession as sector leaders had more cash on their
balance sheet than the losers. In the current climate, companies
also being reflected across the South East?
could be forgiven for thinking that their chances of refinancing their
Looking into the statistics specifically for the South East, at first it would
debt are slim, but debt funding is still available to businesses with a
seem that the region is doing well with a decrease of 13.8% on the
well thought-out plan and a robust cash position.
previous quarter’s insolvencies from 152 to 131. However, if we take
into account the fact that the first quarter of the year always shows an
Flexibility is the name of the game when it comes to companies
improving their operational position in a downturn. Now is the time
increase and the fact that the region’s figures are up a massive 25%
to make some hard-nosed decisions about what they are going to
on the same quarter last year, it becomes apparent that the
spend money on. Winning companies stay light on their feet,
economic downturn is starting to take hold in the South East.
deploying all their resources, including people, in the area of the
But all is not lost. There are still many things businesses in the South East
business most likely to do well in the conditions while directing their
can be doing to manage their way through the downturn and ensure
operational energy towards tapping the opportunities that arise.
they don’t become one of the insolvency statistics. Our experience
suggests that most insolvency is down to inadequate planning by
Finally, businesses must ensure they are managing their
management to deal with these more challenging conditions.
stakeholders effectively and keeping them on board. Managing
stakeholders well in difficult times is crucial to executing a winning
There are four key areas to focus on at the present time in order to
strategy. In today’s often complicated business environment, there
effectively manage through a downturn: strategy, finance, operations
is only one way to manage these diverse relationships and that is
and stakeholder management.
through good communication. Keep shareholders and lenders
informed, stay on the customers’ agenda and safeguard assets by
In a consumer led downturn, the first questions for any business to keeping up dialogue with employees.
answer must be, “Are my products or services seen as discretionary
purchases by my customers, or am I threatened because I supply
Much of this might seem like common sense, but in our experience
other businesses in the discretionary sector?” Regardless of where you
it is not common practice. However, if companies in the region are
believe your business to be today, to assess the possible impact of the
pro-active in these areas, businesses in the South East will be well
downturn and to take advantage of opportunities that will arise, ask
placed to weather these turbulent times and emerge from the
yourself some strategic questions such as:
downturn stronger.
How flexible is my business model – will it allow me to react quickly Source: Karen Dukes, PricewaterhouseCoopers LLP
to a change in my business environment?
karen.dukes@uk.pwc.com www.managinginadownturn.com
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