SCENARIO PLANNING TO BEAT COVID
Covid-19 is still a crisis for most businesses - and one of the keys to dealing with it is scenario-based planning, says Yolande Steyn, head of SME Enablement at First National Bank.
Covid-19 has had a significantly negative impact on all but the most fortunate of businesses. However, that impact has differed for every business, and South African companies that managed to survive the ravages of the national lockdown and various bans and restrictions, today find themselves in diverse positions from which they now need to rebuild their operations.
Some businesses are in the relatively fortunate position of having experienced stalled revenues, but still holding a fairly decent amount of cash to survive the crisis and be able to restore operations quickly. Others, have barely survived, and are now facing the prospect of having to rehire staff and get their operations back up to speed with little or no working capital and piles of debt to contend with.
Irrespective of the extent to which any business has been negatively impacted by Covid-19, the simple truth is that most currently find themselves in some form of a crisis. Yes, the move to Lockdown Level 1 has made it possible for the vast majority to return to at least a semblance of full operations, but that doesn’t mean that getting to a sustainable or profitable position is as simple as going back to business as usual and hoping that the revenues will flow.
The concept of the ‘new normal’ has been touted across media channels so much over the past few months that few of us want to hear the phrase ever again. But the reality behind the cliché cannot be ignored. The operating environment for South African businesses will take many months and years to return to what it was before Covid-19, if it ever does.
Customers are not only poorer now than they were at the start of 2020, they are also very wary of busy public environments. So shopping, eating and entertainment as we knew it going into this year, are not anything like they will be going into the next. And, for the majority of public facing businesses, that spells crisis.
So, the question for most business owners now is, how do I effectively manage my business out of this current crisis and, as importantly, ensure that it isn’t impacted in the same massive way by any future crises? Of course, there’s no simple answer to that question because crisis management is different for every business.
That said, Covid-19 has certainly reminded us that there are a few fundamentals that every strategic crisis response plan must include. Arguably the most important, and valuable, of these is a realistic view of all possible ‘runways’ or scenarios by which to get through the crisis with your assets and business plan relatively intact and emerge on the other side ready to take off.
Of course, this is often easier said than done, especially in a global crisis of the scale of Covid-19, where there are so many unknowns that need to be included in your thinking – not least a complete lack of clarity on how long the virus will continue wreaking global social and economic havoc.
The only effective way of developing a clear crisis survival and business development strategy when the operating waters are this murky is through scenario-based planning.
Since these scenarios are all hypothetical, it is possible to get into the right frame of mind to be able to make the hard decisions that some of them may require if they need to be implemented down the line. In a sense, then, scenario planning is a bit like the visualisation exercises that most self-improvement gurus recommend. By running through these possible scenarios in your head, without actually having to make them immediately, the various business-survival levers involved become easier to pull at the moment when you actually need to.
Importantly, to be fully effective, such a scenario planning exercise shouldn’t only focus on external or environmental possibilities. It also needs to consider the various revenue, operational, staffing, cost-cutting and asset management scenarios that the business would need to implement, should one of the possible external situations become a reality. These needn’t be as extensive as your primary business plan, but they do require careful consideration, by all in management roles, of the actions or reactions that would be required under each possible scenario.
While all of this may sound highly complicated and time consuming, the good news is that scenario-based planning is by no means rocket science. Nor does it require the services of costly business consultants when budgets are already stretched. In fact, the FNB Business Toolkit, which is freely available on the FNB Business Hub at FNB.co.za, offers detailed, step-by-step guidelines, supported by extensive tools and templates, to help any business develop an effective scenario-based strategic crisis response, or preparation, plan.
The value of putting such a scenario-based crisis management plan in place cannot be overstated for any business currently trying to deal with the financial fallout of Covid-19. But scenario planning is not exclusively a Covid-19 requirement. It’s an immensely valuable strategic tool that enables managers and owners to lead well, with the necessary speed and confidence, no matter what challenges the business may face in the future.