The corporate survival guide

Making the right decisions in today’s challenging business environment

The recession and economic downturn has subjected organisations to be even more disciplined about keeping a watchful eye on the key fundamentals of running their businesses. Take a look and see if your business could be focusing on any other areas.

Know what is going on in your business

You cannot make the right decisions on cost unless you know what is going on in your business. Make robust forecasting and scenario analysis a key priority. Understand potential scenarios and your contingencies for responding to them.

Understand the viability of your key suppliers and customers

In today’s challenging business environment, it is important to understand the viability of your key suppliers and customers. How are you managing your counterparty risk? What happens if one of your key customers goes out of business? How is the relationship with your banks, your pension fund trustees, credit insurers, or your shareholders?

Know what drives cost in your business

Make sure that you have a clear understanding on what drives cost in your business and what cost can be taken out of the business. Evaluate whether you are being as thorough as you can be.

Evaluate your cost base

Don’t panic and ‘slash and burn,’ panic destroys value. As you evaluate your cost base, move swiftly to remove waste but don’t use cost avoidance as a substitute for achieving lasting, wholesale efficiencies. Be very careful about removing costs that are close to your customer, losing sales can more than cover any gains made from cost savings.

Make your business more agile

If you want to achieve cost leadership think about how your organisation could do business in a more agile, efficient way. Think innovatively about delivery, could you outsource or joint venture part of your value chain?  What about off-shoring, management de-layering or even joint venturing with your competition to save costs in certain areas? The appetite of your competitors to collaborate may be very different now compared to only a year ago.

Long term value creation and survival

Management teams are beginning to realise that taking out £1 of cost can be equal to generating £9 of new sales and are prioritising their attention accordingly. The challenge of delivering a low cost business model demands a new focus on cost from the board down. Cost is the route to long term value creation and survival.

Understand the cash dynamics of your business
In the current market where cash is king, understanding the cash dynamics of spend can be as important as the impact on the bottom line. Make cash a key component of your cost optimisation approach.

Relentless, ongoing focus and determination

Truly optimising costs requires relentless, ongoing focus and determination. Given the size and scale of the challenge ahead, organisations can not afford to have any confusion about roles and responsibilities.

Initiatives need to be led from the top and should not be delegated down.

Source: KPMG