Credit Crisis to Recovery

There is an excellent article published in ‘The McKinsey Quarterly’ on recovery of the companies from credit crisis. As companies shift their attention from fighting the crisis to getting the most from the recovery; these are the key points:

One has to understand what they should expect as normal after the crisis has fully passed and to set appropriate performance targets.

A weak economy makes it easier to implement unpopular operational changes and divestitures: companies have more leverage over suppliers, unions and regulators are more cooperative, and employees understand the need for change. When the economy strengthens, these advantages will quickly vanish.

An intense focus on reducing costs and working capital will leave many companies incapable of responding to a rapid pick-up in demand. Can they respond without either bringing back high costs or cutting the quality of their products?

Businesses that may emerge from the recession at a competitive disadvantage could find a quick and effective solution in joint ventures with companies in a similar predicament.

Growth requires capital. To finance growth, CFOs should prepare a battle plan—including ways to line up new equity, as well as bonds and new debt—that can be activated if necessary.

Take advantage of the buyers’ market for talent and other resources as it costs less in the current market.

One has to understand and know what risks a recovery might bring. Risk management and contingency planning are typically better at highlighting day-to-day issues than at anticipating major shifts.