Toward an Understanding of When Executives See Crisis as Opportunity

AUTHOR: JOEL BROCKNER AND ERIKA HAYES JAMES

We live in a time of economic uncertainty, where companies are still waiting for the
end of a crisis that does not seem to stop. Under this scenario, how do companies prepare to
manage risks and reduce the impact? Are they identifying and taking the advantages? Some
surveys on the business landscape, identified the dangers and the most important
opportunities for business.

In times like these it is important to question critically about some key aspects of the
business, what we need to do differently? What we need to do better? The secret of survival
is to achieve simple changes correctly, rather than embarking on radical changes in every
aspect of the operation. You can take practical measures to minimize the effect of the crisis
and position the business to grow strongly when economic conditions get better.

Due to the economic uncertainty, companies are focused on cutting costs and prices.
Mature markets are growing slowly, leading to saturation and fierce a price war. This,
coupled with the low-cost competition and online rivals, has intensified the struggle for
market share and premiums have made them difficult to sustain. In addition, high wages,
input costs and new regulatory burdens are impacting profits.

Nowadays, companies must make decisions about how to reduce costs without
affecting the business. To achieve this, they are using technology to improve productivity,
introducing more flexible working practices and conducting a reengineering of the supply
chain, to save costs and to pay margins growth in other areas. Similarly, companies make
price cuts more frequent and aggressively, considering about five years of the crisis, the
obvious measures have already been implemented.

Executives must establish a management crisis. The main purpose is to take

preventive measures to avoid or reduce the possibility of a crisis. In the case that the crisis
breaks out, companies must have a response planned and organized in advance and also
ensure that the company becomes viable after the crisis. Therefore, the companies should
be aware of the need for a series of preventive measures. These preventive measures with
the correct capacity for action, and with the implementation of a communication plan will
help to eliminate or reduce the negative consequences that can lead to a crisis on the image
of the company.

When the company seems to have taken control of the crisis, before getting a
situation of calm, it is time to evaluate what were the consequences, how to repair any
damage caused and not lower our guard yet. Although the severity of the crisis has
subsided, an unexpected change is possible and could get worse if we do not monitor their
process. Executives should correct and update crisis plans, both of communication and
crisis management. In general, these should be studied and assimilated by the CEO, and of
course, communication’s director of the company. You may also be possible to implement
a plan for overcoming crisis will be discussed at the last point of our theoretical
framework.

To keep the interest and attract new potential investors, businesses are required to be
transparent. Shareholders, who see a clear entity, especially in environmental and social
issues, are more willing to commit long term. The environmental and social responsibility,
are becoming more important in companies. A good strategy that companies can take is the
incorporation of clean and environment friendly technologies. A story of mismanagement
of the environmental issue can affect the reputation of the organization and those who
invest in it. An open and proactive management of the subject can significantly enhance the
image of the company.

Moreover, there has been an increase in the role played by the government in
business. For example, in China, some multinationals are being forced to work with local
firms, as an impulse to support local industry. However, this intervention can be more
aggressive, including the risk of expropriation, nationalization of resources and to the need
for foreign organizations deliver more visible benefits to the host country. Similarly, the
change and apply more rigorously the law, remains the most common form of intervention
in the companies. That is why they must invest more resources to find more efficient ways
to manage their regulatory obligations.

Currently, there is a growth in market demand and a desire to expand the

organizations, which means an opportunity to do business in new markets, new countries
and new niches in existing markets. To achieve this, innovation is the key, both in terms of
new products and services, and operations. Organizational culture and the ability to adapt,
make a big difference on the road to success, while having a clear vision of what it means
for the business is the key.

For organizations feel the least impact of the crisis, it is essential to conduct a
review of its operations, considering that simple changes were probably already made. The
first step is to recognize how domestic investment can help the organization. For example,
some private hospitals in India have reduced the cost of treatment by means of remote
diagnostics. On the other hand, improve the implementation of a strategy is essential, it
avails nothing to having a definite plan, if it cannot be implemented. Often the difference
between a good and bad strategy is execution, so that organizations must ensure that their
lines of communication and processes are consistent.

In times of crisis the process of budget and projections is critical to the effective
planning and daily decision-making. The role of management information systems cannot
be limited to measuring past financial performance. In the short term given to a limited
number of Key Performance Indicators approach is required. These measurements should
be transparent, unambiguous and easy to understand. Meanwhile, in the medium term a
strong financial capacity to budget and make projections is required. Such activities must
be addressed seriously in order to make strategic plans for the business.

Crises produce new challenges for all parts of an organization, but the function of
finance is likely to be under more pressure than usual because of the demands of additional
information that must be generated to make effective decisions. The resources in terms of
people, experience and information technologies that are needed should ensure financial
sustainability of the company.

For example, Venezuela's economic crisis may be an opportunity for companies

engaged in providing services in the human resources area and particularly for those who
have gained recognition as temporary employment. It is likely that in the chaos and
uncertainty some may grow to offer striking alternatives on issues such as recruitment,
payroll management and labor separation.

Executives have to understand the true impact of the crisis on the business and
remember that when conditions are difficult, the most successful businesses are those that
react most quickly, and those who make the early decisions and leading to the changes that
must perform. Once you have defined a new strategy, it must be shared with all levels of
the firm to ensure that the new strategy can permeate with the all levels of the company.

The main conclusion is that, to survive, companies have had to optimize their
business and reposition itself to smaller markets. On the one hand, they decreased costs and
increased operational efficiency; on the other, they continue to look to grow through new
products and markets. Predicting the future is risky. Organizations that fail to look forward
will be left behind. Opportunities exist for companies able to understand the current needs,
take controlled risks and integrate the processes and operations that meet the changing
market demands.
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