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Don’t misunderstand me, the commercial world has always been prone to the odd shake up, but they now seem to just be a regular part of the business landscape. From pandemics to economic sanctions and global events, we seem to be regularly dealing with unexpected disruptions.
I am currently, of course, currently at least, referring to President Trump's aggressive protectionist tariffs and trade policies that are having wide-reaching effects at a local and global level.
I’m not a fan of the phrase ‘expect the unexpected. You clearly can’t possibly do that. That’s what unexpected means.
I am sure Jaguar Land Rover (JRL), for example, didn’t want to suspend their shipments to the US in response to Trump's tariffs this week, but it was obviously seen as a necessary reaction to a totally unexpected event. That shipping pause will, in turn, almost certainly have a knock-on effect for many suppliers, logistics chain companies, and service providers. I doubt they were expecting these global events either, nor could they anticipate JLR's response to them even as they unfolded. In turn, these suppliers will now need to reduce their spending with their component and service providers who also probably didn’t expect… well, I am sure you get my point. You simply cannot expect the unexpected.
What you can do is be prepared for unforeseen events. You may not be able to expect the unexpected, but you can plan for instability.
All businesses should be aware of the need for resilience. We all seem to have been saying ‘Hopefully, we will get some stability now’ at the end of yet another crisis for some time now, but stability still seems a rare commodity. The practical upshot is that it is more important than ever to focus on proactive risk management. While you can’t avoid them, you can reduce your vulnerability to sudden market shocks.
Optimism is all well and good, but it is potentially a dangerous trap when it comes to the unexpected. Businesspeople do tend to be optimistic by nature. Perhaps as a result, they see potential more clearly than they see the downside of a situation. That can maybe lead to a reluctance to accept that things could change when they are going well. We need to acknowledge that the unexpected may happen, and it’s important to always recognise that. While we cannot predict the event, we can plan for the effects.
Diversify logistics options: Logistics has been a nationwide problem several times in recent years. Could you investigate alternative transport routes or carriers to avoid single-point failure problems?
Stock essential inventory: Building buffer stock can protect against supply delays during a crisis. As we mentioned in a recent article, supply chain issues can be just as catastrophic as sales issues.
Renegotiate contracts: Having more flexible terms with suppliers and customers allows for more adaptability during periods of disruption. As a minimum, though, make sure you fully understand where you stand with them. At the same time, reinstate your own terms to clients to keep the cash flow going.
Clear stakeholder communication: Transparent updates and open communication help to maintain trust and support, especially when tough decisions must be made. It may be necessary to draw on goodwill during a sudden crisis, so it’s well worth making sure it is there.
Check your numbers more often: Knowing where you stand with your cash flow right now and for the foreseeable future can often be the single most effective response to a changing market. Check your numbers frequently and be as detailed as needed to fully understand your financial position. Cash is king, particularly in a crisis scenario.
Supply chain diversification: Avoid over-reliance on any one supplier or even region. At one point, because of the pandemic, for example, deliveries from China became less reliable, not due to a lack of supply of suitable goods but due to a shortage of shipping carriers. Suddenly, perhaps more expensive sources nearer to home became more viable. Knowing where your options are if there are unexpected supply issues could keep you in business.
Scenario planning: Model different crisis scenarios. You don’t need to work out every possible cause of a problem, you just focus on the results it will have. The current situation is a great example of this. Whether the US imposes a 10% tariff on UK exports is not the scenario you need to consider. The cause is not important. What would happen if you had a sudden 10% unexpected increase in sale price or costs is where to focus your attention. That way, you can develop response strategies in advance based on outcomes rather than trying to second-guess every possibility.
Embed resilience into strategy: Make resilience a central theme in your business planning, and don’t allow it to be an afterthought. Sadly, we see a lot of businesses going through insolvency that, in hindsight, we realise could have potentially had a strategic response ready earlier. That’s why it’s important to embed reviews and strategic resilience planning into your business strategy.
Businesses that invest in resilience can often turn disruption into a competitive advantage. Those with flexible supply chains, diverse markets, and strong contingency planning are more likely to adapt and thrive in challenging times.
However, it’s also important to acknowledge that resilience has its limits.
While resilience planning is crucial, it is equally important to recognise that not all crises can be survived. That is especially true for businesses already operating on tight margins or in difficult sectors. The reality is that some shocks are too large, too sudden, or too prolonged for even well-prepared organisations to withstand. Recognising that is also a part of a successful response strategy.
JLR's pause of shipping to the US has a very important lesson attached. They are (one hopes) in a financial position to take such a bold move with one of their market areas. If you are a business that finds itself in a difficult position due to unexpected market conditions, you may not have that same financial resilience. When that happens, you must recognise the situation, accept it, and act on it.
At Smart Business Recovery, we support businesses both in preventing insolvency and navigating it when it becomes unavoidable. In either case, early intervention is key. If market conditions change rapidly, and your financial situation is reaching, or likely to reach, a crisis point, then seeking professional advice quickly can make all the difference.
*As a footnote to this article. In just one day, the US has escalated its apparent trade war with China by imposing 104% tariffs, and China has responded with an 84% one in retaliation.
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