Over the past year, the storm clouds of recession have gathered. So how does a business cope? Cutting costs, reducing spending and hoping that economic confidence will return is one solution. The other is to take a 'belt and braces' approach, run a much tighter business ship and pro-activity navigate through the choppy waters. Paul Coleman reports.

If anything is certain, it is change. It is an old adage but one that rings especially true today. In an uncertain climate, companies can be reluctant to make decisions. And, since spending has stagnated in many sectors, many know their customers are thinking the same way.
Although businesses remain cautious, they can take heart from economic indicators that imply a more positive horizon. In the US, for example, analysts are growing confident as the economy grew unexpected in the last quarter of 2001, after shrinking in the previous period. Although this growth is at a meagre level, it took Wall Street by surprise and is likely to spur a surge of optimism about the state of the global economy. However, at best, Federal Reserve chairman, Alan Greenspan, views the economy as moving from 'unrelentingly negative' to 'mixed'. "There are sound reasons for concluding that the long-run picture remains bright," he said. "But I would emphasise that we continue to face significant risks in the near term."
The story is similar across the Atlantic. The UK is enjoying the longest period of sustained non-inflationary growth in more than 30 years, but HM Treasury acknowledges that 'challenges and risks remain'. Bank of England governor Eddie George believes that the economic decline has slowed but not disappeared: "I think the latest indicators suggest that we are around the bottom and that we may see little or no growth for a little while yet."

'W-shaped' recovery

Economists at the World Economic Forum's Davos Symposium in February 2002 predicted that any recovery would be 'W-shaped' rather then 'V-shaped'. Robert D Hormats of Goldman Sachs International told the audience: "We think we will get a trampoline bounce, then the economy could weaken again."
Whichever viewpoint you endorse, there is little doubt that considerable risk remains, requiring predictability and security to be put back into the business picture. In the words of the management consultants McKinsey, business has become 'exponentially more daunting'.
Old approaches to strategy are based on the assumption that executives, with the right analytical tools, can predict the future of a business accurately enough to choose a clear strategic direction for it.
But this vision often requires uncertainty to be largely discounted in order to create a vision precise enough to satisfy the financial controller. In its report, Strategy in an uncertain world (Dec 2001), McKinsey said: "Globalisation, digitalisation, and unfettered capital markets have all helped make traditional strategy tools such as market research, value chain analysis, and discounted-cash-flow analysis less useful."
So what principles should underpin a business approach within an uncertain world?
* Think positively. Uncertain times need a steady hand and a level head. Negativity simply induces panic. Many would claim that panic prompted all the talk of a recession earlier in 2001 - and played a key role in reducing business confidence at that time. A positive mindset is vital to a positive approach. Instead, the fresh challenges each day should be viewed as new opportunities to be managed.
* Get to know your business better. It is difficult to keep an eye on everything across a large corporation, but technology can help you to know much more about your business. Debtor days, margins, receivables, inventory turnover and much more can be accessed in real-time across the globe. Executives can make decisions based on the state of their organisation today, rather than how it was a few weeks ago. And through automatically generated alerts via e-mail and SMS messages to your mobile, problems can be highlighted immediately rather than eventually.
By analysing your company, enterprise-wide efficiencies can be identified. Imagine the scenario of a financial director in Asia-Pacific looking at his professional services operations. He reviews his regional reports and asks: "Why is my Hong Kong operation outsourcing services to a third party elsewhere in China when my Singapore office has Mandarin speaking staff available?" Without centralised systems, major savings can be missed and burdens must be carried.
By using an enterprise-wide approach backed by the right technology solution, businesses can make more efficient and better-informed decisions, as well as streamline the working environment and empower employees. This will make the business more cost effective in the long-run.
* Better cost/cash controls. Better business information is a financial officer's number one weapon. But such an approach does require a business to spend money and adopt a longer-term strategy if it is going to control costs. By identifying clear objectives and installing fit-for-purpose systems, the return on investment can be swift.
Technology can now help control costs in a number of ways:
* By streamlining administrative tasks through efficient time and expense capture, companies can reduce billing cycle times and enhance cash collection.The quicker the finance department can produce the figures, the faster management can respond. For example, monthly accounts that take two weeks to produce leave little time for action to be taken before the next monthly accounts are produced. With real-time financial intelligence software, accounts can be produced and analysed in days.
* Technology can facilitate accurate project profitability analysis, so companies can focus on the most lucrative engagements (financial and management) and learn from prior mistakes.
It can manage resources more tightly, so managers can utilise employee resource more effectively.
* It can improve contact and communications - and, therefore, satisfaction - with customers and prospects, so companies can find prospects and retain customers.
* It can monitor stock levels so that funds are not tied up for too long, and slow selling lines can be identified.
For those companies that do improve their control of costs, the rewards are many. It can make an organisation leaner, fitter and ultimately strengthen the business. It frees up cash-flow, so that companies can realistically plan for the future, from a lower cost base. And making a company more resilient also has the beneficial knock-on effect of increasing employee confidence.
Controlling cash remains one of the best ways to control costs. According to Fred Adler, a venture capitalist: "Happiness is a positive cash flow." Figures collated for the Grant Thornton European Business Survey, show that the current European average payment period is 54 days and the worst offenders are the Greeks who on average take 90 days to settle their bills.

Manage risk globally

The multinational nature of business means uncertainty is now on a global scale. Although some areas of the world are more susceptible to the downturn than others, world economic indicators have seen fluctuations in every region.
An antidote to the uncertainty is greater control. Every region will be affected in a different way so it is vital to drill down and develop a deep understanding of local conditions in order to manage them. Such an approach will also help to alleviate uncertainty, strengthen the business and improve shareholder confidence.
Times of uncertainty require a business to take a calm, collected and critical look at it strengths and weaknesses. And, if it invests wisely in the right, low risk, IT solutions with low total cost of ownership, it will have the knowledge to take control, reduce panic and put some security back into this uncertain world.

Paul Coleman is CEO of Systems Union and author of SunSystems, a leading financial and business management software solution. www.sunsystems.com