Businesses are facing increasing concerns about a potential recession, fluctuating tariffs, and market volatility, among other concerns in today’s economic landscape. While there is no official declaration of a recession, recent developments have raised concerns. Companies must be proactive in their strategies to navigate potential downturns and challenges effectively; this requires proactive strategies and a resilient approach. 

In our webinar, “Business Strategies: Building a Strong Foundation Amid Uncertainty”, panelists from various industries came together to discuss the challenges of the current economic environment as well as key strategies and best practices for navigating these uncertain times.

 We gained perspectives from: 

• Yvette Connor, Partner, Risk Advisory Practice Leader, CohnReznick
• Roger Matthews, Vice Chairman, Global Consumer and Retail Investment Banking, Bank of America Securities
• Kelli Santia, Director, Strategic Risk Management, General Motors
• Phil Taub, Partner, Head of Private Equity Group, Nixon Peabody
• Amit Wadhwani, Senior Director, Third Party Global Operations, TransUnion
• Cindy McLoughlin, Managing Partner, Consumer, Hospitality, and Manufacturing practice, CohnReznick

Key risks and resiliency strategies

The panelists agreed, the overarching theme during this tumultuous time is resiliency, noting that it's important to not just acknowledge risks but to also be able to weather extreme change successfully.

This means understanding and addressing key risks, and the financial impacts of them, before it’s too late, including:

• Cash and liquidity management: Ensuring liquidity is crucial.
• Credit risk: Monitoring credit spreads and counterparty risk exposures.
• Supply chain disruption: Understanding supply chain dependencies and financial impacts.
• Revenue and demand risk: Working with shifting customer spending patterns.
• Regulatory changes: Navigating changes in regulations during volatile times. 

Best practices for building resiliency

To build a strong foundation amid uncertainty, companies should adopt the following best practices:

1. Proactive risk management: Companies should be informed, prepared, and proactive in their risk management strategies. Regularly assessing and monitoring risks to stay ahead of potential challenges. Use scenario analysis and stress testing to prepare for various outcomes. Smarter sourcing and contracting, as well as understanding systemic risks and portfolio-level resiliency are key.

2. Diversify supply chains: Proactive risk assessments and scenario planning can also help companies understand their supply chain dependencies and potential pitfalls. Implementing effective strategies, including supplier diversification and renegotiating contracts, can help ensure stability. Avoid over-reliance on a single supplier or region. Diversify suppliers to mitigate risks associated with supply chain disruptions.

3. Enhance contracting strategies: Review and renegotiate contracts to include clauses that protect against unforeseen events, such as tariffs and supply chain disruptions.

4. Strengthen financial management: Maintain robust cash and liquidity management practices. Monitor credit risk and counterparty exposures to better ensure financial stability.

A. Leverage technology and novel solutions: Uncertainty around tariffs has led to liquidity events being put on hold. However, novel solutions like tariff escrows, the use of escrow accounts to manage disputed tariff payments, are being used to mitigate risks. During this time, it’s important to be patient and keep a global perspective. Utilize data-driven tools and models to forecast risks and make informed decisions. Implement risk intelligence systems to monitor real-time indicators.

5. Engage with advisors: Seek advice from trusted legal, financial, and industry professionals. Listen to honest and realistic assessments to navigate complex market conditions. While the U.S. capital markets are resilient, they are currently stretched. Many transactions are still moving forward, however, those on the smaller side of the spectrum are struggling. Companies should also get ahead of refinancing discussions and be cautious about taking on extra debt.

6. Focus on resiliency: Develop a culture of resiliency within the organization. Encourage proactive thinking and continuous improvement to adapt to changing circumstances.

Build a strong foundation now

Building a strong foundation amid uncertainty requires a multifaceted approach. Companies must understand their risks, develop proactive strategies, and enhance resiliency. By being informed, prepared, and resilient, businesses can better navigate economic downturns and emerge stronger.

For a deeper dive, watch our webinar: Business Strategies: Building a Strong Foundation Amid Uncertainty