Business strategy after flooding

According to the Serbian Ministry of Economy about 11% of all enterprises in Serbia are in the flooded regions. Precisely, out of 121,000 companies and 224,000 sole proprietors in Serbia, 11,500 companies and 26,000 sole proprietors operate from the flooded areas – most of those in trade, agriculture, food production or construction.

MULTIPLE AND COMPLEX DAMAGE TO BUSINESS

Not only businesses from flooded areas are affected, but all supply chains that include even a single flooded (non-operating) enterprise. I find five forms of damage:

  1. Direct damage or loss of buildings, equipment, plant, machines, consumables, materials and finished goods.
  2. Loss of trade during flooding and recovery times relates to losses in sales and operating profit.
  3. Decrease in sales after re-start due to a contraction of economy in the region and reduced buying power.
  4. Brocken supply chains in which a flooded enterprise had role. Other chain links might even be in a dry region but still losing either a supplier or customer.
  5. Loss of opportunity to win new business during non-operating period. Other competitors jump in.

These forms of loss present a direct threat to business survival or at least cause its contraction which means less tax for the state and loss of jobs in the already poor pre-flooding economy.

STRATEGIC GOALS FOR MANAGEMENT

  1. Urgently secure finance for repairs, stock refill and restart. Unfortunately in Serbia, less than 10% of businesses were insured against this type of natural disaster and only 2% of farmers. Economy was very weak even before flooding. Consequently only few businesses have enough own funds to execute the recovery. Most of affected businesses were already in debt with banks and other creditors before the disaster, but now they need fresh funds over and above the existing loans. They look for banks, revenue service, suppliers and other creditors to allow for all current repayments to be frozen and postponed with zero interest and to provide further finance at reduced interest rates and longer repayment periods. Government and non-government agencies as well as donors will have to provide security to financial institutions for all those extended and new loans as well as to donate funds directly. This complex situation requires all parties to sit together and negotiate a deal that secures the wheel to start rolling again now even financial recovery and profits might be years away.
  2. Start trading a.s.a.p.  Extending unproductive time due to own inefficiency is the second biggest enemy for business as only sales can generate money for salaries and recovery. Loss of trade can, at certain point, become greater than direct damages. Good management in this situation is a must!
  3. Regain market share. Regain old customers and supply chain position. Sustaining clear communication with customers, suppliers and distributors will be the best way to do that as their support during recovery may show crucial.
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