Numerous companies have suffered greatly as a result of the coronavirus pandemic, especially those in the struggling hotel and leisure industries.
After years of sporadic business, a 91-room Glasgow hotel in the city’s center, operating as Pocotel, just entered administration, relying on struggled to sustain its operating cash flow.
Undoubtedly, businesses may find it challenging to manage the stress brought on by a financial crisis. What steps can they take to get around this, though? Here are some things to remember:
HOW IS THE MACROECONOMIC CLIMATE AFFECTING Businesses? The business community has benefited from the end of lockdowns and social isolation tactics, especially businesses in the travel, leisure, and hospitality industries. However, the macroeconomic environment is still in a delicate balance as economies attempt to recover.
For instance, during the second part of 2021, inflation in the UK has gotten out of hand reaching a 30-year high of 6.2% in February before peaking at 7% the following month.
This problem has arisen as a direct result of increased public borrowing and broader quantitative easing policies that were implemented to lessen the effects of COVID-19 on the economy.
The basic interest rate was raised by the Central Bank from 0.1 percent to 0.75 percent in just four months between December 2021 and March 2022 in an effort to combat the inflation crisis.
As this should accomplish its goal in the short run, it will initially present difficulties for firms because borrowing costs will increase while soaring inflation continues to have an effect on demand and household spending.
A FINANCIAL CRISIS’ STRESS: MANAGEMENT STRESS Of course, the question that remains is: How can you manage the stress brought on by this kind of financial crisis? Here are some helpful suggestions to get you started.
#1. Gain a Clear Understanding of Your Situation: In times of financial and economic crisis, accurate budgeting is essential since it gives you a genuine understanding of your particular situation and empowers you to go forward with more educated judgments. Consider carrying out an internal financial audit , which can spot problems with your reporting procedures and potentially very frivolous or uncontrolled spending, as another preventative action. 2. Attempt to Cut Costs: While some companies may raise prices in response to a financial crisis, this is not always feasible when inflation is strong. Furthermore, it is meaningless unless you have appropriate cost control because you must constantly focus on profit rather than turnover. More specifically, in uncertain times, you’ll need to work to cut or minimize operational expenditures, focusing particularly on non-strategic costs when practical. 3. Consider Your Workforce: Keeping a sizable core of permanent personnel can consume a significant portion of your budget and result in longer-term costs that are greater than necessary. So you might wish to hire creative freelancers on brief contracts to work on certain projects in order to have a more flexible workforce that can respond to your real-time need.