While many businesses are still dealing with the acute impacts of 2020’s economic and social disruption, innovative businesses will apply what they’ve learned to excel in 2021. Here are five ways businesses can build resilience and meet future challenges while being better positioned to capitalize on emerging opportunities.
Financial discipline — not just for tough times.
A thorough and proactive review of internal processes and key relationships can help protect a business. For example, cash flow problems are a common source of business failure. It’s important to examine your supply chain and customer base for vulnerabilities that could impact your business. Plus, review customer payments to identify small issues before they become bigger issues.
Reducing spending in a defensive and reactive posture can have unintended consequences. Instead, create “what if” scenarios now and plan allocations for each. When the time comes, you can respond with a carefully checked plan.
Don’t let uncertainty stop you from growing.
The M&A market has changed in 2020 due to the impact of the coronavirus and widespread digital transformation. Companies with substantial working capital and cash reserves could have a significant opportunity to implement this through a merger or acquisition, particularly if their leverage is limited.
If your company is unable to pursue M&A activity, develop a strategic plan for future growth. Start by identifying the best opportunities, whether it’s expanding into new markets, reaching a new customer segment, or further digitizing your business model. Consider the potential obstacles you will face in pursuing these opportunities. It will help you formulate an actionable, prioritized plan specific to your situation.
Make cybersecurity a strategic priority.
Cybercrime is more of a risk in today’s remote work environment, so businesses need to be prepared. Criminals realize that workers are less protected when working remotely. They launch malware campaigns targeting people with insufficiently secure devices. To reduce vulnerable attack surfaces, look to strengthen mobile device management, ensuring security tools and protocols are in place.
Companies should also update and enforce a security policy for remote connectivity. Policies should provide guidelines for the safe use of public Wi-Fi. A policy should prohibit workers from transmitting sensitive information and require the use of well-protected VPNs and home routers. Finally, cybersecurity training can teach employees how to put essential protections in place while keeping cybersecurity front and center across the business.
ESG strategy is no longer reserved for large companies.
The focus on environmental, social and governance (ESG) is far from being a welfare and concession strategy – it creates a culture of responsibility, sustainability and innovation and can be directly linked a company’s long-term prospects.
Best practices for strengthening your company’s ESG commitments include disclosing comprehensive ESG information and helping investors understand how to interpret it; have a diversity and inclusion program; and ensure diverse representation on the board, including as a strategy to attract top talent. Employers interviewed in our 2020 survey Workplace benefits report cite diversity and inclusion programs as essential for retaining talent (73%) and something that builds a strong company culture (76%).
Apart from the social benefits these actions bring, looking out for the good of society is also good for business. During the March 2020 market crash, $8.2 billion was withdrawn from exchange-traded funds while ESG funds tracked by BofA Global Search continued to attract inflows, suggesting that fund managers were under less pressure to sell stocks with strong ESG characteristics.
Invest in your employees.
Just as you take steps to protect cash flow and business operations, it is essential to protect the well-being of your employees. Management must support employees even more comprehensively and proactively than before. Leaders can schedule more frequent communications with staff and take an active role in broader wellness areas like financial stability and mental health.
Comprehensive wellness programs that support employees’ physical, mental and financial health are more important than ever. The percentage of employees who rate their financial wellbeing as good or excellent has increased from 61% in 2018 to 49% in 2020, and up to 57% of employees believe their wellbeing has a significant impact on their productivity , which could have major consequences. ripple effects on a business health.
Financial wellness tools and education should cover a range of needs, including saving for retirement, planning healthcare costs, budgeting, saving for college, and managing the debt.
COVID-19 has created unprecedented challenges and leaders have bravely faced new hardships. While no one can predict what’s to come in 2021, these 2020 lessons can help businesses kick-start growth and plan for financial success in the year ahead.
Bob Arth is Executive Vice President and Head of Northeast Region, Global Commercial Banking, for Bank of America.
© 2020 Bank of America Corporation