Financial Planning and Resiliency for the Next Disaster
The recent banking industry failures have put into perspective the need for good planning. The companies affected by the banking industry troubles and closures didn’t have much warning that trouble was brewing, much like those of us who weathered the COVID pandemic. Paying attention to your business resiliency and preparing for the next business crisis is vital.
The PBO Advisory team has been emphasizing the importance of forward-thinking planning for many years. In September 2020, our Managing Director and Founder Mike Ford wrote an article for the Forbes Finance Council on planning in light of the pandemic.
Mike’s insights span HR, accounting, and technology management. He encourages having a plan that encompasses lessons learned from previous interruptions you may have experienced. An important component of the plan is a clear summary (like an org chart) that defines chains of command in case of an emergency. Having this defined in advance will streamline decision making and communications.
The recent banking failures highlighted FDIC and other forms of deposit insurance. As many companies learned, without government intervention, only a portion of their deposits would have been protected.
Our recent webinar and blog post regarding bank closures offered several suggestions as to insurance coverage and understanding your risk. We also delved into counter party risk (the risks that extend to you via those you do business with), the increase in fraud as a result of bank closures and the need for heightened cybersecurity.
In both Mike’s Forbes article and the banking closure blog post, we also provide multiple suggestions for best practices to manage uncertainty, such as:
- Evaluate your short- and long-term cash flow needs and how much cash you need on hand to meet these needs.
- Take a deep dive into your financial needs and evaluate how much risk you should undertake.
- Create a budget that is flexible for your business and the circumstances you could potentially face. This will require creating several scenarios ranging from worst-case (a disaster has shut down much of the economy like the country experienced with Covid-19) to best-case where your business will survive the disaster with minimum affects.
- Talk with your banker about options beyond standard insurance coverage as well as the bank’s net assets to liabilities on its balance sheet and understand its position.
- Talk to your various advisors about additional types of risk and how you should respond.
- Consider moving all important data off of servers and into a secured cloud location for easy access anywhere. Make sure key employees have the skills and equipment to access this information remotely.
Planning isn’t a one-and-done activity. Your plans must be reviewed and updated on a regular basis. This is often the responsibility of the CEO, CFO, and/or CPO.
Getting started with a plan can be daunting and PBO Advisory Group is available to help. With years of experience, our team has successfully navigated many crises. Our accounting, finance, human capital/human resources, and business services professionals are available to provide guidance and help you draft and implement your plan, as needed.
Please reach out to us for more information.
Managing Director/Founding Member