“Sailors navigating tricky winds, shifting tides, and mercurial weather systems prepare their vessels so they can sail on safely and purposefully, and companies can do the same. Rather than simply reacting instinctively and responding to the informational noise detected by their instruments, leaders can move swiftly and proactively to alter their course and chart a new one — and capitalize on dislocations in the market.” – Will Jackson-Moore, Heather Swanston, and Mohamed Kande
This week, we’re finishing our two-part series on leading your business during uncertain times.
Adjusting to Tax and Regulation Reform
One of the biggest drivers of the current uncertainty is the truly complex landscape of tax and regulation reform. In a range of large industries, the regulatory situation is volatile and prone to significant change. Many organizations have found that these shifts impact their industry, the specific markets in which they operate, and the general environment for business. Unfortunately, hiding under a rock is not a suitable option. In order to be resilient to shifts in the tax and regulatory environment, companies must get ahead of the changes and, where appropriate, work with industry peers and government to improve outcomes.
For example, embracing technological solutions can help companies manage compliance issues while they assess the longer-term impact of other changes. Above all, being in a position to respond effectively will enable a business to continue focusing on its trading environment and not be further disrupted by legal or regulatory challenges at an already difficult time.
Capital Strength
Companies can implement capabilities-driven strategies, invest in human capital, and execute deals effectively only if they rest on a strong financial foundation. But finance has its own heuristics in a time of uncertainty. Commercial organizations are often slow to react to changes to their forecasts. Working capital often increases, consuming more cash and effectively restricting liquidity. Companies often become motivated sellers at a time when asset prices are low. To ensure effective action, it is vital not just for finance to act as an operationally involved partner and conscience of the business, but for all key operational functions, including commercial, procurement, and supply chain, to be actively engaged.
By harnessing data and information technologies to run scenarios involving their business, companies can review and challenge economic, business, and sales projections — and continually feed the results into updated forecasts.
Act Now
No one action, by itself, can dispel a heavy cloud of uncertainty or significantly mitigate its impact. But if organizations can get out of their defensive crouch and assume a more aggressive stance, they have a better chance of maintaining their balance and shaping their future. Building and harnessing the mutually reinforcing attributes of optionality, agility, and resilience will enable leaders to adopt the strategies and mind-sets that allow them to succeed in the full spectrum of uncertain outcomes. Pursuing this path takes a lot of courage. Companies must consciously lean into changes and counterintuitive activities in the precise moments when it is most uncomfortable to do so, or when the forces of inertia and gravity are pushing them toward a predictable outcome.
Rather than being an excuse to detach or check out, uncertainty should be a spur to engage and build sustainable advantage.