Navigating Economic Uncertainty: Financial Strategies for CEOs

By Carl Johnson, UK Sales Director at Anglo Scottish Finance

Economic uncertainty isn’t new, but the speed, frequency and scale of disruption facing today’s businesses is. Volatile interest rates, rapidly shifting demands and customer behaviours, as well as supply chain disruption, are all key issues facing CEOs and other C-suite executives.

Now, the question is no longer whether or not your business will face uncertainty – for it certainly will. What sets apart the businesses that thrive from those that merely survive depends on their flexibility in the face of volatility.

It is no longer enough to react to the chaos – in fact, CEOs must ensure that their business is set up to deal with these fluctuations in the long-term. Here’s how.

Cash means control: Remain liquid

For a CEO that faces uncertainty, liquidity is perhaps your most strategic asset, particularly if you operate in a sector with high overhead costs or expensive machinery costs, like manufacturing. Retaining flexibility will give you the ability to pivot and adapt quickly in response to fluctuating market conditions, while cash-poor competitors languish behind.

Non-dilutive forms of raising capital, like commercial finance, can offer security. These methods allow you to tackle high one-off costs, forecast reliably in the medium-term and enjoy predictable repayment plans. In the event of machinery outages or costly VAT bills, paying outright can have a significant impact on your cash flow, hampering your agility as a leader.

Partnering with a reliable commercial finance broker will help CEOs spread the cost and retain control over the future of the business.

Bridge the gaps: Tackle seasonal inconsistencies

Another common issue for C-suite executives in consumer-facing sectors is seasonality, with seasonal payment cycles creating an unreliable yearly cash flow. During these periods, many businesses suffer not from lack of revenue but from misaligned cash flows – and are forced to deal with significant outgoings during seasonal lulls.

There are a number of ways to tackle this, but financial leaders should remember that tightening internal cash flows can have as much impact as raising external capital. CEOs should look to lead initiatives to shorten receivables cycles and reduce excess inventory, increasing financial resilience from within. Supporting this with short-term, tailored finance agreements will help establish a more reliable cash flow.

Consolidate debt: Increase balance sheet resilience

Beyond cash flow management, CEOs looking to increase their company’s financial resilience should cast a critical eye over how existing debt is structured. Market volatility dictates that the wrong kind of debt can become a liability.

You might find that your debt is too short-term, creating refinancing risk. Alternatively, you might find yourself with a high interest burden, with excessive interest expense eroding your cash flow.

Strengthening the balance sheet by consolidating liabilities or strategically refinancing can reduce the financial risk your business faces, improving investor and lender confidence.

Think long-term: Improve forecasting

Investing in improved forecasting and modelling is another way that CEOs can increase their company’s resilience in the face of uncertain market conditions. Building multiple financial scenarios, and regularly stress testing your business model against them, will give you the confidence that your company is equipped to handle anything.

Adopting this forward-thinking method gives CEOs the visibility and confidence to act proactively, rather than reactively, pre-planning business responses to a range of different market scenarios. Of course, investing at a time of financial instability can be daunting.

However, showing your stakeholders that the business is equipped and prepared to deal with a range of financial scenarios will be a worthwhile investment – and will lay the groundwork for stability during future uncertainty.

Looking to help your business weather the storm? Taking an approach that combines some, or all, elements of the above will reinforce your business’ stability and prepare the rest of your C-suite to prioritise organisational agility. That could be the key to your business navigating financial uncertainty with ease.