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What is Crisis Management

What is Crisis Management?

Article by: Sara Pantaleo

Crisis management is a necessary skill for any business to have. It’s the process of identifying threats and mounting an effective response to prevent further damage or loss.

Businesses that plan to prevent crises from spinning out of control can limit the damage when something goes wrong. This process, known as crisis management, is essential for any company’s survival today, where bad news travels fast online.

Organisation threat

The first step in any company’s risk management plan is to analyse the threats and what may go wrong. This process, called “risk assessment,” looks at the potential adverse events and their likelihood of occurrence so you can make informed decisions about how best to protect yourself from these threats and prepare for the best- and worst-case outcomes.

Crisis management

Types of crises

Whether it be financial consequences like losing customers due to their fear over finances; or emotional implications such as anger towards employees who caused panic among coworkers because they didn’t know what was happening at work resulting from misinformation spread by people with vested interests within those narratives (this could lead them into dangerous situations); tangible ones where assets fall apart without enough staff on hand- all this contributes towards decreased productivity which can ultimately fail business strategy.

The key types are:

  • Financial Crisis.
  • Personnel Crisis.
  • Organizational Crisis.
  • Crisis of Malevolence.
  • Technological Crisis.
  • Natural Crisis.
  • Confrontation Crisis.
  • Workplace Violence Crisis.
Limiting negative impacts

Having a crisis management plan in place means you can prepare for the worst outcomes should a threat come to fruition. For example, destroying a company’s computer systems would be disastrous. It would mean a loss not only on current projects but also on customer and supplier data!

When you know what you are dealing with regarding possible risks and impacts, your plan will include a backup mitigation plan to minimise negative impacts. For example, you might create a backup system for all computer systems. This way, their data and work processes will still be saved in case anything happens to any particular machine or network connection!


What is Crisis Management? Read More »

The powerful, inspiring women leading family businesses

When I first joined the family business, I found it very difficult to break through the sexism and invisibility of being a woman in a male-dominated industry.   Even though I was developing and improving the business, I was seldom acknowledged in the early days and treated like a little sister.  Not just from my family members but also others who were working in the business.

It took many years to get recognition, and I had to work a lot harder, build trust and prove myself at every stage.  All this while creating my family and all that came with that.

How women are seen in the family business

So, I found it interesting when I read a KPMG article in 2020, following a survey of family businesses that talks about women in the family business as having hidden roles and being designated as the ‘chief emotional officer’ in some situations. However, women took more of a support role in keeping the family together instead of leading the family business.

I am happy to say that there are a growing number of women leading their family businesses and not in any way invisible.

I had the privilege to have a close look at some of these inspirational women leaders in the family business as part of a project I have been involved in this year.

These women are not in the background, but they have broken through the stereotype of the traditional male-dominated head of the family business.  They have founded the company, or they have taken over in the succession of their family business.

They have successfully broken down the barriers and are redefining leadership in the family business.

Challenges for women in the family business

Most of them cite their primary challenge as the male family members putting barriers and not trusting that they can do the role in male-dominated environments.

The consistent trend I read in their submissions is that they have transformed their family business into achieving high financial performance and innovation. In addition, they implemented a transformational leadership style to create an inclusive and diverse workplace.

They have in common that they succeeded despite the barriers while having families and building inclusive teams with a sense of belonging.

These women showed immense resilience and grit to succeed. Yet, they had to fight for their place.

Embracing and supporting women in the family business

In the future, we need to be aware and cautious that all women are given the same opportunities as their male counterparts and not miss out on women’s contributions because they do not think the fight is worth it.

I know in my own experience, I sometimes questioned if it was worth it.

The risk of not embracing women in family businesses may mean the end for the company.

Celebrating women leaders in the family business

So, I want to give tribute to all the female leaders in family businesses and encourage all organisations to embrace all they have to provide and support them to succeed and remove any barriers in their way.

I want to share some of the quotes from the inspirational women I had the privilege to review.

A woman as a business leader

My strength and courage to fight for change, to show those who came before me that there is nothing to fear from this new approach, have driven growth and secured the business for future generations

A woman overcoming challenges in the family business

I’ve fought constant resistance and been required to prove my worth time and time again.  Courage has been essential to my success both as a leader and a woman in the business

Supporting women in your family business

I have ensured that flexible working hours and days are core to the business. It doesn’t just make good moral sense, but it makes good business sense

I have coached and built the women in leadership in my business by providing a leadership pathway and funding the furthering of their learning and experiences

The powerful, inspiring women leading family businesses Read More »

Crisis Management Planning

It takes 20 years to build a reputation and five minutes to lose it..Warren Buffett

 

What is a crisis?

A time of intense difficulty or danger?

So, in business, a crisis is related more to a significant adverse event with possible reputational damage.

An out-of-the-ordinary event, disclosure or set of circumstances, real or perceived, which seriously threatens safety, disrupts the activity or negatively impacts the reputation of a business or customer patronage.

It will not matter whether it is real or perceived.

Types of crises

Most importantly, are you aware of all the different types of incidents that could threaten your business and reputation?

A crisis, which can last from a few hours to several days or longer, needs decisions to be made quickly to limit damage to an organisation.

Types of crises can include natural disasters, accidental or intentional human-caused events, and technology issues such as cyberattacks.

Why have a crisis management plan

A crisis management plan will detail all the organisation’s risk areas and respond in a critical situation that negatively affects your organisation.

A crisis management plan allows an organisation to act quickly should an incident occur, with well-documented responses to potentially critical situations.

An effective crisis management plan will include:

  • criteria used to determine if a crisis has occurred
  • monitoring systems to detect early warning signals,
  • contingency actions
  • list of emergency contacts
  • specify who will be the spokesperson in the event of a crisis
  • strategies for everyone to know their role during and after a crisis

Having a plan will not avoid an incident but will minimise the impact of adverse reputation outcomes and guide how to manage and recover from incidents.

Right, now is a great time to prepare a crisis management plan and be ready for the recovery of COVID19 and have contingencies to deal with the employee well being and any matters arising from bringing the team back to the office.

Recovery is more clear with a crisis management plan.

As a result, after a significant adverse event, a crisis management plan could be the difference between your organisation being left vulnerable by highlighting the organisation’s and systems weaknesses or coming out more resilient.

Thus, leading to enhance the organisation’s capacity to retain its state and function despite external disruptions and adapt and transform from these events and be better equipped to undergo future changes.

 

 

Download – Steps to create a crisis management plan

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Cash is KIng

Cash is King

So it’s the end of the financial year, and your accountant reports your business has a nice profit.  You are surprised and tell them you cant understand as you have no money in the bank and don’t know how you will pay the taxes on the profit.

According to a report released by ScotPac in its latest, SME Growth Index 72.5 per cent of small business reported having cash flow problems.  Small businesses with limited financing must focus on earnings and pay attention to cash flow, the actual money resources used to support operations.  What does this mean, and how can business owners track?

Cash Flow and Profitability are Not the Same

Although closely related, cash flow and profitability are different. Cash flow represents the cash inflows and outflows from the business. Profitability represents the income and expenses of the business.

Think of cash flow as transactions that affect your business “Bank account” and profitability as items that impact your “income tax return”.

Cash inflows and outflows show liquidity, while income and expenses show profitability.

Liquidity = Can I pay my bills?

Profitability = Am I making money?

Cash Flow-Positive vs. Profitability

When your business is cash flow-positive, it means your cash inflows exceed your cash outflows. Profit is similar: For a company to be profitable, it needs to have more money coming in than going out.  So, when you see that you have more receivables than you do payables, it can be easy to assume that your business is making a profit. But that’s not always the case.

Your business can be profitable without being cash flow-positive

You can have a positive cash flow without actually making a profit.

Here’s how to see if you’re cash-flow positive:

Many businesses use accrual accounting, which means your revenue and expenses are recorded, regardless of whether or not cash has been exchanged.

For example, let’s say you send out an invoice for $1,000. This $1,000 will be recorded on your profit and loss statement as a profit—even if you don’t receive payment for said invoice right away.

This difference is critical when your bills come up as due. If you’re still waiting for payment on that invoice, you may not have enough cash on hand to cover the costs.

  • Not having the cash makes you cash flow-negative.

Since profit doesn’t tell you exactly when money is coming in and going out of your business, you will still appear profitable on paper, even if that isn’t in the bank for you to use.

How to Calculate Your Cash Flow

To calculate your cash flow, you have to know how much money your business starts with on the first of the month.

Your “cash on hand” should include precisely that—the cash you have on hand that is readily available to use.

Once you know how much you’re starting with, you’ll subtract all your operating expenses, investment activities, and financing activities.

  • Cash flow will not include any unpaid debt or outstanding invoices.

Let’s say you have five customers and you send five invoices every month.

Let’s also assume your average invoice value is $2000, and your payment terms are NET21 days.

We’ll assume your Cost of Goods Sold (COGS) is 50% of your billed amount and that your operational costs are flat at $3000 per month (including rent, employees/contractors, insurance, etc.). In this case, your cash flow chart may look something like this (not taking into account prior balance or actual cash on hand, for simplicity):

Example: Cashflow Calculator

Cash Flow Chart Month1 Month2
Issued Invoices 5 5
Value Per Invoice $2000 $2000
Paid Invoices 0 5
Booked Revenue $10000 $10000
Actual Income $0 $10000
COGS -$5000 -$5000
Operational Costs -$3000 -$3000
Monthly Net Profit $2000 $2000
Monthly Cash Flow -$8000 $2000
Running Cash Flow -$8000 -$6000

If you sent that $1,000 invoice out, but it is yet to be paid, you will not count it as a cash inflow. Instead, you’ll mark it as “collections or accounts receivables” until the invoice is paid.

Or, let’s say you purchase something with a business credit card but don’t pay it off right away. The balance you owe on your card will not count as a “cash outflow” until the debt is paid.

After your calculations, your cash flow is positive if your closing balance adds up to be greater than your starting balance. If it adds up to be lower, your cash flow is negative.

Which One Is More Important to a Business Cash or Profit?

When determining which one is more important, it depends on the business and the circumstances.

For example, a business may see a profit every month, but its money is tied up in hard assets or accounts receivable, and there is no cash to pay employees.

A business may see increased revenue and cash flow, but there is a substantial amount of debt, so the business does not make a profit.

The absence of a profit eventually has a declining effect on the cash flow.

An unprofitable business that is cash flow positive will have a hard time remaining positive for long.

Cash flow is what keeps the lights on

In short, profit can show you how successful your business is, but it can’t tell you if your business has the money to survive long-term.

Ciao,

Sara Pantaleo, Affari SP Founder

Cash is King Read More »

Leading Diversity and Inclusion in the workplace

Does Diversity mean better performance?

In the last few months, there has been a lot of news about gender issues and how our Government has handled complaints by women for serious alleged incidents.

Many private business leaders were horrified and I have heard many say, ‘This would never be tolerated in private business!’.

We have strong laws in this country that regulate Occupational Health and Safety, but I have seen many workplaces that have zero focus on Diversity and Inclusion (D&I).

Diversity is generally defined as acknowledging, understanding, accepting, valuing, and celebrating differences among people with respect to age, class, ethnicity, gender, physical and mental ability, race, sexual orientation, spiritual practice, and public assistance status.

The latest McKinsey report, ‘Diversity wins: How inclusion matters’, found that the most diverse companies were more likely to outperform less diverse ones on profitability.

In actual fact, they state that the greater the representation in the workforce, the higher the likelihood of outperformance.

The five areas of action the report highlighted are:

  1. Ensuring the representation of diverse talent – advancing diverse talent in to executive, management and board roles
  2. Strengthening leadership accountability and capabilities for (D&I)
  3. Enabling equality of opportunity through fairness and transparency – Advancing to true meritocracy and leveling the playing field
  4. Promote openness and tackle microaggressions – zero-tolerance policy for discriminatory behaviour
  5. Foster belonging through unequivocal support for multivariate diversity – build a culture where all employees feel they can bring their whole selves to work

Embracing D&I will increase profitability, but the progress of making it a priority is slow, in large and small companies.

I believe part of the reason is that implementing D&I policies may seem overwhelming and organisations are concerned about the risk of unintended negative outcomes.  Such as discrimination and conflict, emanating from employees not accepting the differences.

Simply making pledges and having a policy is not enough when considering D&I policies.  Managing diversity is more than equal employment opportunity and affirmative action.   It’s a comprehensive process for creating a work environment that includes everyone.

Diversity is not about differences among groups, but rather about differences among individuals.

Diversity leadership requires a commitment and understanding that every individual in the organisation contributes to its diversity. 

Leaders capitalising on the skills and talents of an individual who is different on some dimension and making them feel a valued member of the organisation.

Leaders must consider diversity of opinion with the team, find shared ground and reach agreement through focused communication and understanding.

They must incorporate commitment to diversity and inclusion as part of their business strategy and add to their values.

In conclusion, in order to succeed with implementing effective workplace D&I policies and processes and create a culture of belonging, leaders must:

  • Include their team and work together to understand what is best for the organisation based on teamwork and group dynamics.
  • Review constantly. At least every twelve months and adapt as required.

Risks of getting it wrong

There are many benefits of creating an inclusive and diverse workplace where employees feel a sense of belonging.  There is a moral and ethical duty to ensure the safety of employees.  There are also significant risks to the business for failing to take steps to provide a safe working environment. These include:

  • Reputational damage: people ignore it, but one bad news story (or several) can significantly damage your relationship with your clients, employees and the public.
  • Penalties: you can face significant financial and/or criminal penalties for each breach of your state’s occupational health and safety, and discrimination legislation. You can also be on the hook for damages if an individual claims you failed your duty of care.
  • Personal liability: individuals involved in a breach of a business’ duty of care can potentially be held personally liable.
  • Injuries: if an employee is discriminated against, or sexually harassed at work, they may suffer an injury (mental and/or physical), go on leave and/or lodge a workers’ compensation claim.
Download some helpful tools:
Considerations when implementing D&I policies
Questions Leaders need to ask in regards to Discrimination and Harassment

Leading Diversity and Inclusion in the workplace Read More »

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