By Bowale Odumade Adeoye, a Senior Investment Executive At The Africa Finance Corporation (AFC)
Uncertainty is a key part of any business environment. In Africa today, currency fluctuations, inflation, supply chain disruptions, and the ongoing effects of regional conflicts have deeply impacted business leaders. While we are currently in turbulent times, having to deal with change and uncertainty is a perennial part of life, and a significant part of business leadership and management. To effectively lead a business during periods of flux, it is critical that leaders remain proactive and consistently take action to sustain progress. Here are 5 tips that I have found to be helpful.
1. Keep a Risk and Opportunities Register
Risk is defined as an uncertain event or condition that can result in a positive or negative outcome. However, in managing risks, there is a tendency to focus on the negative outcomes while losing sight of the elements of uncertainty that can yield positive outcomes, referred to as Opportunities. In Africa’s context, regional conflicts, supply chain disruptions, and inflationary pressures are all key risks. On the flip side, opportunities may include new markets, or investing in climate-resilient infrastructure. In managing businesses, it is important to identify risks and opportunities, measure the probability and impact of occurrence, and assign owners who will proactively manage and report on them. In managing risks and opportunities, business leaders should keep sight of the importance of the role of corporate governance in the outcome of company performance.
2. Explore Alternative Options to Leverage Assets
During times of uncertainty or business interruption, it is important to consider options to monetise business assets beyond those originally envisaged in the business plan. Successfully doing this enables a company to pivot and adapt to changes in the environment. For instance, amidst economic instability and infrastructure gaps in Africa, companies may explore alternative energy sources to offset high electricity costs or find new logistics models to overcome supply chain challenges. For example, in response to the COVID-19 pandemic, Ethiopian Airlines temporarily converted some of its passenger aircraft into freighters, which enabled it to boost its cargo shipment capacity, ultimately delivering enhanced service to its customer base and allowing the airline to play a laudable role in the distribution of medical supplies and vaccines.
3. Maintain a Robust Cash Flow Forecast
Understand the current cash position and cash flow forecasts. Forecasts should not be developed in isolation but should incorporate input from other functions of the business, as well as with customers and other stakeholders. In Africa’s current inflationary environment, cash flow management becomes more critical. With inflation eroding purchasing power and rising interest rates, businesses should prioritise conservative cash flow projections, factoring in regional variances and commodity price shifts. When preparing cash flow forecasts, prepare various scenarios with conservative assumptions around underlying drivers. Identify causes of variances between earlier forecasts and actual performance and determine if present forecasts need to be amended. Review the cash position and forecasts regularly and plan mitigating measures.
4. Engage Financial Partners Proactively
Understanding the concerns of your financial partners is paramount. Their support is critical during times of financial stress. These parties are less likely to be flexible, however, if they do not believe that the business is prudent in its business and financial operations. Given the debt burdens faced on the continent and the tough lending conditions that businesses must navigate, maintaining honest, proactive relationships with financial partners is crucial. Share the challenges, explain actions taken, and propose solutions that will be mutually acceptable to all parties. For lenders, this can include deferral or restructuring of payments. For both investors and lenders, this can involve the injection of additional funds to ensure that the business stays afloat and is well positioned to deliver improved results.
5. Engage and Invest in the Workforce
Company employees are stakeholders in the business and should be kept informed about company developments that affect them. Management can also solicit ideas and solutions from the staff through direct engagement, group consultations, or task forces. With Africa facing a high youth unemployment rate, investing in your workforce’s skill development not only ensures operational efficiency but also contributes to addressing a critical socio-economic challenge. It is also essential to identify learning and development opportunities to foster engagement and well-being of staff.
Rather than being swept away with the tide or simply surviving, I believe that leaders can in fact harness uncertainty to build sustainable advantage and guide their businesses through unpredictable times.