Building a Resilient Business: Strategies for Surviving Economic Volatility

Building a Resilient Business: Strategies for Surviving Economic Volatility
Sukanya16 December 2023

What is the common growth factor in companies like Netflix, MailChimp, Groupon, Airbnb, Microsoft, and Warby Parker? Besides being billion-dollar net-worth companies, they experienced growth during recessions or economic volatility but gained immense success. 

How did this happen? According to Austrian economist, Joseph Schumpeter, during an economic downturn or what we commonly call a recession, inept businesses exit the market. This allows the availability of better resources for resilient businesses which leads to great innovation opportunities.

However, the availability of resources is not the sole deciding factor. Financial and strategic planning, digital transformation, efficient allocation of resources, restructuring and several other business elements together make resilient businesses.

This blog guides you through the challenges faced by businesses during economic volatility, and how to overcome those and build resilient businesses during recessions.

Significant business challenges posed during an economic downturn

During economic volatility, sales and profits decrease, the cost of raw materials and labour go up, consumer demand decreases, businesses lose out on cash flows, there is a lack of credit in the market, and customers demand cost reductions. All of these challenges pose business continuity risks, and many companies do not survive.

Let's see these challenges in detail and how you can manage them.

1. Reduced Demand

Customer demand for goods and services decreases during economic downturns because people are more concerned about personal finance. It leads to a steep reduction in sales and high inventory volume, thus leading to a loss of revenue.

You can tackle reduced demand by diversifying or expanding the scope of products or services and targeting different audiences or customer segments. Doing market research to analyse the latest consumer trends is further beneficial.

2. Liquidity Crunch

Because of loss in revenue and increased prices, businesses also face liquidity crunch during economic volatility. It restricts daily operations and the organisation’s capital growth.

Liquidity crunch is manageable by optimising working capital flow, renegotiating payment terms in contracts with suppliers and customers, and collecting receivables. Businesses can also use their assets as security to raise funds or liquidate their extra inventory.

3. Business Uncertainty and Continuity Risks 

During an economic downturn, economists or market researchers cannot correctly estimate the duration. Thus, business uncertainties are at an all-time high.

You can mitigate business uncertainty risk by diversifying assets and investments, identifying gaps or opportunities in the market, and training the workforce. Tech export businesses can build an agile business operational model by integrating Agile methodologies and DevOps techniques.

Opportunities for businesses during downturns

Economic volatility can create a huge dent in the business growth path. However, a recession may also turn out to be a blessing in disguise for businesses. 

Opportunities for businesses during downturns
  • Availability of Resources
    During periods of economic downturn, many businesses face cash flow challenges that can hinder their operations. However, these times can also offer unique opportunities to tap into market resources that are usually overlooked. Leveraging these resources can catalyse resilience and foster sustainable growth, turning challenging times into a launchpad for potential expansion.
  • Innovation
    High financial risk and uncertainty deter businesses from working on new ideas or plans, and they focus on marketing their existing products. However, you can use the resources to innovate new technologies or products that solve complex consumer challenges. 

    You can use resources to carry out research and development. One of the prime examples of a business that survived tough times through innovation is Apple. The company innovated with digital technology and introduced iPod and iTunes in the market.  
  • Retain Quality Talent
    Many businesses execute mass layoffs during a recession. However, economic volatility is the best opportunity to retain a quality workforce in your organisation. It motivates the employee and leads to better performance and overall growth.
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