How finance consulting in Belgium will help prepare you for the impending economic downturn in Europe
Summary
Many experts are discussing the possibility of a global recession in 2023, but businesses should not panic.
By implementing proactive strategies to address different areas of your business that could be impacted by an economic downturn, you can rest assured that your business could be recession-proof.
Having a good understanding of your cash flow and focusing on liquidity is perhaps the first step in making your business strong against an impending recession.
With the economic crisis impacting almost every business, monitoring your lenders and ensuring that you have a proper plan in place in case you’re not able to maintain your loan settlements, should be priorities.
Some of the leading firms in finance consulting in Belgium may even suggest managing JV partners since their financial issues could very well impact your business as well.
Europe has been plagued by crises and disruptions. From dire energy crises to geopolitical humanitarian tragedies, 2022 has been a challenging year.
The cost of essential items has also skyrocketed, with some countries experiencing price hikes that have risen eightfold.
Businesses are also experiencing signs of economic distress as China—a key supplier and customer—is dealing with its own economic woes.
Experts see this as a defining moment for a generation of executives who will be tested like never before even though they have emerged from global financial crises such as Brexit, the Euro crisis, and the pandemic.
While these challenges pushed business leaders to their brink, every crisis was handled with determination, grit, and ingenuity, but today they are met with a unique situation that only seems to be increasing in magnitude, especially with the IMF predicting that one-third of the global economy will be in recession in 2023.
So how are Europe’s business leaders going to respond to this onslaught of volatile market conditions?
Businesses can undoubtedly depend on the playbooks they have used in previous occasions of financial distress, but they will also need to build resilience using new approaches. This is where finance consulting in Belgium can help you achieve the finance transformation you need to adapt and grow.
Focus on liquidity
Adapting during an economic downturn starts with having an in-depth understanding of your company’s cash flow and liquidity.
While a crisis like a pandemic may seem like a temporary crisis, the effects may last longer and even create a more severe recession.
Firms that specialise in finance consulting in Belgium can help you review your industry’s history and analyse the severity of the situation, giving you a better understanding of what you need to do to manage your fixed and variable costs.
In times of volatility, it becomes critical that you have multiple strategies prepared as part of your contingency plan. You need to have a detailed timeline of how you are going to implement these plans and under what circumstances. A financial consultancy firm can help you execute this if your business does not have the expertise to carry them out.
Businesses need to have the financial discipline to review past economic downturns and objectively consider how they should do business today for sustained economic growth. With survival heavily depending on liquidity management, profit margins, and revenue growth, decisions need to be made by keeping liquidity constraints at the forefront.
Monitor your lenders
Economic shocks predict financial downturns across industries where loan adjustments and forbearing agreements are required to prevent bankruptcy.
During these times, financial institutions adjust their policies to thoroughly analyse existing loans and any new applications for loans. Aside from liquidity, banks are vigilant about cash flow, meaning that the margin for error between budgeted and actual credit metrics is slim.
Maintaining a positive relationship with your lenders during times of uncertainty is important and a financial consultant can help you arm yourself with realistic financial information about your company.
Opening a dialogue between your company and your lenders is crucial since hiding any financial issues could negatively impact your credibility. The key is to be proactive and speak to your lenders with realistic action plans.
Financial consultants are professionals at handling these sensitive conversations and creating an atmosphere where both parties can compromise and devise mutually beneficial solutions.
Manage your JV partners
Performing a complete financial analysis of your JV partners and going over any agreements can help you plan for any worst-case scenarios.
If your JV partners are experiencing distress, they may be unable to meet their financial commitments or carry out contracted services. This can mean that you have to find a way to handle the financial burden yourself.
Have your legal team go over the documents and agreements and get a better understanding of your legal rights. If your JV partners cannot perform the contracted services or offer to fund projects that they are contractually obligated to, you may have some remedies.
Financial consultants may even advise you to make direct payments to your vendors rather than paying via your JV partner. This is in large part due to the possibility of your funds being trapped in a JV partner’s bankruptcy estate, should it come to that.
Prepare for an economic downturn with finance consulting in Belgium
Predicting the ultimate effect that a potential financial crisis can have is not an easy feat, but you can take deliberate steps to prepare and reduce the impact of these scenarios.
You will also realise that aside from your business, your stakeholders will also go through tough times, and a financial consultant can help you negotiate efficiently with your stakeholders while keeping your best interests in mind.
