A quick guide on Crisis management from Scale Capital

How you handle a crisis will define your future success. A quick guide on Crisis management from Scale Capital.

If you look at the bios of us partners at Scale Capital, you will see that we have had to handle more crises than we care to remember. From company restructurings due to disrupted business models that are no longer sustainable to natural disasters and geopolitical events that have affected large regions, we have survived first and then established the basis for significant growth in the following years.  

The COVID-19 crisis is unique and unprecedented in many ways.  While it is not (yet) systemic like the 2008 financial crisis, it is a dual worldwide shock in supply and demand due to the massive quarantine measures implemented.  Uncertainty about what will happen next, how deep the contraction will be and how long it will take to normalize things are the main questions we hear nowadays.

We believe that the same crisis management principles that have helped us in the past apply here. We have been sharing our insights with our portfolio companies and other friends but thought it would be useful to share with a broader audience. Feel free to use, share and comment on the attached quick guide.

Good luck and stay calm and healthy.

 

Financial Principles

  • Cash is king: manage inflows and outflows over P&L results. Create enough cushion to survive worsening scenarios and to gain advantage in unique opportunities that will arise.
  • Sharpen your senses: leading indicators are more important than lagging KPIs. Ensure that you combine both qualitative as well quantitative and monitor on a daily basis if needed.
  • Model simplified outcomes: simplified models respond better to fast changing environments (time to develop “Napkin Modelling” skills). Create scenarios and stress test them to decide the course of action. Be ready to completely change your plans as new information becomes available.

Strategic Principles

  • Expand your influence: deliver clear and consistent messages increasing your impact and building your reputation.
  • Customer before profits: it is time to fight for market share and leave price or even margins for the future. Listen to your customer new needs and exceed expectations to increase their loyalty.
  • Opportunities around you: leverage your strengths to win in the marketplace. Now is the time to buy low certain strategic assets that could be synergetic to you.

People Principles

  • Focus on leadership: have a clear chain of command and expect new leaders to emerge.  Set clear and short term goals to react fast and effectively. Care for your people while hard decisions are made: compassion and shared pain are paramount.
  • Communicate clearly and often: adapt your internal and external communications: short, simple and clear. Repeat as needed.
  • Calm & steady: save your energies for things that you can control. Toxic behaviors around you need to be eradicated without hesitation. Remember to rest; this is a marathon, not a sprint. 

You can download our Quick Guide here:

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