Avoiding Pains and Achieving Gains

A Steinbeis method that identifies risks and avoids a crisis

A crisis is a risk that actually happens. That may be a risk the company consciously enters into, or a risk it is not aware of. Risks can be posed by both internal and external factors, which can then develop into a corporate crisis. Is the business model still viable during a climate crisis? Is it sustainably competitive with respect to digital transformation in the economy and society? How resilient are supply chains in an age of globalization, especially given conflict of a military nature? How significant is the risk that the disruptive innovations of new market players could destroy the business model? Thomas Hösle, entrepreneur at the Steinbeis Consulting Center for the Prevention and Management of Crises, has developed a structured model for identifying risk at an early stage, thus helping to avoid crises.

 

These days, crises are becoming the norm rather than the exception, and as a result, companies increasingly face crisis situations that come in various guises. Whether it’s a slump in sales, the threat of insolvency, an imploding segment of the market, mass lay-offs, environmental scandals, PR chaos, or a natural disaster, to a business, a crisis is any situation that endangers the ongoing existence of the company.

More room for maneuver by taking early action

Friction and information deficits in management often go unnoticed, or if they are perceived, it’s because the working atmosphere is so bad. This can, however, lead to a genuine crisis in management, one that manifests itself in an inadequate corporate strategy or a lack of market focus. The result of this is declining market share, immediately followed by profit problems due to waning sales and net revenues. These, in turn, are a hindrance to required investments in the future. And the result of that can be an earnings crisis in which equity is eroded by negative operating results. This leads to liquidity bottlenecks and a growing volume of liabilities toward suppliers. A direct consequence of such a liquidity crisis can be insolvency. Something must be done – and quickly – yet there is limited room to maneuver.

The earlier a threatening situation is recognized, especially if it could develop into a crisis posing a danger to the overall company, the more leeway there is to take action. Conversely, the need to take action increases with each further escalation of a crisis.

Systematic knowledge acquisition

Identifying risk at an early stage and taking preventive action in order to counteract a crisis describes the specialist area of the Steinbeis Consulting Center for Crisis Prevention and Management. The experts from Pfullingen help companies identify potential risks, playing an active role in achieving concrete results. Their aim is to crisis-proof companies by equipping them with the resilience to understand the risks they face and prepare for a potential crisis. “This includes developing a strategy to secure the future in the long term, to develop new digital business models, and to strengthen operational excellence. To ensure that everything remains sustainable, we establish a system for continually monitoring individual measures,” explains Steinbeis Entrepreneur Thomas Hösle.

Organizations can be assessed in qualitative terms, looking at strengths and weaknesses in a variety of fields of competence, by conducting a Steinbeis Enterprise Competence Check (ECC). To gain additional transparency, the Steinbeis consultants use an instrument called the Independent Business Review (IBR). Based on a variety of business evaluations, this identifies areas in which strategic and operational action is required in order to secure the future viability of a company. An IBR also offers a detailed analysis of communication measures, looking at both content and implementation. To identify potential risks going forward, an environment/arena analysis can be performed, including an analysis of issues, describing and identifying trends and underlying currents. This process identifies risks that are not only of relevance to the company but may also develop into a crisis.

These assessments focus specifically on pinpointing early indicators of undesirable developments and identifying warning signals. To do this, all company stakeholders are taken into account – such as business partners, investors, the social environment, but also internally when it comes to employees and the works council.

Active support in developing solutions

“Based on this, we develop solutions and a crisis prevention concept and define KPIs for before-and-after comparisons. We can also support companies during this phase on an interim advisory basis, but also in operational terms by becoming actively involved in implementing crisis resilience projects and temporarily taking on operational tasks,” says Thomas Hösle, explaining the numerous options for working with companies. This phase also includes the development of a communication strategy and overseeing ongoing communications at the company. Services are rounded off with the temporary assumption of operational communications as well as integration into internal company projects with the aim of realigning crisis-resilient communication measures.

Ad hoc measures and safeguarding the future in the event of a crisis

When risks have already developed into a crisis, what is needed first in terms of acute crisis management are ad hoc ideas. The priority later will be to reduce the company’s vulnerability to crisis situations. Accordingly, Hösle and his team focus on developing solutions that will secure the survival of the company in the medium and long term across the entire business spectrum – such as business model development, new business development, new sales concepts, and new communication concepts.

Underscoring formal factors that can be of existential importance during a crisis, Steinbeis expert Hösle says: “Aside from conducting a scientific analysis of the crisis, we organize experts to conduct an audit based on IDW S6 standards. This can be important to ensure banks stay on board even in a time of crisis.” The business recovery report is based on standards laid down by the Institute of Public Auditors in Germany (IDW) and analyzes whether a company experiencing a crisis can be successfully restructured in the long term. “Our experience and expertise in this area extend over many years, and this really comes into play when we’re implementing the restructuring and recovery measures. There’s a saying in the Swabian dialect that increasingly applies to us at this point. It goes something like ‘Work, don’t natter’,” adds Hösle with a twinkle in his eye. During this time, the Steinbeis consultants provide support as “caretakers” or “interim air traffic controllers” and will even assume front-line responsibility as Chief Restructuring Officers (CRO).

To communicate effectively while a crisis is actually happening, it is also of fundamental importance to have a systematic emergency plan in place for stakeholder communications. To do this, tools such as an ad hoc stakeholder analysis or a media response analysis are used. To provide active help with communication management during a crisis, among other things the Steinbeis experts develop guidelines for internal and external communications. It may also be necessary to assume an interim function as a Chief Communication Officer (CCO).

Act quickly and focus on goals – specifically, according to the situation

One thing that becomes particularly evident during a crisis is that companies face totally different problems. It is therefore important not to resort to frantically doing things just for the sake of it, but to come up with individual solutions that match the specific situation. Rapid and targeted intervention broadens the scope to take action and increases the chances of preventing the company from ending up in a situation that poses an existential threat.

Contact

Thomas Hösle (author)
Steinbeis Entrepreneur
Steinbeis Consulting Center Prevention and Management of Crises (Pfullingen)

Holger Hagenlocher (author)
Freelance Project Manager for Communication
Steinbeis Consulting Center Prevention and Management of Crises (Pfullingen)

217079-40