Despite another remarkable employment report on Friday and continued strength in the stock market, there will eventually be a recession. One way to be ready is to build what in recent years has been called organizational “resilience” to respond when the unexpected, including recessions, occur. But resilience can be a complicated goal to achieve as all parts of the organization need to ready change and do so quickly.
But there is one element of resilience that if lacking, can make the others irrelevant: Cash.
Andrew Carnegie, the founder of Carnegie Steel (and forerunner of US Steel) once remarked that “A man with money in a panic is a wise and valuable citizen. (In an earlier time, “panic” was the name severe recessions that usually culminated in “runs” on then unregulated banks with no deposit insurance and no Federal Reserve to step in.) Bill Gates “From the day he started Microsoft, …insisted on always having enough cash to in the bank to keep the company alive for 12 months with no revenue coming in.”
Such practices helped make both men among the richest in the world. You may not be able to match Gates’ 12-month cash reserve, but a little liquidity planning can significantly up your odds of surviving a recession, downturn, or other unexpected event.
An article in Chief Executive Magazine offers a seven step model, including a “CLO” that will help you in “Putting Cash First: The Secret to Business Resilience.”
