Recession Survival: How Procurement and Finance Teams Can Prepare for a Recession
Company leaders across industries are looking at the macro environment with concern:
- With persistent inflation and rising rates, consumers are already squeezed and changing their spending habits.
- Inventories are backing up and orders to manufacturers are dropping.
While some organizations are considering layoffs, many executive teams would rather refocus their investments and increase efficiency. It’s a shift from focusing predominantly on growth to a balance of growth and profitability.
Short-term strategies to survive a recession
In our previous post, we talked about the many ways that Business Spend Management can help companies quickly deliver savings and improve profitability in the very near term. Some examples:
- Approvals — Effective spend pre-approvals lets companies avoid unnecessary spending as they pivot their budgets and investments
- Sourcing — Extending the reach of sourcing helps to mitigate inflation in the supply chain
- Payments — Optimizing payments with card programs and early-payment discounts make working capital more efficient
While there are significant opportunities to optimize spend and cash at many companies, better managing business spend helps leaders with their longer-term concerns as well.
Long-term strategies to recession-proof your procurement and finance
Uncertainty in global markets, the domestic economy, and capital markets is likely here to stay. The best companies will not only reevaluate their investments and cut unnecessary spending today, but also put the right processes in place to mitigate risk and sustain a cost advantage over their competitors in the long run.
New research indicates that 78% of CFOs will increase or maintain enterprise digital investments through 2023, even if inflation persists. Expectations are that digital investments can be funded by efficiency savings, and that automating the back office will help to retain scarce digital talent.
Monitor risk and ESG performance during a recession
The best companies recognize that they must also invest to address changes in the risk environment. From continually evaluating suppliers for signs of distress to staying on top of changing ESG and other regulations, companies must invest. But, only 30% of companies have a supply risk solution in place today.
What should CPOs be thinking about now?
The best companies will make strategic investments to improve agility. Companies must look at their supply chains to identify over-reliance on any single supplier or geography, and reconsider their design priorities to prioritize agility as well as cost savings.
Recently, Coupa CPO Michael Van Keulen and Ardent Partners founder Andrew Bartolini took a look at the surprising discoveries made by Ardent research about procurement priorities. In this webinar, they share those insights as well as a deeper understanding of how Business Spend Management can help to address the short, mid, and long term issues on the mind of leaders today. Check it out in the link above.
To learn more about cost containment, see our article on why getting a handle on your costs is more important than ever.