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By Rakis Christoforou BBA, CPA/ABV/CFF, CGMA, ACFE
The present economic and financial crisis is gravely impacting business volume and causing far-reaching changes in numerous management variables for most companies operating in Cyprus. Under these circumstances companies concentrate on down-sizing staff, cutbacks in strategic plans, and sometimes indiscriminate cost-cutting.
Despite the fact that some of these measures may indeed be necessary, companies can also implement an alternative response in the opposite direction. The current situation is one of the most appropriate in terms of boosting Business Transformation processes. It is the ideal time to prepare for the future, consolidate projects, always with a watchful eye to the present of course, and to come up with solutions that create value. These critical times open the door to strategic opportunities for businesses operating in Cyprus, including international clients.
Following are some of the Transformation Processes that businesses must explore
1. Employment of highly qualified professionals
This is the right time to reinforce company structures by incorporating highly qualified professionals, with relatively lower cost than ever before, who would most probably be impossible to hire any other time. Cyprus is unique in this respect because there is an abundance of professionals in almost every area.
This unique advantage that we have as a country must be promoted much more by all decision makers both in the private as well as the public sector. It is also a source of utmost interest for international firms looking to extend their operations abroad.
2. Improvement of relationships with clients and other key agents
It is requisite to appreciate the nature of each relationship and to identify whether there are distinct groups that need to be approached differently. It is highly probable that through this process we discover underexploited opportunities which would allow us to determine new lines of business. Although this is an essential exercise at any point in the economic cycle, it becomes much more important in times of crisis.
It is of great importance for all companies to invest now more time with existing key customers in order to win back their trust and/or strengthen their relationship.
3. Mergers, acquisitions and reorganisations
In Cyprus we have many small and medium size companies that operate in the same line of business and are now struggling to survive; actually we have more than we need. Such companies need to explore the possibility of merger or acquisition. Business M&As aim generally in the union of companies for the creation of more powerful and stable structure of companies. M&As can also be used for business expansions into new markets with new prospects. In many cases, mergers or acquisitions may prove to be the best solution available. International firms may also be interested in the acquisition of some of these enterprises operating in Cyprus.
At the same time internal reorganisations can restructure the internal activities of a business for greater efficiency and significant cost savings.
4. Improving operational and financial management
During times of scarce liquidity, like the present, it becomes paramount to seek out alternatives to reduce the financing needs of the company’s operations. For this reason the company must explore various avenues at its disposition for reducing the company’s long term operating needs, divesting non-essential assets, increasing company resources and cutting overhead; but should not proceed with indiscriminate cost cutting.
Times of crisis are opportune for analysing what elements are not going to be adding value in the future, and therefore dispensable, and which are vital, and must absolutely be preserved.
5. Establish a sound Risk Management Plan
Enterprise Risk Management (ERM) in business includes the methods and processes used by organisations, businesses and government in general to manage risks and seize opportunities related to the achievement of their objectives. ERM provides a framework for risk management, which typically involves identifying particular events or circumstances relevant to the organisation's objectives (risks and opportunities), assessing them in terms of likelihood and magnitude of impact, determining a response strategy, and monitoring progress.
By identifying and proactively addressing risks and opportunities, business enterprises protect and create value for their shareholders, including owners, employees, customers, regulators, and society overall.
A detailed step by step approach from “Risk Assessment to the Development of a comprehensive ERM Plan” will be addressed in a workshop organised by CIIM (Cyprus International Institute of Management) on June 18. For information contact CIIM at 22 462246.
Conclusion
More than ever, the present crisis in Cyprus demands an approach that manages short term needs while staying focused on the strategic issues for companies.
It remains, therefore, fundamental that the management of companies take the lead and maintain strategic coherence even in the most turbulent of times. This has been the key factor for companies, which not only survived past crises, but came out ever stronger.
Rakis Christoforou is the first qualified accountant in Cyprus to hold the CFF (Certified in Financial Forensics) and ABV (Accredited in Business Valuation) certifications. He is also the Vice Chairman of the Economic Crime and Forensic Accounting (ECFA) committee of the Institute of Certified Public Accountants of Cyprus (ICPAC).
