Riding the storm
In a world in which the global economy has been buffeted by relentless headwinds, financial performance remains arguably the number one priority for businesses today.
Sarath Ganegoda says: “An increasingly challenging operating environment has meant that businesses are grappling with high interest rates, expensive borrowing and tight rupee market liquidity. Under such circumstances, a business still needs to create and share value across its products and services, as it typically contributes to the wellbeing and livelihoods of stakeholders.”
A sound financial position, a healthy balance sheet and the appropriate leverage are key to ensuring the creation and sharing of value, he notes.
The path to target achievement and growth is clear, according to him: “We should not disrupt our supply chains to customers including global buyers. It is important to meet deliverables at any cost, even at lower margins, in overcoming the current challenges.”
Business continuity is critical, which includes ensuring the stability of supply chain partners. Raw materials must reach factories on time, staff must be in attendance for production to proceed, and finished goods must reach ports that are manned and operational.
Ganegoda opines that “a positive attitude is everything. A challenging environment can be an opportunity to garner new market share. Businesses must engage with relevant authorities, and advocate for the right policies that will support a fair, sustainable and conducive operating environment.”
Yet, some organisations thrive more than others. So what qualities must companies possess to thrive in the midst of the challenges that Sri Lanka is facing at this time?
“Companies need to be proactive in the face of challenging environments. Proper planning will assure the availability of raw materials and consumables, and help businesses withstand short-term disruptions. All value chain teams involved in execution must work seamlessly in synchrony to meet the highest standards of quality even in the most difficult times,” he emphasises.
Ganegoda continues: “Inculcate agility and flexibility in ways of working, so as to respond to market changes and stay ahead. In this way, companies can continue to honour commitments to customers and service markets even during a crisis.”
In challenging circumstances, it could become difficult to balance other environment, social, and governance (ESG) considerations with financial performance.
On the contrary, Ganegoda explains that “ESG must function as a guiding light and compass to day-to-day decision making which, once integrated into strategy, will play a greater role in navigating tough times and delivering performance. Empowering ESG champions to effectively implement related actions as a matter of routine will facilitate this.”
Going the extra mile to foster community relationships, and develop a diverse, inclusive and socially and environmentally conscious workforce, can support business continuity. During an economic downturn, ESG considerations will support factories to be fully operational, and help employees and the wider community to stay engaged.
“For export manufacturing industries, this will help factories operate at capacity sans disruption, which may well be the competitive advantage that global buyers are looking for. Investing in ESG will also help position an organisation with global market stakeholders who value sustainability, compliance and responsible production,” he notes.
Expanding on the key tenets for ensuring an organisation’s sound financial performance, Ganegoda urges: “Avoid overtrading, and focus on liquidity and profitability. Organisations need to adopt the right capital structure including sustainable gearing levels and cost of capital.”
“Even under the most stressful conditions, an agile organisation operating at optimum capacity, backed by smart people with the right mindset, could ensure a sound performance and create value for all stakeholders,” he adds, in conclusion.