In simplistic terms, a financially resilient business will be able to anticipate, prepare for, and recover from adverse economic events while continuing profitable trading.

To successfully navigate turbulent times and ensure financial stability, adverse economic events must be navigated with care to produce the best outcome. Therefore, plans for financial resilience should encompass strategies that mitigate risk and minimise the impacts of disruption.

In this article, SWIG Finance’s Senior Business Manager, Nicola Parker, explores why financial resilience is important for businesses and the key aspects to consider when building financial resilience for your own business.

Why do Businesses need Financial Resilience?

There are several reasons why businesses need financial resilience. Mitigating risk and minimising disruption to ensure the business can operate are key reasons. However, reputation and long-term viability should also be considered when planning for financial resilience.

Being able to manage and effectively respond to economic crises will help to maintain trustworthiness and demonstrate the business’s commitment to its customers, stakeholders and employees.

In terms of long-term viability, resilient businesses will be able to recover and adapt more quickly to challenges. This will be key in retaining customers and minimising financial losses.

Developing proactive financial strategies to build a robust financial foundation will help your business withstand economic shocks and enable it to emerge stronger and better positioned for long-term success.

What are the key aspects of Financial Resilience?

The key aspects of financial resilience include:

Financial Planning and Budgeting: is essential to enable businesses to set financial objectives and goals, as well as the key performance indicators (KPIs), that will help align your team to achieve the business’s objectives. Your financial planning will also be key in helping you to make well-informed decisions. Your financial plan and budgets will need to be monitored regularly and adjusted to support ongoing financial stability.

Debt Management: maintaining a healthy level of debt is a key contributor to financial resilience. Navigating and overcoming financial challenges will be much easier if you can maintain healthy levels of debt. Do this by avoiding and unnecessary borrowing and ensuring that you make any payments in a timely manner.

Risk Management: identifying risks and managing them through appropriate insurance policies will go a long way to support financial resilience. By protecting your business from unexpected adverse events, such as liability claims or damage to your property, you can mitigate some of the risk to your insurance providers.

Diversification of income streams: having diverse streams of income will ensure that you are not dependent on a single source of income. Single income streams could make businesses vulnerable to loss if the source becomes disrupted.

Business Continuity Planning: in the event of a disaster, your organisation will need recovery plans in place to ensure it can continue to operate and process transactions. To minimise the impact of disasters, your business will need to establish disaster recovery protocols, including backup systems, to ensure it can continue to trade.

Regulatory Requirements & Compliance: Aside from the penalties imposed on businesses that are non-compliant, ensuring that your business complies with all applicable regulations and laws will help your business maintain customer confidence. Losses in customer confidence directly correspond with losses in revenue, and this can be difficult to bounce back from.

Financial Literacy: is critical to making logical financial decisions. To ensure financial resilience you will need to understand financial concepts and be ready to adapt if financial circumstances change. To be financially literate, you’ll need to understand the current economic landscape, including trends, investment opportunities and financial strategies.

Financial Monitoring: is another key component of financial resilience. If you are regularly monitoring your financial activities, you’ll be able to easily identify any issues and resolve them before they become bigger problems. It will also ensure that you keep on track with your KPIs, objectives and overall goals.

Emergency Savings: an emergency fund could prove to be critical, should your business face any financial setbacks or unexpected expenses. Aim to have an emergency fund that covers up to 6 months of trading. This will ensure your business can continue trading during difficult periods.

Financial Resilience Transformation

Becoming a financially resilient organisation won’t happen overnight; many pieces of the jigsaw puzzle need to be in place before a business can be truly financially resilient.

Building financial resilience will take time. However, it is worth working towards financial resilience to ensure that your business can quickly recover from disruptions.

In our experience, those businesses with strong financial leadership are often those that are the most resilient.

Final Words

Navigating short-term and long-term disruption is challenging for any business. If your business is experiencing temporary setbacks that are affecting its financial resilience, a business loan could be a useful tool to help you get back on track.

We would always recommend that any businesses looking to borrow should speak to their bank first.

For those businesses that are unable to source funding through mainstream lenders, your local Community Development Finance Institution (CDFI) may still be able to help. CDFIs, like SWIG Finance, exist to support businesses that are neglected by traditional finance providers.

At SWIG Finance, our business managers work with you to help you prepare your application, providing support and guidance throughout the application process, and for the duration of the loan.

If you would like to know more about SWIG Finance, please visit our website, or contact us on 01872 227 930.