The European Central Bank; following its promise to bring inflation back to its 2% target in the medium term; has raised interest rates again to 4.25%. With this 25 basis point increase; we have now seen nine consecutive rises and reached the highest level since 2008.
With rising prices and constant changes facing the market; it is essential for companies to consider how to deal with such a changing environment in order to ensure success despite the challenges that may arise. Therefore; at ERA Group; we would like to highlight three levers for mitigating risks and planning for a successful year.
· Liquidity and Cash Flow: Maintaining a steady cash flow is essential for smooth operations; especially in times of uncertainty. Right now; you may need to do more with less. Increasing accounts payable should be a central strategy in your working capital optimisation. Focusing on freeing up cash and reducing your inventories can be key. Companies must establish effective capital management strategies that allow them to maintain sufficient liquidity to deal with unexpected situations.
· Supply chain: Having a reliable and secure supply chain is essential to achieving objectives and maintaining relationships with customers and suppliers. This is another critical aspect that can be affected by unexpected changes; such as production disruptions or logistical problems. Companies should diversify their sources of supply wherever possible and establish contingency plans to ensure the continuity of the supply chain; as well as make them more resilient by reducing the number of steps or improving their visibility.
· Supplier management: Suppliers play a crucial role in the operation of a company. Maintaining strong relationships with suppliers and establishing open communication can help mitigate the negative impacts of supply chain problems. In this regard; it is important to assess both price and quality and the relationship with them; as forecasts indicate that prices will continue to rise progressively; so evaluating; seeking interesting alternatives or renegotiating conditions with existing suppliers can be a smart strategy.
Does your organization devote time to these issues? Contact us
