Dos and don’ts in 2009

Author: Petr Smutný
Publication: Czech business weekly
Date: 1.12.2008
Page: 25

What Czech managers’ fear

Excessive public deficit. “There is a risk the weak governments, both Czech and others might be lured to spend more of the public money to help the economy. This might theoretically lead towards an excessive state budget gap,” Šichtařová said. Another peak of the Czech crown. “If the crown still goes up, it’ll be very negative for us,” Straub said. Loss of trust. “We fear that our clients and partners lose trust in the future and behave ‘paranoiac.’ This would increase the crisis effect and most probably lead to a deep recession period,” Neves-Štrunc said.


PwC’s Smutný said that according to the well known rule “cash is the king and time is the queen” companies should not underestimate the management of cash flow. “In the short term, the company can sell goods and products on the condition that it receives more than pay for inputs, for example the selling price is higher than variable costs. The crisis will also affect customers who may also get into liquidity problems and do not pay claims on time. This can lead to the deterioration of payment discipline of customers and then to the growth of accounts receivable and inventories, which create back pressure on the cash flow of the company,” he said. While 2008 was a year of managing foreign exchange issues, next year liquidity will be the main topic. “We see two strategies:

Defensive: reduce useless costs (investments) that do not bring the immediate effects (such as marketing, research);

Offensive: try to utilize the fact that other companies reduce expenditures (investments). Another area for cost savings in particular through the remedy system is the area of purchase, management of working capital, the area overhead costs and area of savings on investment spending," Smutný said.


Don’t panic Don’t save irrationally Take 2009 as a “normal downside of the economic cycle,” Šichtařová said.

Who will survive the crisis?

According to Smutný, the survivors will be businesses and managers that “are able to rapidly and objectively assess the current situation within their companies and evaluate whether their companies have been under the crisis. When quickly assessing the current situation, they will have more time to avert declining sales and margins. The winners will be those who prepare a medium-term business plan, including an assessment of negative impact and sensitivity on inputs of energy or interest rates which prove the viability of the company in the medium term. “The sooner they start to address the crisis, the greater the chance and more options they have,” he said.