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17. Business financial approach to this global crisis

Chapter 17

BUSINESS FINANCIAL APPROACH TO THIS GLOBAL CRISIS 

                                                                                                                                           by: josavere


The first thing is to analyze the urgent need to carry out Digital Transformation according to the type of industry and make a careful review of the advances that can be implemented. In the case of construction, for example, the use of Drones for preliminary and control analyses, Virtual Reality for new projects, the Internet of Things to connect devices for different uses, Three-Dimensional Printing to build elements, Innovative Materials, control programs for administrative use and Predictive Analysis to improve efficiency and reduce costs, incorporating circular economy concepts to design the treatment of construction leftovers and user waste by reusing water, using renewable energies , home gardens and vertical gardens with nutrient production. In addition, verify that the Sustainability standards are met, using the national BIM (Building Information Modeling) strategy published by the Colombian government.

The Digital Revolution forces us to rethink many situations in which, for obvious reasons, the financial executive must act as a facilitator and objective support for the company in making decisions that allow the global recovery from the crisis generated by COVID-19, whose the impact is so serious that, without any doubt, we can affirm that it will change many patterns of human behavior and, as a consequence, it will have a great impact on the economic aspect and consequently on business administration.

For obvious reasons, the financial executive must be a facilitator and objective support of the company for decision-making in the midst of a global crisis such as the one that occurs with so much human pain, as a consequence of the COVID-19 causing the crisis of the year 2020, whose impact is so serious that, without any doubt, we can affirm that it will change many patterns of human behavior and as a consequence will have a great impact on the economic aspect and consequently on the administration of the business.

Colombia, recently admitted to the OECD (Organization for Economic Cooperation and Development), which is equivalent to a certificate of quality of public policies and opens doors to institutional investment funds; it has international recognition for its traditional behavior honest debt; much political stability; free trade agreements with the main economies of the world, which gives it the ability to predict the rules of the game for exports and foreign investment; with great power generation capacity; the tradition of respect for foreign investment; inflation highly controlled by a Bank of the Republic independent of the executive, as occurs in countries with advanced economies; Immensely respectful of the freedom of the press and of different opinions and classified as an investment grade country, it must exploit these advantages to boost its economic recovery.

Fortunately, according to the report of Dec / 2021, THE ECONOMIST, Colombia is the country that has been reactivated the most in the world of the hundred analyzed to qualify the levels of pre-pandemic. The year ends with impressive growth (9.5%) and with very good prospects for the future.

As it is a general problem, we must start by accepting the decisions of the SPECIALIZED INSTITUTIONS and then go on to diagnose the particular case with great care and make all the pertinent decisions focusing on the sector at a global level and see how we can integrate to be part of the solution. always remembering that the human resource is the most important and that the first principle of life is health.

You should start, keeping calm and the maximum state of happiness that circumstances allow, with a rigorous analysis of the effect of the situation on cash flow, which is done by comparing the initial and the resulting projection, including the repercussions by the effect of the phenomenon in question and presenting it with all the rigidity as critical as it may be. Based on this model, a meeting should be held with the entire executive team, until everyone becomes aware of the situation and accepts the figures.

The model, which must classify cash outflows into a) fiscal, b) labor, c) operating, d) suppliers e) financial, and f) owners, becomes the basic tool for periodic meetings to control decisions that are taken oriented in accordance with the guidelines of the presidency.

Nowadays, with the electronic sheet or programmatically in Excel, the operational part is very easy. The real difficulty arises in the premises for its preparation and for disciplining the entire organization and making him understand that cash flow is the true measure of liquidity and that its projection becomes a guideline that requires a lot of application to obtain the full benefit. that can be achieved with its use.

The ideas that are approved in these meetings must be specified in the expected effects with the cash flows, a variable that becomes the true support of acceptance, as the cash situation improves until we find the strategy that allows us to overcome the crisis, which becomes the maximum objective in the short term and gives us the basis to start looking for recovery alternatives in the medium and long term.

The organization's president is responsible for exercising the effective leadership that brings to fruition the rescue operation he designed with his entire executive team, whom he must keep empowered according to his style and with periodic control, supported by his board of directors.

Meanwhile, assuming with faith and confidence the plan drawn up for survival - the responsibility of the entire group - the revised financial equilibrium point must be calculated, according to the cost of capital, calculated as a dynamic concept, resulting from the decisions made in salvage alternatives.

The financial executive must take full advantage of government aid, the banks with which it operates, those that it can obtain with its suppliers and with some clients to improve cash flow, in addition to all the decisions at its disposal in relation to accounts by collect, inventories and other working capital accounts aimed at improving EBITDA.(ability to generate cash)

Thinking of the medium and long term, in addition to the Command Board, it must prepare, based on global sector indicators, discussion bases with the presidency for more far-reaching decisions such as capitalizations, divisions, mergers, acquisitions, purchases, and even the sale of the company.

To structure powerful decisions, financial theory has developed models such as the sector growth matrix, multiple correlations, , managerial costs, the holistic model of financial analysis, the valuation of intellectual capital, etc., which serve as the basis for decision making.

The recovery plan must be structured according to the new guidelines, knowing the production capacity and its level of occupation, bearing in mind the guidelines that will govern the companies of the future, seeking simpler structures to reduce fixed costs to a minimum, facilitate domestic work, use outsourcing in everything related to distribution logistics and look for mechanisms that facilitate the level of happiness of the workforce.

The entrepreneur must hope for the best with an optimistic attitude but prepare for the worst, covering himself to the maximum extent of the risks that he assumes and living intensely day by day, reinventing himself whenever the opportunity arises, objectively measuring with appropriate indicators to the case individual, and providing feedback to the workgroup, involving those who work in places other than the main plant, taking advantage of technology and advances in telecommunications, making good decisions in a timely manner. In addition to trusting your human group, you must control by verifying progress in relation to agreed goals and cultivating healthy flexibility.

As far as possible, seek exponential alternatives(capable of generating disproportionately higher results compared to traditional ones, having technology as an ally in the structure and development of the business) to increase productivity, the most powerful tool to counteract global inflation caused by COVID-19,  as seen with the emergence of companies with quite visible results globally. . The world's largest hotel company, Airbnb, offers more than 7 million lodging options in more than 100,000 cities in 210 countries, without owning a single hotel and with just under 6,000 employees. The world's largest transportation company, Uber, manages more than 3.5 million drivers in 10,000 cities in 71 countries, without owning a single car. Nubank, one of the most valuable financial institutions in Latin America, has more than 48 million customers without having a single bank branch or safe with physical money. Tesla, a company founded just 20 years ago, is today the most valuable automotive company in the world with a market value of almost $1tn dollars, more than the following 9 automotive companies together, many of them with brands such as Mercedes Benz, Ford or Toyota with decades of existence.

For decisions subsequent to the rescue plan, it is recommended as a project evaluation model to use INCREMENTAL CASH FLOWS, with a great deal of focus on feasible alternatives to increase productivity as much as possible as a strategy to deal with inflation that occurs at the global level. worldwide, considered the most regressive of taxes, caused in part by the liquidity that is required to be injected in each country and worldwide to increase the money supply necessary to recover the economy.

In the case of SMEs and medium-sized industries, it is highly recommended to analyze the problem at a group level and, when appropriate, use integral alternatives that involve multiple operations, using the divisions; Absorptions, and Mergers; Securitization and in what it touches, La Fiducia. In these cases the union institutions must exercise the leadership that corresponds to them to present to the governmental entities true alternatives of the solution, accepting the seriousness of the problem and becoming real engines to mark the recovery keeping in mind the changes that are looming in the very short term in the focus on economics and very specifically on business administration.

Let us remember the words of Pope Francis:
"God asks us to dare to create something new. We cannot return to the false security of the political and economic systems that we had before the crisis. We need economies that give everyone access to the fruits of creation, to the basic necessities of life: land, shelter and work. We need a policy that can integrate and dialogue with the poor, the excluded and the vulnerable, that gives people a voice in the decisions that affect their lives. We need to slow down, take stock, and design better ways to live together on this earth.
The pandemic has exposed the paradox that while we are more connected, we are also more divided. Feverish consumerism breaks the ties of belonging. It makes us focus on our self-preservation and makes us anxious. Our fears are exacerbated and exploited by a certain kind of populist politics that seeks power over society. It is difficult to build a culture of encounter, in which we meet as people with a shared dignity, within a throwaway culture that considers the welfare of the elderly, the unemployed, the disabled and the unborn as something peripheral to our own well-being. Being.
To get out of this crisis better, we have to recover the knowledge that as a people we have a shared destiny. The pandemic has reminded us that no one is saved alone. What unites us is what we commonly call solidarity. Solidarity is more than acts of generosity, however important they may be; it is the call to accept the reality that we are bound by bonds of reciprocity. On this solid foundation we can build a better and different human future".


Note taken verbatim from the book "Myth and reality of neoliberal globalization." (Guillen R. 2007: 234): chronology of financial crises; 1930 also called “great depression” • Rise in oil prices • Fall in financial markets. • Speculation. 1982 • Crisis of savings and loan companies in the United States. • Foreign debt crisis. 1987 Crash of the New York Stock Exchange. 1989 Junk bond market crisis in the United States. 1990 Japanese financial crisis. 1992-1993 Exchange crisis of the European monetary system. 1994-1995 Financial crisis in Mexico. 1997-1998 Asian financial crisis. 1999 Brazilian Crisis. 2000-2001 NASDAQ stock index crash in the United States; crisis in Argentina.



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Josavere