As I see it, those organisations that survived 2008 are only going to get through 2009 if they manage cash really carefully. Cash management is only useful if it takes into account the full range of possible risks faced by the organisation. Simply hanging onto cash, not paying creditors and avoiding all expense and investment, is not the same as managing cash – because, even in a recession, there are business opportunities and growth prospects and those organisations that manage their cash effectively are able to prepare themselves to handle the range of possibilities – both on the upside and the downside.
Effective risk management tends only to happen in well-governed organisations; where risk management has failed (such as in our banks, the Big Three auto manufacturers and so on) it doesn’t take long to spot that their governance framework must also have been ineffective – not least if the organisation has had to beg for a support package from central Government.
I think that governance and risk management are going to be key themes in 2009 for the world’s better organisations; for all the rest, those for whom governance is just about box-ticking, 2009 will bring much more box-ticking, because regulatory authorities are not going to allow a repetition of 2008’s ‘perfect storm’, which means that compliance requirements are going to increase.
Of course, box-ticked governance will still be the poor relation of more constructive, fully engaged governance and risk management models that boards – under the guidance of an independent Chairman – deploy to manage the risks faced by the organisation in the difficult economic climate we all face this year.
I kind of hope that those organisations that eschew proper governance will go bust quickly, and get out of the way of the rest of us.