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Inflation-proofing your business

Smart moves to make today to reduce costs, manage pricing, and manage capital structure to thrive amidst inflation

Helping thrive through inflationary pressures

With inflation at its highest level in 40 years, few executives and leadership teams have navigated an entire enterprise through an inflationary environment. Amidst massive shifts in digitisation, cloud computing, the workforce, capital formation, and globalisation–not to mention pandemic and war-related disruptions–yesterday’s playbooks won’t serve tomorrow’s economy.

Key actions resilient leaders are taking today to address inflation

Market disruptions lead to changes in transactional flows, functional profile, geographical footprint, digitisation, changes to existing models and costs.

It has become necessary to identify supply chain risks and potential disruptions, and fine tune your third-party supply chain resiliency to ensure continued execution with timeliness and quality.

Organisations need to improve operational costs, process efficiencies, and organisational agility associated with their third-party relationships—all while gaining greater control over related risks.

It has thus become imperative to fortify your enterprise against disruption by identifying supply chain exposures and developing corrective actions.

It is vital to develop inventory strategies to buffer volatility and risk. Look at establishing multi-tier supplier network visibility to risks.

Deloitte’s range of services in supply chain optimisation enables organisations become resilient in the wake of change by bypassing market disruptions

  • Supply chain & network operations
  • Third-party risk management

Outsource any processes which are not core competencies and differentiators for your business to more effective, lower cost alternatives

At times of heavy financial volatility, it makes sense for businesses to achieve operational efficiency and cost reduction by outsourcing processes which are not core competencies

Businesses need to determine whether in-house services are performed at a fair-price, to ensure the processes are carried out in the most cost-effective way.

Setting the right foundation during the outsourcing strategy, negotiations, and transition can impact the outcome greatly in terms of price and service delivery.

Aligning elements at every phase of the strategy, negotiation, transition, and vendor management can help deliver the services effectively at a price that is both advantageous to the buyer and remain profitable for the vendor

Deloitte works with many outsourcing vendors worldwide and stay current with their capabilities and performance, thus helping clients outsource processes to these vendors ensuring cost effectiveness

  • Restructuring business functions and outsourcing
  • Third party risk management

Refinance existing credit lines to lock-in rates during inflation volatility

To mitigate inflation volatility impact, it is crucial to have a medium and long-term approach to support variable cash needs. This may include debt and funding, as well as assets disposal or acquisition.

Debt restructuring require analysing liquidity headroom and debt-servicing ability, including reviewing short-term cashflow forecast, reviewing existing loan agreements and analysing balance sheet

Cashflow forecasting is needed to understand debt-servicing ability and to perform recovery analysis under different scenarios.

Businesses need help to formulate a debt restructuring plan (rescheduling repayment, reducing interest payments, debt-to-equity swap, etc.), together with plans on operational turnaround, asset disposal and capital injection.

Significant technical, model driven process and planning is necessary for identifying alternatives, communicating impacts and optimising tax results for debt restructuring transactions

Deloitte can refinance existing credit lines and provide debt restructuring for businesses to reduce volatility during disruption

  • Corporate Finance
  • Turnaround & Restructuring

Finely tune working capital, including taking advantage of the arbitrage between receivables and payables to generate additional liquidity

During volatile times, it is particularly important for organisations to identify and release cash tied up in working capital.

In a time of rapid change, shorter-term cash forecasting (e.g. 13-week cash-flow) become more important, especially to and test/challenge assumptions to be prepared in case of a disruption.

It is important to evaluate and possibly expand lending arrangements in preparation for a downturn in the form of line of credit, interest rates, length/term of loans

How can you restructure (e.g., capital planning) or suspend certain practices (e.g. dividend distribution) in the face of a downturn?

Optimising the portfolio along with use of dynamic risk-modelling tools have become important as they can provide risk-resilient guidance to crisis response capital allocation decisions

Deloitte’s range of services and strategies to manage capital can help protect its clients against cash shortfalls, and finely tune its working capital to effortlessly function in case of a disruption

  • Capital Management, Liquidity and Treasury Risk

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