How to optimize costs during a crisis?

Not all cost reductions are beneficial to a company. In the actual turmoil like, all companies should have an exhaustive deep dive on their costs structure. However, this cannot be done hastily as some cost reduction could negatively affect the business and have an overall negative effect. Management needs to decide which initiative to pursue.

The decision framework proposed by Gartner (see reference at the end of the post) is an excellent tool to work at the management committee level as the selected cost reduction initiative must be supported without restrain by all managers. In order to do so each initiative will be assessed following 5 angles:

  1. Potential financial impact
  2. Business impact
  3. Time requirement
  4. Organizational risk
  5. Investment requirement

Each company should make its own assessment as the same initiative could have significantly different business impacts from one sector to another or could have different organizational impacts depending of the company culture.

As always, there is no one size fits all and it is our duty in Finance to tailor-made this approach to the context of the company. Moreover I would add additional axis to the Gartner framework in order to include CSR aspects which must be key when sculpting the recovery of our economies.

https://www.gartner.com/smarterwithgartner/how-to-pick-your-best-cost-initiatives/

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