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Rapid economic disruptions- 8 Key lessons for Indian SMEs

A business is prone to economic ups and downs but as long as it is armed with the appropriate financial tools, it will flourish. No business is free from risk; especially after the economic slowdown of 2009, financial uncertainty has become more frequent. In such scenarios, it has become imperative for SMEs to prepare and keep a strategy in hand to deal with troubled water.

With the current economic condition, we can’t anticipate what will happen next. Thereby, it makes more sense to keep a contingency plan ready for any financial emergency.

To help you out, here are some ways to prepare your business from rapid economic disruption.

Insure your business

From the day an entrepreneur establishes his/her business, they expose themselves to multiple roles, challenges and goals, be it economic or personal. At Aviva, we understand this and offer solutions for your business security. Aviva’s Wealth Protection plan for SMEs helps business owners to work towards their prosperity. Every entrepreneur needs money to grow their business. While you are going the extra mile to run the business, you expect your money to grow and available when required. Isn’t it? Our investment-oriented insurance plans offer business owners the opportunity to create wealth for the future along with a comprehensive life cover. You can opt from the following alternatives:

  • Traditional life insurance plans with guaranteed or non-guaranteed returns
  • Unit Linked Insurance Plans with the flexibility to make your own investment decisions for long term growth.
  • Combination of multiple policies to fulfill your investment objectives for specific life goals

An insurance tool for SMEs will not only guide you to financial security but also let you nurture your business as an asset. Having adequate insurance also helps minimize your losses and evade the disastrous aftermath of a financial crisis.

Safeguard cash

One of the frequent advice given by financial experts to SMEs – conserve cash. It is always a good idea to save some cash for rainy days. Whether it is personal or business finance, having some cash at hand is a wise step. Setting aside cash means wherever possible reserve cash your business generates. Keep them as capitals to ensure that you do not spend it unless you really need it. Stocking some cash also enables you to take a thorough look at your costs and make sure that no frivolous expenses are making a hole in your pockets.

Curb cash flow

Maintaining good cash flow is another imperative step for your business to run it successfully. If you have large receivables and less cash, improving cash flow doesn’t make any sense. However, it is important that your customers and debtors are paid on time and there is no issue related to unpaid invoices. Besides, cash-flow also includes efficient management of payments – paying your vendors on time. Evaluate your operating expenses to cut down where required.

Make your resources flexible

Don’t lay all your eggs in one basket. Keeping your best resources in one place may end up costing you risks you wouldn’t want to take especially at the time of a financial crisis. To save yourself from this situation, train your staff to be flexible so that they can take over the operations if your office shuts down. In addition, don’t forget to get key man insurance to insurance your best resources. Likewise, make certain that your suppliers are geographically spread around the town/country/globe so that an economic crisis couldn’t affect you.

Analyze your assets

As already mentioned above, your liquid assets are going to be the biggest help in case of uncertainty. Try to maximize them. As the value of your cash accounts doesn’t decrease with the market, you can withdraw the money without fear of penalties.

In addition, train your employees as well as the human resource department about an impending disaster and how to behave at that time. It will help them to keep their cool if a financial disaster strikes.

Line of credit

Getting a line of credit is boon for businesses, especially small ones. Also known as overdraft facility, line of credit is business loans with an upper limit of the loan. The borrower can withdraw any amount within the upper limit at any time and the interest is charged on the amount the borrower has withdrawn not on the entire amount at their disposal. Such facilities enable a business to overcome a temporary shortfall in cash.

Diversify your business

It is not a direct way to ride over troubled times, but diversifying your business makes sense. It ensures that you are not dependent on one line of business which can be affected by a slowdown in the economy. Having a diverse resource of avenues keeps you stable even during the economic crisis.


As a business, holding on to inventory means locking your working capital. If you perfect the art of not holding on more than you need, your business stays safeguard during the economic crisis. For instance, if the economy slows down, the demand for your product decreases along with your inventory requirement. Not reserving too much will make sure that not too much of your money is stuck.

The financial world is unpredictable and so it is wise to have a safety net that saves your business from falling into any crisis. The only way you can save yourself from disaster is by being vigilant and take the required step when it has not arrived. As long as you are willing and ready to deal with the temporary setbacks, your business can survive.


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