There’s no doubt about it—business communities are grappling with intense economic pressures. Insolvency levels have reached an all-time high, and small to medium-sized enterprises (SMEs) are bearing the brunt of this storm. From rising costs of goods and services to supply chain disruptions, no industry is immune from the financial strain. For board directors, this environment calls for vigilance, proactive leadership, and financial acumen.

Understanding the Urgency: Stay Across the Financials

When businesses face economic challenges, it’s imperative for board directors to stay completely informed about the financial state of the organisation. This isn’t a time for waiting and watching—it’s a time for getting on the front foot. As a board director, you need to have clear and comprehensive answers to questions like:

• Where do we stand with our balance sheet?
• What do our financial forecasts look like?
• How healthy is our cash flow?
• Are our suppliers delivering on time, and are payments being managed efficiently?
• Do we have any looming legal or financial issues?

Being across these details is not a luxury; it’s a necessity. In many cases, waiting for the next scheduled board meeting to review financial reports isn’t fast enough. You must implement mechanisms that keep all board members informed with real-time financial dashboards and up-to-date reporting. Informed decisions are the only path forward in uncertain times.

Act Early and Get the Right Advice

If your business is facing any form of financial difficulty, it’s crucial to act early. This means reaching out to financial experts, accountants, or legal advisors as soon as warning signs appear. In times like these, complacency can be devastating. Every board should have processes in place to regularly “war game” various scenarios and be ready to adapt to the changing landscape.

There are businesses right now that are technically insolvent or on the brink of insolvency. As a board director, you must identify these warning signs early. This includes monitoring cash flow problems, negotiating with key suppliers on terms of payment, and addressing overdue accounts. A key part of your role is to stay proactive and never allow the business to drift into crisis mode without exploring every possible avenue to correct course.

Hands-On Leadership: Stepping Up in Times of Crisis

Being a board director during tough economic times requires a hands-on approach. This isn’t the time to sit back and hope for the best. When I’ve served on boards facing financial issues, I took proactive steps—whether it was finding new capital sources through my network or negotiating new terms with suppliers to navigate through difficult periods.

Support for your executive team is also crucial. They are the ones in the trenches, dealing with the day-to-day impact of economic pressure, and it’s essential that they feel backed by the board’s strategic decisions and input. That means pulling in the right expert advice, being ready to make tough decisions, and leading from the front.

Anticipate the Domino Effect

Even if your business is performing relatively well, you cannot afford to be complacent. The ripple effect of one company’s insolvency can spread rapidly across industries. If key players in your supply chain or customer base are under financial stress, it could directly impact your cash flow, collections, and overall business health.

This is why you need to continuously monitor not just your own financials, but those of key partners and stakeholders. It’s critical to maintain open lines of communication and anticipate where potential weaknesses or disruptions might arise.

Be Prepared, Be Accountable

Finally, the responsibility of a board director during these challenging times is not just to oversee, but to actively engage and contribute. Every director must be across the brief—there can’t be any disconnect or confusion in understanding the organisation’s financial status. War gaming scenarios, keeping open communication channels, and ensuring everyone on the board shares accountability are key components of navigating economic turmoil.

Final Thoughts: Lead with Vigilance and Proactivity

The reality is that we’re facing one of the toughest periods for businesses across all industries. But this doesn’t mean burying your head in the sand or being paralysed by fear. As a board director, you have the power to pull the right levers, make informed decisions, and guide the organisation towards financial resilience.

Stay across the financials. Anticipate the ripple effects. Seek advice early. And most importantly, act with vigilance and proactivity to bring your organisation back from the brink and build a buffer for the future.