For most organizations and small businesses, in particular, 2020 was a challenge, and those organizations that were able to pivot and adapt were best suited for surviving those difficulties. Some of the challenges that were faced came from the black swan event that is the COVID-19 Pandemic, while others may have been ingrained within the business operations and structure.
The task of leadership is to have a plan in place for routine activities, and more effective leaders will create contingency plans for the inevitable challenges that will occur. The tricky part is designing a plan for your organization to transition roles and strategies when things arise suddenly and unexpectedly.
What Is A Black Swan Event?
A black swan event rarely occurs but has severe consequences and is nearly impossible to predict prior, though in hindsight is perceived as evident. The 2008 Housing Crisis that occurred is another such event.
The problem with traditional forecasting models is that they struggle to predict the occurrence of a black swan event that can cause combustibility and volatility to markets and economies the world over.
How Can Leadership Adapt
The theory of black swan events was first described by finance professor and writer Nassim Nicholas Taleb in 2007, just prior to the housing crash. In his book, Taleb claims that leaders from business to government should equate the risk of a black swan event as it is both unpredictable and catastrophic.
According to Taleb, the solution is to develop contingencies that allow your organization to adapt and pivot. An organization’s strength is its flexibility is the defining characteristic of survival.
As the COVID-19 pandemic of 2020 spread throughout the world, it caused many countries to put a pause in social life, affecting large and small businesses alike.
Businesses that relied on face-to-face interactions such as retail and restaurants suffered the most, but there were impacts broader than those industries. As the workforce also suffered, so did consumer spending on things other than necessities, further impacting economies.
In order to survive, restaurants were forced to choose one of three options.
- Close down until there was a time it’d be safe to open.
- Stay open only modified as public health ordinance would allow.
- Find creative options such as delivery and take-out as the primary business model.
Even if a restauranteur chose to modify their operation, there were still multiple challenges to survival. Part of the restauranteur’s challenge was keeping operational expenses low while staying open. With many delivery services charging upwards of a 30% fee for their delivery and rent, payroll, and utilities, the business model has serious flaws.
With many small businesses barely scraping by, the fear is that the rise of business closures and bankruptcies are about to surge drastically.
Is Work From Home Getting On Your Nerve?
The Looming Crisis
There are many reasons why the trend of bankruptcies hasn’t been as dramatic yet as initially feared. Some may be due to enhanced unemployment and the Payment Protection Program, or PPP, that may have kept some afloat. As these programs run-out, the lost stimulus may be creating an environment rife for bankruptcies to surge.
The potential surge of looming bankruptcies has the industry buzzing. For some, they see the opportunity to work with organizations that need bankruptcy protection as a good thing. In contrast, others are worried about the court system’s impact as there are simply not enough bankruptcy judges for the looming crisis.
Suppose you are a leader of an organization or business that needs to protect itself in case of bankruptcy. In that case, you can look around at the growing bankruptcy lawyer marketing ads that are populating online, or you can find direct assistance through a smarter search.
You can reach out to your current legal team for referrals, search Google and go through the rabbit hole to find a good source, or research through social media and review sites such as Yelp to see some that come highly recommended.
There’s no shame in bankruptcy protection, especially in light of the black swan event that the COVID-19 pandemic caused worldwide. Effective leadership will understand the value of protecting assets and reducing debtors’ obligations to restructure and survive the difficulties right now.
Lessons Learned
The biggest takeaway is that leaders of an organization need to plan for the unknown and not get too bogged down in traditional business activities. While the black swan event is unpredictable, creating a flexible business operation allows the organization to pivot and adapt in the best structure and strategy to develop.
