Home topics finance finance-cash-flow Cashflow Managing Cashflow Stress testing your business to survive tough times Michael Fingland May 22, 2009 The global financial crisis has dramatically increased the speed at which business conditions can change, forcing many business owners to rely more than ever on risk management strategies to protect their businesses. Stress testing a business can be an effective way to ensure a business survives unpredicted change . Many companies are getting stuck in the current economic climate because they are not prepared for change. They start working on the problem after it has already arisen. By the time their plan of attack is implemented, the impact has already caused serious damage to earnings, cash flow and the overall viability of the business. Businesses need to understand first how they would be impacted by an economic downturn on a ‘worst case scenario’ basis, and then take appropriate defensive action. Regardless of the position a business is in, it’s essential to undertake detailed financial modelling and “what if” scenario testing to gauge how various sudden changes in market conditions will affect the business and more importantly, what initiatives management can deploy to combat these challenges. Organisations should be focusing their attention on stress testing their business to minimise risk. There are many benefits to be had from stress-testing. These can include: Enabling a business to react quickly if conditions change suddenly Forcing a business to ask ‘what if’ and creating strategies to deal with given scenarios to minimise risk and