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Crisis Management

If the organization is facing a financial crisis, strong management is needed to take control of the situation by performing the following tasks (use links to navigate page):

Cash Management

Develop a basic monthly cash flow budget that shows anticipated income and expenses for each month. Ideally, this budget will be informed by three to five years of historical monthly data so that seasonal variations can be identified (e.g., property tax revenues remitted during a certain time of year, increased overtime expenses in public works during snowplowing season, etc.). A cash flow budget allows you to examine year-over-year trends in the budget, control spending more precisely, and anticipate the need for bridging strategies such as short-term borrowing.

Create Predictability

Financial crisis is often characterized by surprises – unpleasant ones.  The manager’s job is to stop surprises so that longer-term plans can be made. Three practices to follow are:

  • Disclose and report on problems. Let others know about potential future problems before they become a crisis.
  • Adhere to promises. Recovery requires teamwork. Organization members must be able to rely on each others’ commitments. 
  • Develop a monthly variance analysis model. Monitoring actual spending against monthly budgets will provide greater insight into where budgets may be going outside of established parameters. Here is an article on variance modeling.

Create accountability

Distressed organizations may not have well established practices for determining accountability for financial performance and for achieving service objectives. Prioritize the actions needed for recovery and made individuals responsible for their execution.

Communicate

Communication is a primary leadership task, but it is so vital to recovery that it should also be considered as part of management. A well designed communication plan should be created that provides reassurance and hope to stakeholders, but that also clarifies and reinforces new responsibilities under the recovery program.

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