This toolkit will help business leaders formulate or update their financial contingency plans with tactics applicable during the COVID-19 crisis and beyond.
As the COVID-19 crisis evolves, colleges and universities are under acute pressure to realize savings and balance unprecedented budget shortfalls. However, a purely reactionary approach to financial challenges can leave institutions even more vulnerable. Amid immediate pressures, leaders may be tempted to prioritize tactics that can be implemented most quickly—not those that promise the most savings. Rather than reacting to tightening budgets with one-off labor cuts, leaders should create a contingency plan that proactively identifies and sequences savings opportunities based on potential financial scenarios.
A financial contingency plan has three basic elements. The first element is a metric to measure and project an institution’s financial health. The second element is defined thresholds or triggers that signal varying states of financial health. The third element consists of cost containment tactics triggered by each threshold to improve institutional finances.
Create tiers of actionThe first critical step in creating a financial contingency plan is to identify potential cost containment tactics and organize them into separate tiers. The tiers specify which tactics the institution will pursue immediately and which it may pursue if financial conditions worsen.
Commonly, a plan includes three tiers. The first tier includes tactics to pursue immediately. The second tier includes tactics to implement if finances worsen. The final tier includes the emergency or “doomsday” tactics, if required.
Explore a list of sample first-tier tactics for a financial contingency plan, such as:
Freeze hiringFreeze travelDelay new capital projectsExplore a list of sample second-tier tactics…