In India, we prefer to coin our own terms. We do not like “privatisation”,

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we “disinvest”. We do not like recession, we like to believe that we are entering a phase of “growth moderation”. Some of us truly believe that “India is decoupled from the US economy” and that the desert storm will blow over if, for now, we bury our heads firmly in the sand.

But as Deng Xiaoping said, “We must seek truth from facts.” The West, which has been the engine of growth, is in recession. The financial situation in the US has developed into a deep economic crisis. Predictions indicate that the US and the UK economies will actually shrink by around a percentage point in 2009. Europe and Japan will both have negative “growth”.

The fast emerging BRIC countries will have considerably lower growth compared with the previous year: Brazil 2.9 per cent (5.2 per cent), Russia 2.9 per cent (4.2 per cent), India 5.5 per cent (6.8 per cent) and China 8.2 per cent (9.8 per cent). The oil-producing countries have also been affected by the sharp decline in oil prices. Dubai is feeling the chill. The construction cranes are fewer and shopping malls are experiencing lower footfalls. Most important, consumer confidence is at its nadir.

On account of the meltdown, CEOs are keeping awake at night with multiple challenges: conserving cash, cutting costs, reducing workforce without scaring talent, managing expectations of stakeholders and simply keeping afloat. In reaction to a worsening environment, some companies are taking knee-jerk actions that will hurt the longer term well-being of the enterprise. It is vital to fix the current crisis swiftly and in a determined manner. But make sure you don’t lose sight of the future preparedness to grow when the crisis is over.

Well-led companies are creating scenarios for different eventualities. The nightmare scenario is the one in which the CEO and his team are completely unprepared and caught napping. Unless scenario planning is thoughtfully done, companies will not be well-equipped to tide over the present crisis.

There is a silver lining in the dark cloud though. In normal times, any change is difficult to sell. And a dramatic change is nearly impossible to drive home. In times of crisis like this, we have an opportunity to take tough decisions and implement them fast. Where appropriate: create a war room. The current economic situation provides a unique opportunity to break silos and fiefdoms, and foster greater teamwork. If deadwood and non-performing assets need to be shed: do it now. If drastic restructuring is called for — do not wait for discussions ad nauseam.

All companies need to keep a sharp eye on the latency of their cash-to-cash cycle. Many companies in India do not have an optimised treasury management system. The reasons are many: from historical legacies to fiefdoms to fragmented organisation structures to archaic technology platforms and sometimes a combination of these. In times like this Cash is King again. The top team must focus on cash and treasury management. While fixing fragmented systems that create cash management inefficiencies, it is also an opportune moment now to seek generation of cash by divesting idle and under-performing assets.

Now is also the time to take a hard look at customers. Customers that are unprofitable, risky, slow to pay and fickle should be carefully reviewed for selectivity and retention. In many cases, companies are often mesmerised by “big name” bully customers. These customers often set impossible delivery schedules, contribute very little to turnover and even less to profits and cash flow. Now is the time for tough love. The top team must look at how important and how strategic a customer is. Many companies in India go by hunch or gut-feel. Several of these have implemented sophisticated enterprise applications. This is the time to extract a return from these investments. Business intelligence tools can mine customer databases to provide insights on our customers for tough and timely decisions.

There has been a slowdown in M&A activities. But a volatile environment invariably engenders market consolidation. There will be unique opportunities for companies who have a strong balance sheet and are in cash. Such companies can now pursue a growth strategy that hinges on acquisition of assets and companies at attractive prices. While there is nothing wrong with a strategy of opportunistically reacting to the market, preparedness and homework always improve your luck, and not by chance! For strong companies with cash and appetite for investments, this is the best time to set up a targeting group that will scan the market for potential takeover targets with the right fit, sometimes at garage sale prices.

For companies with major operations in high-cost economies — creating a shared-service centre to run the global back office processes in India will save costs without affecting efficiencies. On the other side, some US and UK-based global companies are looking at opportunities to divest their “captive” offshore BPO/KPO centres in India to generate cash for their core operations back home. It is a great opportunity for Indian KPO companies to acquire these centres. In one sweep, they will acquire trained people, new clients, long-term contracts, ready infrastructure — probably at a great price.

It is commonly believed that the word “crisis” in Mandarin is depicted by two characters, Danger and Opportunity. The real question is: shall we be mesmerised by Danger and tremble in fear? Or shall we pause at the incipient moment, grasp the nettle with both hands and seize the opportunities that may lurk behind the danger?