1. BUSINESS WITH CONFIDENCE icaew.com A presentation by Clive Lewis Head of Enterprise, ICAEW Managing the recovery and ensuring growth

2. BUSINESS WITH CONFIDENCE icaew.com Chart 1: Effect of the economic downturn – by size of business Base: All respondents: 1,000 +2 -13 +13 +1 -19 +18 -2 -10 +13 +6 -16 +10 +1 -11 +11 +2 -13 +11

3. BUSINESS WITH CONFIDENCE icaew.com Chart 2: Business seeing a ‘negative’ effect of downturn – 2009 vs 2008 – by industry sector Base: All respondents: 2008: 1,020; 2009: 1,000 * Sample base < 100

4. BUSINESS WITH CONFIDENCE icaew.com Chart 3: Effects of the downturn on UK organisations

5. BUSINESS WITH CONFIDENCE icaew.com Responding to the economic downturn All staff related measures - 64% (decreasing staff numbers, reducing staff training spend, staff pay cuts, reducing working week) Which of the following helped your business significantly in responding to the effects of the economic downturn? (Prompted) Base: All respondents (1,000)Mentions of fewer than 5% not shown

6. BUSINESS WITH CONFIDENCE icaew.com Summary of steps already taken Fighting for every sale Attention to detail Tight control of costs Total focus on cashflow and access to finance So now “lean and mean” and better financially managed

7. BUSINESS WITH CONFIDENCE icaew.com Trend of Business Confidence UK and regions Base: All

8. BUSINESS WITH CONFIDENCE icaew.com Some key questions – short-term Will the banks increase the supply of credit? Will consumers respond by increasing demand for credit or continue saving? Will businesses increase investment in capital expenditure, staff and start building up working capital?

9. BUSINESS WITH CONFIDENCE icaew.com Key questions – longer-term Public Expenditure cuts take effect in 2011-12 When will interest rates start increasing and by how much? Sterling exchange rate movement Inflation /wage costs Increased prices of raw materials, energy and fuel.

10. BUSINESS WITH CONFIDENCE icaew.com Managing the recovery and ensuring growth – 1. Be ready for the Upturn Are you well placed to grow? Growing requires a different mentality and skills from cost- cutting and cash conservation If you made cuts in “soft” areas, such as marketing, IT, training, you might need to look again at these areas Demand is still unpredictable in many sectors, so flexibility the key

11. BUSINESS WITH CONFIDENCE icaew.com Managing the recovery and ensuring growth – 2. Look to new markets Decide which markets, products and customers are future growth areas for your business Consider overseas markets –likely to grow faster Entering overseas markets can be risky – consider alternative entry strategies such as joint ventures But be aware of the competition: In 2009 Enterprise Survey favoured strategies were: - Develop higher value added products - Increase number of countries sold to - Adapt products to foreign markets

12. BUSINESS WITH CONFIDENCE icaew.com Managing the recovery and ensuring growth – 3. Plan ahead Time to revisit growth plans and strategy Do you have a clear vision of how the business should develop? How do you build flexibility into your plans? What additional resources might be required? Consider a number of scenarios

13. BUSINESS WITH CONFIDENCE icaew.com Managing the recovery and ensuring growth – 4. Manage cash, secure funding Sales growth requires working capital Product development and marketing spend might require further equity finance Consider total funding requirement: - What unused facilities do you have? - Are they any non-core assets or activities you can sell? Make sure forecasts are realistic and regularly updated Do you have a good relationship with finance providers? Consider all forms of finance

14. BUSINESS WITH CONFIDENCE icaew.com Managing the recovery and ensuring growth – 5. Have the right team in place Growing requires different skills from protecting profits. Consider the skills you will need to grow, particularly business development Does the current team have sufficient innovation? How do you plan to retain and grow talent? Never likely to be a better time to recruit staff with the skills you might require Are your staff likely to be targeted by your competitors ? Loosing key staff identified as a “major risk” in ICAEW survey

15. BUSINESS WITH CONFIDENCE icaew.com Managing the recovery and ensuring growth – 6. build a sustainable business Sustainability extends beyond effective financial management Will there be a place for your business in five or ten years time? Are you reliant on a diminishing resource? How will measures to enhance sustainability impact your business? Is there another, more sustainable way, to meet your customers needs? Do you measure and plan reductions in your greenhouse gas emissions?

16. BUSINESS WITH CONFIDENCE icaew.com Managing the recovery and ensuring growth – 7. Manage risk The business environment has become more risky Are you satisfied that your business has established a risk management process and mindset across your business? Does your board agenda include the assessment and management of risk? Do you have a system such as the traffic light system for highlighting risk? How will you respond to the major external events outside your control? How do you balance risk management and entrepreneurial activities? How up-to-date are your business continuity plans? Do you measure how much you spend on risk management?

17. BUSINESS WITH CONFIDENCE icaew.com Managing the recovery and ensuring growth – 8. Information Systems Current environment requires up-to-date information for management Stakeholders want to be kept informed Growing businesses – particularly those trading overseas- require increased visibility A good information system can help deliver competitive advantage But ICT failure identified as “major risk” in ICAEW survey.

18. BUSINESS WITH CONFIDENCE icaew.com Managing the recovery and ensuring growth – Adjusting to a World with less Debt Government, consumers and business will have to adjust to a world with less debt Debt has been re-evaluated in terms of risk and price What are the implications for your business? Can you justify the capital employed in your business in terms of the returns? Does the balance between dividends/ rewards for shareholders and retained profit need to change? Are you likely to be finance constrained? Is a merger or acquisition an alternative

19. BUSINESS WITH CONFIDENCE icaew.com Managing the recovery and ensuring growth Any Questions? Are these your major challenges? Has the downturn made the Finance Director more strategic or more of a crisis manager? Has financial management improved in your business? Is there a greater awareness of the need for good financial management? What actions are you taking to facilitate growth of your business?

20. BUSINESS WITH CONFIDENCE icaew.com Managing the recovery and ensuring growth Clive Lewis Head of Enterprise, ICAEW Email: clive.lewis@icaew.comclive.lewis@icaew.com Website: www.icaew.com/enterprisewww.icaew.com/enterprise

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