Crisis resilience: Swiss companies receive good marks

The economic impact of major crisis events is multifaceted. They range from declines in sales, cost increases, supply chain problems and job losses to the destabilization of entire industries and economies. These effects were also felt in Switzerland during and after the coronavirus pandemic, followed by the war in Ukraine, the energy crisis and inflation. During this time, the crisis management of individual companies was essential in order to contain the scope of the negative effects. A study by Lucerne University of Applied Sciences and Arts (HSLU) and Kiel University of Applied Sciences examined listed companies in Germany, Austria and Switzerland and identified and compared companies that were particularly susceptible to crises as well as those that were particularly crisis-resistant. The aim was to identify key influencing factors for greater corporate resilience. The study shows that there are differences not only between the individual sectors, but also between the countries.

New crises enable new insights

"For the first time in a long time, the coronavirus crisis has made it possible to examine the crisis resilience of companies," says Prof. Dr. Stefan Hunziker, head of the study. The last time this was possible was after the 2007/2008 financial crisis. The pandemic made it clear that companies need to know the bottleneck areas of their business model that are affected by external crisis events. They can lead to dramatic slumps in earnings and liquidity as well as cost explosions. "Not only knowing such bottleneck areas, but also reducing them in a targeted manner can make the difference between successful management and insolvency in the event of a crisis," says the HSLU professor.

Swiss companies more crisis-resistant than their neighbors

The study shows: Swiss companies were ahead of their German-speaking neighbors in terms of crisis resilience - for example in terms of return on sales, a key risk indicator for measuring crisis resilience. It is higher overall in Switzerland. The high agility of business and politics during the pandemic has contributed significantly to this: the switch to working from home and digital sales channels was faster in this country. "Although the level of digitalization in Switzerland still has some room for improvement, it is ahead of Germany in several areas," says Hunziker.

Other indicators are the above-average equity base and low expense ratio of Swiss companies. Resilient Swiss companies are significantly better in both areas. The equity base not only helps to buffer individual risks, but also reduces the risk of over-indebtedness and facilitates cash procurement. "Equity signals confidence, solvency and performance, and potential lenders such as banks are interested in this," says Hunziker. A high equity base is therefore an effective protection against liquidity bottlenecks. The low expense ratio is an indicator of a more robust business model and greater cost efficiency.

State support: fast and unbureaucratic

Together with a highly diversified Swiss economy and continued strong exports of pharmaceuticals, for example, Swiss companies experienced fewer liquidity bottlenecks overall - in other words, the probability of insolvency was lower. The government support measures in Switzerland were also initiated quickly and unbureaucratically and the coronavirus policy was comparatively more liberal than in Germany. All of this would have ensured that the crisis resilience of companies in Switzerland was higher on average during the coronavirus crisis. However, the author of the study emphasizes that not all sectors were affected equally and at the same time. While consumer-related sectors and industry were hit harder during the pandemic, the construction and real estate sectors suffered particularly badly alongside industry when interest rates and inflation rose. The statements therefore relate to the economy as a whole.

Crisis resilience as a necessity

Overall, there is a certain conflict between strengthening crisis resilience and improving cost efficiency, as building up buffers consumes additional resources in the form of equity and liquidity costs. The challenge for companies here is to find an appropriate balance. Hunziker assumes that after these crises, most companies have become more aware of how important it is to prepare accordingly. Companies would do well to know their bottleneck areas and think about appropriate operational, financial and personnel buffers and flexibility - because the next crisis is certain, even if "longer periods of calm" create an illusion of invulnerability.

Source: www.hslu.ch