Four Concepts Of Crisis Management For SMEs

November 6, 2023

by Saarthi

Four Concepts Of Crisis Management For SMEs

– By Mithran Sri Ram |

SMEs are significantly affected by the COVID‐19 crisis as they over-represent the hardest‐hit sectors such as retail, hospitality, food services, entertainment services, and construction. The discovery and the spread of COVID‐19 in the absence of a cure have led governments to take drastic measures, including the lockdown of large parts of society and social distancing resulting in behavioral changes. Some SMEs respond to crises by applying creativity to problems to obtain opportunities. However, they can see an opportunity in chaos and survive uncertain times because of resilience. However, to convert those opportunities to reality, some government interventions are needed to correct the adverse effects of lockdown restrictions by revitalizing the entrepreneurial ecosystem.

In his exclusive interview, Dr. Vijay D. Gotmare, Governing Council Member, The Textile Association (India) Mumbai Unit, narrates “How SMEs came back bouncing post-COVID.” He is the Guide and Supervisor for M.Tech and Ph.D. students. He has done various research projects such as Utilization of textile waste, Ecofriendly textile fibers & processes, High Tech Fibres development for Construction Industries and Medical Textiles, Textile Green Technology, Functional Finishes, Biotechnology Application in Textiles, and some others. He is also associated with several Academic bodies and Professional Societies. 

Q1. Tell us about you – your business & TAI Mumbai.

Ans. I am a Doctorate in Textile Engineering. Currently working as a subject expert & advisor to the Ministry of Agriculture, who work in the RAIB area, which is concerned with developing entrepreneurs in the area of Food, Textile, and Agriculture, and I am the expert member for textiles. I work as a Chairman of the JTA Editor Board and have academic excellence with 70 national and international journal publications. Recently, one of my patents got granted.

TAI was established in 1939. It is a foremost leading & non-profit making national professional and technocrat body – having more than 25,000 strong members and about 26 centers across the country. It provides guidance and service to various kinds of textile industry sectors and organizes various textile conferences, both National and International giving all tools and technical information to the participants. TAI has served more than 8 decades in the industry in various capacities.

Q2. What are the crucial Challenges on supply chain disruptions & supply chain management for SMBs?

Ans. “During COVID, this is a very big setback for the small-scale industry entrepreneurs. A sudden crisis, where they could not get a proper solution in the available time because of the government restrictions, and non-availability of workers, led to supply chain disruptions. Even though Covid has caused damage, it has taught many things to Entrepreneurs. Essential needed supplies like food and medicine were moving somewhat, and now we are updated on what to do to maintain supply chain management. In fact, a unique supply chain management is needed to come out of this crisis. 

Digital is one of the greatest solutions come out to bounce back business on supply chain disruption. Digitization is keeping the supply chain area quiet in a good way, and I hope this will be in full flow for the people in the coming times. 

Q3. Any tips on Survivability and Sustainability?

Ans. This is really an area to understand and a thought process during and after the pandemic. Globally economy is the sector that has an expensive significance in the impact, and SMEs are the most vulnerable trade sector & they do not have sufficient sources to survive during the pandemic. Why? Because the SMEs are the limited sector – their cash flow is limited, and their investments are limited. Even in the paperwork, they are not that strong. They cant approach the bank for any sudden loans. Most of the business is cash, and they may not be filing the returns on time. This could be a difficulty for them to survive. 

They should also take certain guidance from the Government. The government sector also has helped them to survive and sustain their business. They have developed many strategies by adopting Resource Based View (RBAV). The proposed framework includes increasing human resources, responding & increasing network utilization, maintaining financial resources, and increasing innovation technology. 

So, to survive & make the business sustainable, we should try to work on creativity and innovation. 

Q4. What are the most common Difficulties in operating routine business?

Ans. Business is not a 7 to 8 hours job. It is planned for 24 hours a day, from manufacturing to finishing, sending the product to the market, and connecting with the consumer. During covid – these activities are completely shut off. The restrictions not to have a human touch, a restricted area where we cannot pass, lay off employees, health issues of employees – all these eventually made a fall in the sales, thereby creating a financial crunch. The fall in customer demand was all the difficulties SMEs faced. 

Online systems have their own app. Most of them are not up to the mark to reach the customer. To overcome this problem, we can suggest a technology update to the people. Nowadays, we are working on a solution for SMEs to oversee these problems by adopting different apps. It is possible by effectively utilizing E-Commerce, social media & several other technological platforms available. 

Q5. What is your take on Operational Challenges, liquidity crunch, delay in production activities, re-sizing the labor workforce?

Ans. There was no cash flow because of these. Products were lying in the warehouse and not coming to the market. However, these challenges were handled very carefully & systematically. The Government came out with a solution & also helped in financing SMEs to a certain level. They have frozen in external funding, and SMEs are now recovering. 

Q6. How to deal with Non-availability of Raw Materials?

Ans. This is one of the greatest problems. For anything to develop, there is a need for raw materials. Even for the food we eat – there needs grains & provisions as raw material. The raw material crunch has happened only because of the transportation problem. The raw material is available at a certain station but to procure that to our destination; there was no transport movement. 

Q7. Any advice for the Crisis Management?

Ans. A crisis is a sudden visitor in any business. We never get a call from the crisis that it is coming to visit us. Crisis Management is a fiction of strategic design to help an organization dwell with a sudden and significant negative event. Whenever such happens, we have strategic design plans. There are 3 types of crisis. Cripping crisis, slow burn crisis, and sudden crisis. Covid 19 was a sudden crisis. 

To handle such a crisis, 4 management concepts are required. Prevent, Plan, Proactive, and Perform. Artificial Intelligence is the area that can predict it. In this way, one can come out of the crisis. Moreover, the Government, intellectual group of people & researcher is also planning much in advance on what could be a crisis in the future & trying to find out solutions to those. Now, SMEs will be well prepared – they can know in advance whether there will be any raw material crisis & can procure in advance and perhaps come out from this issue. 

Q8. How do justify SMBs Moving to online channels for sale?

Ans. Whenever any SME cannot sell his product because the customer is not coming to the shop or he is not able to reach the customer because of transportation or health issues, etc., they need to make a decision on a platform that helps in reaching the customer. Online is one of the best solutions to this. This will be the marketing strategy for the future.

Q9. What type of Supports Provided by the Government side?

Ans. Government is always supportive. The planning commission and finance department are working on this. SMEs contribute around 30% of GDP. So, the Government will not allow this kind of business to be closed down. Certain products are manufactured in MSME & SME only. To assist the SME sector, the govt came forward with a supportive program. They have changed the Repo rate, implemented an emergency credit guarantee scheme, helped with product funds, provided EPF supports and provided the E-marketing links to the people. This shows positive results now. SMEs have reached 88% so far as now compared to the pre-pandemic level. Food and Grocery are at the top, and more than 50% of the SMEs are confident now about business recovery after the economic slowdown. This is really a good sign with the Government’s support.

Q10. Share your thoughts on Creativity & Innovations for SMBs.

Ans. Creativity & innovation is part & parcel of our life. We have to work on innovative ideas in business or academia consistently. When a certain crisis occurs, we have to think of new creative and innovative activities in a process. This sector has to survive. The E Market can also have their own creative and innovative strategies. Even SMEs can have an innovation & creative cell in their industry. Digital technology itself is an innovative one. So, even though they are a small sector, SMEs can be more creative and enhance their business very differently. 

Q11. How to do Crisis Management at Micro & Macro level?

Ans. The crisis is not coming only to small sector people. It may come to the macro level industry also. Crisis management is a must at both levels, and they should have a certain group of people in an organization to handle it. Further, they should also have a ready reckoner on what to do next for each and every crisis that may arise every now and then. 

Q12. What are the Current limitations and what are the recommendations for the future?

Ans. Being proactive and quick will be the right suggestion for SMEs. Suddenly if your product is going in the market due to new competitors coming to the market, keep your eyes open on the market – take quick action and improve your product or price than your competitor and be proactive. Sometimes, you may have to make a hard decision to do your business up to the mark & it’s high time; you should be on digital platforms in all sectors. They have to be critical in the supply chain funding, keeping track of the loans taken, and having a disaster management team will be helpful to have less loss.

Q13. Any Advice to New Comers?

Ans. For any talented students in the college doing a project in their final year and who want to start a startup – looking at the small-scale industry challenges and studying deep into the last 2 years’ scenarios SMEs handled is a must. So they can be well prepared to start a business so that they will face minimum problems during the product development. They can be more focused. This is the way they can take the information and be ready if anything happens. 

Entrepreneurs must be more resilient to respond to challenges and take advantage of opportunities. Resilience is essential in entrepreneurial crisis management as it aids in understanding how businesses adapt or resist change. However, SMEs’ strength also depends on their ecosystems’ resilience. Therefore, government support or public policy also plays a crucial role in encouraging small businesses’ resilience and creating more inclusive and sustainable growth.

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