It’s been a harrowing few weeks. For many, the loss of loved ones has been compounded by financial hardship, with concerns about mental health and the worry over non-Covid-19 illnesses and conditions, including how and when they will be treated.

For the vast majority, we have never faced such uncertainty. When will we be able to go back to work? Will our businesses survive?  When will be able to spend time with our families? What does the future really hold?

It seems clear that it’s going to take months, perhaps longer, to get back to any semblance of what we previously regarded as normality. Even then, it is likely to be a new normal, with the fear of our recent experiences lingering for many years. It will only be when we have a demonstrably effective vaccine or a proven anti-viral treatment that will we be able to properly set our fears aside.

With the great recession of 2008 still leaving its scars, the world is poorly equipped to cope with another substantial downturn. But cope we must and, hopefully, we will learn from the experience, building a better and more resilient future for everyone.

Being from a financial background, a plethora of finance-related thoughts have gone through my mind over the last few weeks. Most of these have been in relation to the horror of the lockdown from an economic perspective and how this might be relieved.

With demand falling off a cliff across a host of industries, there have been plenty of high-profile stories. Large companies that we regard as part of the fabric of our society are succumbing to unprecedented challenges. The reality is, however, that many of these will survive or be restructured, with either a temporary or permanent hit to shareholder value.

The story for the nation’s SMEs, defined as businesses with less than 250 employees, is rather different. Huge numbers of these businesses, which account for around 60% of private sector jobs, are on the brink. For many, the support that has been made available by the government will simply delay the inevitable.

For some businesses, uncertainty will always be the name of the game. Many operate in crowded markets with undifferentiated business models, making little or no profit and providing a meagre living for hard-working owner-managers.  Arguably, it is a question of when, not if, these businesses close.

Other businesses with more robust and profitable business models will also collapse but, in many cases, this will be because they have failed to build their reserves in the good times or made provision for any unexpected economic shocks or downturns.

I witnessed this first-hand in the early 1990s. Following a few successful years in the 1980s, some of the founders I acted for took increasing amounts of remuneration and dividends from their businesses, spending the money on houses, cars and expensive holidays, amongst other things. The result was that instead of conserving their cash and shoring up their balance sheets, they (admittedly unknowingly) chose to put themselves at risk. When demand dried up, many of them failed.

This seems to be analogous to the world we live in today. It may be fashionable to talk about ‘just in time’ and, for many businesses, this type of supply chain and manufacturing management has become the norm. Even that is not without its problems and we will almost certainly see increases in local sourcing, including vertical integration and other protectionist changes as the risk management agenda develops.

At the end of the day, however, there is no greater risk than running out of cash. You don’t build a long-term, sustainable business by operating on the edge and for the founders and management teams that I now mentor and advise, ‘just in time’ finance is something to be avoided at all costs.

In conclusion, the Covid-19 pandemic has highlighted the fragility of many of our current practices, including our propensity to spend more than we can afford. This is not limited to our SMEs, but also applies to governments, businesses of all sizes and yes, our families too.

So next time we are facing an emergency, let’s hope we are better prepared!