A deepening recession need not be all doom and gloom. Studies of previous recessions have shown that there will be winners as well as losers. Companies that effectively manage the downturn have a higher likelihood to emerge more quickly and successfully post recession.

In today's highly networked economy it is not enough to understand what the effect of the downturn will be on demand for your own products and services. It is equally important to understand what is happening to your partners, customers and suppliers. A 360 degree assessment of risk provides the starting point for designing your strategy. So, choose your response.

Survival Strategies

During a downturn a clear focus on the key business drivers is essential to ensure resources are allocated to those areas that deliver most value to the business. This is particularly true in China, where rapid growth over the past two decades has resulted in many companies adding significant complexity to their business. Consider to outsource non-core business functions.

Reduce and restructure debt. Many companies have been encouraged to take on high levels of debt, and now need to pay this down. To preserve cash companies will choose to reduce or cancel dividend payments. Selling non-core assets is also an option. Although asset sales are not an appealing prospect in the current environment, the reality is that prices could go much lower. As one pundit said "Don't panic! But if you do panic, panic early."

Tactical cost reduction will include eliminating discretionary spending, renegotiating purchasing contracts, and reducing exposure to poor payers. Companies may need to review policies on defined benefit schemes, retirement ages and levels of company contribution.

Improving staff productivity is critical to cost efficiency and improving customer satisfaction. Lacking visibility into demand, capacity, and staff productivity, many companies do not accurately allocate staff to match the variable customer demand patterns common that a downturn brings with it. These companies suffer from unnecessary downtime cost when staff levels are excessive and poor staff performance when demand levels exceed resources.

Repositioning Strategies

Streamline and simplify. People are expecting change, and companies should use this opportunity to adjust their business model.

Eliminating duplication, moving activities to the most economically advantageous location, exploiting economies of scale, and upgrading their performance management systems.

Invest in innovation. Whether a company serves consumers or other businesses, it makes sense to invest now in understanding how purchasing patterns are likely to change and what new needs are emerging.

Moving early to anticipate and service these needs can help to establish strong customer loyalty and a sound base for future growth.

Go shopping. For those in the fortunate position to have excess cash or access to financing, a downturn offers an opportunity to pick up new assets or capabilities at attractive prices. Although there are arguments for waiting until asset values fall further, the best assets are likely to come onto the market early.

Upgrade your human capital. While other companies are laying off staff, this is a unique opportunity to access skills and reshape your workforce to the needs of your future business model.

Go green. Moving to more sustainable business practices offers the opportunity simultaneously to reduce costs, manage risk and increase appeal to a growing base of socially and environmentally concerned customers.

Growth Strategies

The underlying trends that have been driving consolidation across a range of industries have not gone away.

The benefits of scale, broader geographic reach, and access to scarce resources will continue to make large acquisitions an attractive source of future growth.

Access to debt with which to fund such deals will create an ongoing problem for private equity firms and companies with weaker balance sheets, reducing the competition for attractive assets.

The largest and most financially secure companies are likely to use this downturn to consolidate their position through substantial acquisitions at attractive prices. Companies who fail to establish their positions during this period of rapid growth will find it much more difficult to break in at a later point.

Opinions differ on the likely depth and duration of a downturn, but few would dispute that we are currently in a challenging economic environment that is unlikely to improve in the coming 12 months. Risks may come from many quarters - mapping these carefully and understanding how to mitigate them will be essential. Many companies will struggle to survive - and some will not make it. In these cases, rapid action to secure cash flow and minimize exposure to risk can make the difference.