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How to manage your company and assets in a crisis situation: examples from my own firm by Peter Lorange

If you are going through hell, keep going!

Winston Churchill

It is not the strongest of the species that survives, nor the most intelligent, but the ones most responsive to change

Charles Darwin

Bolts really can come from the blue

Philippe Pelé Clamour (Professor, HEC Paris)

Everyone is just trying to get by day by day at the moment

Krista Schwartz (Assistant Professor, Wharton School of Business)

This article is primarily targeted towards family-owned firms. It reflects on the crisis mitigation actions that have been taking in my wholly owned company, S. Ugelstad Invest, and in some of our portfolio companies. I have also pulled in recommendations from several other corporate leaders, family offices and venture capitalists, as well as findings from leading consultants, such as McKinsey, to propose eight tactics to adapt and excel in a crisis. In addition to having immediate prescriptive value to the current situation around Coronavirus, these eight points have much broader implications.

At the risk of coming across in a way that might sound slightly too academic, let me position this paper as representing a blend between sociological and anthropological approaches. It takes a sociological lens in that this piece reviews a human phenomenon, specifically a crisis phenomenon. It is also reviewed through an anthropological lens as it reports on a particular experience that one entity (a person, a firm) might have when it comes to coping with the given phenomenon, in this case a crisis situation. While this piece indeed identifies eight factors that seem relevant for managing a crises (sociological), it is indeed based on my own experience in leading my firms S. Ugelstad Invest and Lorange Network, through the Corona crisis (anthropological). Analysis is primarily driven by sociological events, while actions are anthropologically inspired.

Let me at the outset, make three additional remarks:

  • The Coronavirus crisis is wreaking havoc on the global economy as a whole and will have a devastating effect on many firms, e.g. several companies have already gone bankrupt and family fortunes have been lost. While the recommendations that follow do not specifically address the Coronavirus threat, it is clear that they are influenced by the current situation.
  • Projects may have to be developed or abandoned. It is key to assess each project, actual ones as well as prospective, in terms of the attractiveness of the business or industry (we have seen, for instance, that airlines, cruise lines, hotels, restaurants and bars are particularly hard hit during the present crisis). The solvency and liquidity situation of counterparties, the ability to handle defaults from tenants or charters, and the likely need for additional liquidity are key.
  • The first four items to be discussed below deal with what firms can do now. Then, there are three factors that might be addressed both now as well as in the future. The remaining item deals with key strategic consideration issues that leaders might want to take into account when mapping out more robust future strategies.

My eight recommendations:

  • What to do immediately
    • Take actions that safeguard your firm’s “immune system.” For example, maintain a strong link “between the brain and the body,” meaning, stay present, stay calm and composed, and do not make decisions in panic. Preserve cash; stop all pay-outs immediately and start negotiating better deals and delayed payments with key suppliers and other stakeholders. Actions must be reasonable, as seen by all stakeholder groups, including employees, creditors, suppliers and customers. Be decisive and firm. There is always an end to a crisis, and new opportunities will arise. Be prepared for the upturn and keep this in mind when initiating a set of immediate ameliorating actions. Don’t cut senselessly.
    • In line with the above, communicate these actions as early as possible, clearly and honestly, to all stakeholders, including employees, family members, customers, banks, the board, services providers, etc. Both content and tone of the message are critical.
    • Layoffs, whether they are temporary or permanent, and other cost-cutting possibilities must be taken promptly, and in such a way that the logic behind them is understood by employees and other stakeholders. Salaries and other employee benefits must be scaled down in a fair way for all employees. It is particularly key that a firm’s senior executives show the way here. Layoffs should come at all levels of the organization, including from the top echelon of executives.
    • As noted earlier, crises also give rise to opportunities, it will behoove one to look out for them. For example, there may be attractive stock purchase opportunities, since in times of uncertainty stock prices typically tend to fall substantially. Also, there may be attractive acquisition opportunities for firms with spare liquidity. So, try to position the firm to be ready to seize such opportunities during or in the aftermath of a crisis. Even though “cash is king,” I nevertheless felt that it is prudent to acquire some “blue chip” stocks. Like in normal times, when success often comes as a result of being first out with an idea, product or service, ,agility and speed are key in times of crisis. Additionally, do not forget to think about scalability. However, given the difficulty in assessing the length of the crisis period, projections or forecasts of scale need to be “elastic”. Also, it may be attractive to invest in private assets when public markets are trending down. Returns here are typically less correlated with the public markets, i.e. relatively independent from them.
  • What to do immediately and next steps for the future: “The dual focus grey zone”
    • “Cash is key”: preserving cash is the golden rule to follow in any crisis. There are at least three additional factors that are closely related to cash management, which are outlined below. As we shall see, all of these factors call for both immediate actions and continuous action for each of these factors to be kept under control over time. Thus, as also stated in the opening paragraphs of this piece, there shall be a dual focus regarding actions to be called for, immediate ones as well as for what to do over time. It is important to pay attention to these factors, and to attempt to ameliorate negative effects:
      • Covenants on loans, hedging and margin calls
      • Hidden contractual agreements which may have led to cash already having been committed
      • Money back clauses in connection with cancellations, such as for early bookings on airline tickets or hotel reservations.
    • Outsource to keep salary cost as low as possible. Having substantially outsourced, it is easier to adjust activity levels downward. Also, as a result of outsourcing, the downward adjustments in the workforce can be done faster, avoiding labor law red tape, i.e. with relatively less constraints from work force regulations.
    • Have sufficient liquidity reserves. Even when there is no immediate need for cash, it is often wise to draw funds from unused credit lines so as to keep a relatively large cash reserve at hand. This is an important safety measure during unexpected events when speed is of the essence. Typically, during an unexpected event, there is not enough time to ask for additional capital from existing and/or new investors, or to obtain additional credits from the bank because it is time-consuming, with a far-from-certain outcome.
    • Take advantage of business cycle irregularities. Typical business cycles become highly volatile in the times of crises. Yet, we must not forget that many wealthy families built their fortunes during crisis periods. This includes the Wendels, the Rothschilds (“blood in the street”) and the Wallenbergs. Incidentally, the world’s largest independent ship owner, Jon Frederiksen, seems to enjoy it when markets are down because these times offer him opportunities to do remarkable deals.
  • What to do in the longer term
    • Modify one’s strategy and have a set of realistic planning scenarios. When a crisis hits, one may find that one’s strategy is more exposed to factors outside one’s control than expected. Often such factors are perceived by the executives as highly unlikely to occur and are actually neglected. This means that an eventual crisis is extremely hard or nearly impossible to forecast and be prepared for. The re-examination of one’s business portfolio is therefore essential. Which businesses might need additional cash? While generally one should be ready to provide much needed liquidity to one’s portfolio companies, there are some businesses in the portfolio that have greater commercial potential than others. For some businesses in the portfolio, the market for its products or services may have disappeared, or the top management team may be not good enough, etc. Such businesses are highly unlikely to merit additional cash allocation. At S. Ugelstad Invest, we are making this kind of assessments every day. Losing faith and trust in our company’s top management is particularly serious. Extending the “runway” for one’s company is key. In part, it implies instilling more discipline in the use of capital. Delaying certain investment projects is often important. Trimming costs is always a good idea! On the other hand, extending runway may also imply attracting additional capital, in the form of equity or credits. At S. Ugelstad Invest, we work on “runway extension” issues with several of our portfolio companies. Let me give you an example. Unexpected government actions, (like the ban on flights, or many governments’ ban on public gatherings of more than five people) may cause havoc for such industries as airlines, cruise lines, hotel chains, restaurants and bars. In addition, non-leisure meetings and other events are curtailed. Schools and universities are ordered to close. In the crisis we are experiencing today, the underlying purpose of such radical and often surprising government decisions is to prevent excess spread of the Coronavirus. Some countries practice a more laxed imposition of rules and regulations. The UK, for instance, allowed crowds to assemble for much longer than Norway did. As a consequence, event management firms like the Norwegian “Deltager” saw its domestic business drop by 95% in less than two weeks while its UK business dropped significantly less thus far. Crises such as the Coronavirus outbreak may also significantly alter consumer behavior. The cruise industry, for example, saw a dramatic drop in bookings. Apple temporarily closed all its retail outlets, while Adidas saw a dramatic drop in its Asian business, and more examples keep coming. It is doubtful that the pre-crisis consumer behavior patterns will be completely restored and replicated after the crisis.

Many other examples can easily be found where totally unforeseen factors – fires, hurricanes, earthquakes, etc.- emerge. The resulting adverse effects are typically hard to predict.

It is therefore even more important to consider worst-case scenarios when reviewing one’s strategy and to think outside the box when looking for solutions or new opportunities. Reviewing company strategy with this mind-stretching outlook can turn problems and dilemmas into new playing fields. The exercise itself can be very motivating and rewarding.

A crisis like Covid-19 is a real stress test of your portfolio. Many families have already lost what many generations have worked hard to create, while others are finding new ways to make their fortune. The goal for any portfolio is to be diverse enough, so that not all are affected by the same crisis. Another goal is to avoid high leverage, at least at the holding level. Leveraging stock purchases has always been risky. Many family businesses and independent investors have significant gold resources in their portfolios instead. Thus, family firms tend to have relatively low leverage. Both of these factors – asset diversification and low leverage – tend to add resilience and stability during times of crisis.


Nobody welcomes crises. But everybody – every company and every family firm – must be positioned and ready to handle a potential crisis, should one emerge. Strong leadership is paramount. There must be a clear will among owners and management to handle such crises! Communication must be clear, realistic and objective. Actions must be seen as fair not only to the employees, but to the majority of stakeholders: customers, banks, the government, etc. Only then can trust prevail and become a key to success! Although staff cutting and cost reduction may be unavoidable, more established and cash stable companies, family and non-family firms alike, should be encouraged to work with their employees during the times of crisis. Demonstrating purpose is also important. Purpose has been proven to motivate people, provide clarity on new or revised strategy, and strengthen branding. Describing why you are pursuing your goals should also be a priority.

Please refer to Appendix I for a listing of seven factors that McKinsey recommends immediate actions on. In addition, see Appendix II for the five key issues to observe in periods of crisis, by Anand Mahindra, the group Chairman of India’s enormous Mahindra company.

Appendix I (Source, McKinsey)

McKinsey’s seven issues for immediate action:

  • Take necessary measures to protect one’s employees.
  • Set up a cross-disciplinary/cross-functional top-level response/coordination team.
  • Strong financial stress testing, with a particular emphasis on the liquidity situation. Develop a plan to preserve cash.
  • Do whatever possible to stabilize one’s supply chain.
  • Work closely with all key customers.
  • Do “dummy training”, especially when it comes to those issues that involve stakeholders (factor 1 – the employees; factor 2 – creditors, banks; factor 3 – one’s suppliers; factor 4 – one’s customers).
  • Support the Coronavirus containment process. This may entail working from home. It boils down to taking responsibility.

Appendix II (Source, A Mahindra)

Anand Mahindra’s five guidelines for crisis management:

  • The ‘Virus Crisis’ presents business with challenges but also some unprecedented opportunities:
  • We’ve acquired a precious resource: time for reflection. Use it to review strategies and portfolios.
  • Press the reset button and recalibrate all costs and overheads.
  • Associates will have more time: solicit their ideas for business improvement.
  • Use the lull to build deeper personal relationships with customers.
  • We don’t know how long the containment might drag on but prepare the business for a U or even V shaped recovery!


  • McKinsey & Company (2020), Covid 19: Briefing Note.
  • How the Coronavirus is Already Rewriting the Future of Business, (2020), Harvard Business Review.
  • Simunovic, A. (2020), What is the Impact of Covid-19 on VC? Alumni Ventures.
  • Beech, J. (2020), Are Family Businesses and Investors Immune to the Coronavirus, Campden FB.
  • Mahindra, A. (2020).
  • Pfeffer, J. and Sutton, R. (2000), The Knowing-Doing Gap, Harvard Business School Press.


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30 April 2020