A few years ago a drought in Brazil caused a surge in coffee prices, affecting businesses a world away catering to latte-loving crowds. As the cost of coffee beans doubled, Starbucks was able to maintain its profitability—without raising prices—because it had locked in a year’s worth of supply at pre-drought prices. Green Mountain Coffee Roasters wasn’t as lucky; rising costs threatened its ability to turn a profit. Situations like this highlight the fluctuating nature of raw material prices - and the importance of “buying right.” This is especially true when a large portion of your raw material is made up of a commodity; for example, metals, energy, grain or coffee beans.

Today we are faced with a trade war and supply chain disruptions that are creating widespread volatility in raw material prices in addition to shortages.

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Executives planning major expansions or capital projects need to take measures to optimize their chances of success. In many cases, they only take steps to guard against failure while leaving the most important measures out.

When preparing for investments or expansions, executives should consider the following:

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Planning for upturns and downturns in the business cycle can mean the difference between prosperity and failure. Forewarned is forearmed, and business executives should plan for the worst as well as the best.

There are three fundamental steps one can take to ensure their companies not only survive but thrive during economic turbulence.

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All companies want to improve their efficiency, but many find it difficult to identify the gaps in their business practices that are preventing them from achieving significant breakthroughs. One remedy for this malady is to use an external resource that isn’t blinded by the company’s tradition and norms. A financial consultant with a fresh, outside perspective, sophisticated analytical skills and new technology can give an immediate boost to your company. A strong advisor will be able to sort the high value opportunities from the low-payoff activities, develop the plan to achieve them and have the capabilities to execute the plan within your organization.

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The worst time to start planning for a crisis is when one is actually happening. A little foresight can mitigate the damage caused by economic turbulence, especially if companies use the right analytical tools.

One such tool is a sensitivity analysis, also called a “what if” analysis.

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