Sequestration: Time to plan, not panic
How one company is adjusting its strategy to prepare for deep cuts
Despite the recent fiscal cliff aversion, the talk of impending doom remains rampant with sequestration still on the horizon. What is bound to happen is consolidation at some level, but no one is quite certain where and with what ferocity the axe will fall.
From a personal perspective, the situation does provide my company a great opportunity to prepare for such a contingency and stress test our operational and business development processes. We’ve gone through the planning paces several times over, and here’s what we would do should political armageddon occur:
No layoffs planned
As best as we can tell, our current contracts appear to be steady and we’ll keep our warrior engineers, as we call them, on the ground to see the existing projects through. Chances are, our government clients will be pulled in many different directions if they are forced to deal with sequestration, so we’ll also look for ways we can go above and beyond to ease the burden.
Watch cash flow even closer
We’ll put any future investment under very careful scrutiny. It’s a prudent measure in any environment, but even more important if sequestration occurs. We’ll want to keep what we call “dry powder” cash on hand to offset any unexpected contract cancellations or delays in payments by government agencies for work we’ve already conducted.
Continue our current expansion initiatives into the commercial market
This has been underway for some time, as we feel our cyber security and information assurance expertise can be of great value to a wide range of companies across many industries. It seems as if a story runs in the paper every day reporting another high-profile breach of security that exposed consumer credit card information and social media accounts. We’re getting strong interest in these areas, and are continuing to pursue the opportunities we uncover.
The bottom line is this. We hope and expect cooler heads to prevail and a resolution to come quickly. If it doesn’t, we can weather through a short period without making any significant changes, but will most certainly have to re-evaluate our strategy if for some strange reason sequestration became the norm for a good chunk of 2013.
There’s a larger issue here, though, that goes well beyond my company’s fortunes. The impact of the talent that will most certainly leave the defense industry for greener pastures if sequestration occurs will have significant, enduring, negative ramifications for fostering innovation at virtually every level of the Department of Defense. Ceding these capabilities can impact national security issues over time and drive up long-term costs to maintain and improve military capabilities. This threat, while not making any headlines of late, is no less significant.
Eric Basu is the president of Sentek Global. He can be reached at email@example.com.