HOW SHOULD ORGANISATIONS DEAL WITH THE CURRENT CRISIS IN MALAYSIA

by Dr. Ng Yan Goh,Ph.D.

The current crisis is a result of a number of factors which includes currency devaluation, share market crash, and the economic downturn. We need to find new ways to deal with the situation. 

Chapter 11 

There are going to have increasing number of litigation in order to recover non-performing loans and bad debts, business closures and suicides. However resorting to legal means may not actually solve the problems at the micro enterprise level and the national development in the long term. In the process if the small and medium enterprises (SME's) are substantially eliminated the macro economy can be affected as well since the SME's form the backbone in most countries. 

The biggest challenge is for the nation to support and help to sustain the SME's which are having some of the competitive factors including local R&D capabilities, manufacturing capabilities, professional expertise, knowledge workers, made-in-Malaysia products, high technology, and high growth potential. 

Malaysia will probably require a new law similar to the Chapter 11 in the US so that the troubled enterprises can be protected while trying to resolve the financial crisis. 

Turbulent Lending 
Turbulent lending or lending in a turbulent market is an innovative strategy which can be applied to the Malaysian economy to revive or grow companies with potential. 

It is very cheap to finish off an entrepreneur through legal means costing something like RM2000 or more. The damage can be severe since the brainpower, innovation, creativity, entrepreneurial skills, street smart business know-how, experience and risk taking spirit can be gone with each and every entrepreneur being forced out of the business world. 

The government's directive to have the RM1 billion loans for SMI's, RM50 million grants for software R&D, and other special loans are positive indicators of the government's efforts to strengthen the SME's and high technology base. 

The banking sector on the whole has not been forthcoming with the turbulent lending strategies which focuses on giving out loans with certain calculated risks and most of the time without security or collateral. In most cases certain percentage of the shares of the company can be pledged to the lender as a demonstration of a two way commitment. This win:win arrangement will help to boost the confidence of the management of the owners and the lenders. 

No doubt the local banking industry is highly regulated, off-shore banking facilities may be the alternative channel for this form of funding. Whatever it is turbulent lending may become a necessity to save the SME's with potential and that the experienced entrepreneurs are giving another chance at the highly competitive business world. The banking industry and the suppliers may have to be educated on this without having to resort to legal litigation on the customers.

Virtual Partnering 
Another alternative available for the SME's in trouble will be to consider the emerging business strategy of virtual partnering. This synergistic business strategy is to have partnering arrangement which may be short term in nature to ride over the tough economic conditions for two or more companies. The basis of the partnering is centred around the combined forces of the core competencies of the various parties so that the resources can be leveraged for better business volume and possible wider market base to minimise business risk. 

It will involve the fundamental business principles of mutual trust and respect, team-based leadership and management, highly responsive and adaptable enterprise, new product development, more effective marketing and high performance teaming. During the economic downturn, the agile virtual enterprise (AVE) has to be lean and mean besides being responsive and flexible to the customers' requirements. 

The entrepreneurs may have to swallow some ego and pride for the AVE to succeed. For those who are not able to let go and be open it is unlikely for them to establish any form of temporary or permanent partnering. In which case these SME's which are in trouble may not be saved using this business strategy. 

The Role of the Trade Associations 
The trade associations have very critical roles to play in the innovative business matching process as they know their members well. The associations have good understanding of the personality of the entrepreneurs and can explore the initial fit so that a memorandum of understanding between suitable partners are established for further fine-tuning. There may be situations in which various trade organisations may combine force to help their members find suitable partners. 

The Malaysian Agility and Futures Forum (MAFF) 
MAFF is in the process of setting up CEO Panel of Advisors and Working Committees drawing upon the expertise of these volunteers to provide the effective forums. The forums will be opened to the virtual partners to learn the art of agile virtual enterprise (AVE) and all the related tools and skills necessary to ensure sound organisation development and operations management. Various forums will also be set up to help the virtual partners grow their business enterprise to the point that they are highly effective and profitable.

MAFF will also help to identify organisations which can provide the turbulent lending facilities. In a way MAFF, the lenders, the trade associations, potential virtual partners are part of the much bigger AVE. This way everybody will be involved in the practice of AVE. This initiatives of caring and sharing will help to leverage a fair proportion of the private sector resources to ride through the crisis together. 

MAFF will be able to lead the business community on the AVE through on-going extensive education and training programmes, talks at the trade associations, and other public awareness forums so that the business community can understand the power of AVE and how to implement them effectively. 

Global Village 
The virtual partners have to focus on the local as well as the global market to ensure consistent sales growth. MAFF will help the forum members to "bring the world to Malaysia and Malaysia to the world" as a cost effective method for global market penetration without the associated high costs. An innovative virtual mall is continuously being improved upon so as to help in the global marketing with the use of multi-media applications. Other initiatives will include the AVE operating in the global village. 

Down-sizing & Retrenchment 
In the process of carrying out corporate recovery, it may become necessary to execute down-sizing and retrenchment as the result of AVE. However, these options shall be exercised whenever absolutely necessary rather than as the expected ritual. The AVE may uncover business opportunities which have not been possible due to the lack of competent resources which are now at their disposal and require more to use the redundant resources. 

The Way Ahead 
In a crisis like this, we need some innovative leadership to help the business community to pull through the difficult periods together. The biggest mental block is ego and if we can lower our pride now and be committed to the new solutions we will be able to deal with the current crisis with less stress and pressure. Together we shall succeed.