Global companies have to be predictive and proactive in their decision-making to preserve business continuity and build enterprise resilience.
As companies navigate the ongoing COVID-19 crisis, there are a number of key issues corporate leaders should be thinking about, as well as steps they can take to not only react to severe business shocks now but also reshape their business and plan for recovery.
1. Prioritize people safety and continuous engagement
Ensuring the safety and wellbeing of the employees in the workplace is essential. People are looking to their employer, community and government leaders for guidance. Addressing their concerns in an open and transparent manner will go a long way to engaging them and reassuring the business continuity.
One of the adjustments companies have to make is to initiate or expand flexible work arrangements and other policies that allow people to work remotely and safely. Depending on the sector, companies will want to reorganize teams and reallocate resources, and establish employee wellbeing programs and policies that support a safe working environment. Additionally, companies will want to produce regular communications that align with current government and health authorities’ policies to help employees remain engaged as they and the organization navigate through the crisis.
Finding ways to reimagine a business-as-usual environment that minimizes disruptions for the organization requires a fine balance. Where telecommuting or flexible work arrangements aren’t possible and companies must have workers on site or in direct contact with customers, it is important to provide infection protections measures.
Even with all these measures, there will be businesses that will experience workforce disruptions. Labor shortages and increased costs due to mobility restrictions that various state and local government authorities have imposed will impact businesses. Companies that experience unique challenges, not covered by specific policies already issued, should seek advice from their local governments. Many governments have introduced fiscal stimulus and assistance programs for small businesses and sectors which have been severely impacted.
2. Reshape strategy for business continuity
Most businesses are likely to experience significant disruption to their business-as-usual operations and will face business underperformance throughout the duration of the COVID-19 crisis. At the start of this crisis, supply chain challenges were significant for companies with exposure to China. But now the crisis has spread to Europe and the U.S, many more companies are experiencing operational disruption, as well as significant shifts in consumer demands and behavior impacting sectors from consumer and retail, to manufacturing, life sciences to automotive.
To help address these challenges, companies should:
Organizations that operate with transparency and open communication have inherent advantages when events require quick actions to react and reshape.
There is also the issue of short-term capital demands for continuous business operations. Based on the outcome of the assessment, companies may need to look at short-term capital raising, debt refinancing or additional credit support from banks or investors, or policy supports from the government. At the same time, companies will need to review overall operating costs and consider slowing down or curtailing all non-essential expenses
3. Communicate with relevant stakeholders
Clear, transparent and timely communications are necessary when creating a platform to reshape the business and to secure ongoing support from customers, employees, suppliers, creditors, investors and regulatory authorities.
Companies have to ask themselves whether they have the right supply chain and agility to withstand a three-month disruption.
4. Maximize the use of government support policies
Central and local governments in China have released several financial, social insurance and tax-related policies to support companies. This includes the China Securities Regulatory Commission’s (CSRC) interim policy on listed companies refinancing. Recently the US, UK and many other developed nations have announced amendments to tax and financing policies.
Companies should monitor nation-wide government and organizational opportunities for support and how they may best serve the individual circumstances of their situation. It is important to note that government support may differ based on jurisdiction and sector. Companies will need to identify and understand each offer of support and determine which ones are best for their organization.
The China State Taxation Administration (STA) has published a series of policies to provide support for preventing and treating the epidemic, including:
Temporary social insurance contribution reductions and exemptions the STA and Ministry of Finance (MOF) have introduced also have helped to ease the burden on companies.
Other countries impacted by the crisis, including Singapore and Japan, are introducing similar government policies. Companies should monitor the availability of these kinds of programs and use them to mitigate the risks they face.
5. Build resilience in preparation for the new normal
Once companies have solidified strategies based on stress tests and communicated any new directions with relevant stakeholders, they will need to execute the strategies based on the revised plans while monitoring what continues to be a fluid situation. Senior management should report any material deviation from the plan in a timely manner so that their companies can take additional action to avoid further negative impact.
Once the COVID-19 outbreak is controlled, companies will want to review and renew business continuity plans (BCP). They’ll want to assess how existing BCPs are working. If there are deficiencies, companies will want to identify root causes, whether it’s timeliness of action, lack of infrastructure, labor shortages, or external environment issues. Companies will then want to consider putting new internal guidelines in place based on lessons learned, as well as solid contingency plans to build resilience and better respond to future crises.
Financial services organizations have an ethical opportunity to develop more agile products for working capital and short-term loans to support the economy.
The COVID-19 crisis was impossible to predict with conventional wisdom and forecasting tools. However, there are many lessons companies can learn and carry forward once the crisis has passed and they’ve had a chance to analyze their response.
In the meantime, companies should be making decisions and taking actions during crisis with recovery in mind. When the crisis is over, it will be clear which companies have the resilience and agility to reshape their business strategy to thrive in the future.
In the longer term, companies will need to consider how robust their business, management team and initiatives were in facing the crisis. It will also be important to consider and reset the business assumptions that underpin the supply chain and other concentrations that many businesses have been exposed to over time.
Once the situation is mitigated, companies should reevaluate how robust their business management was facing the crisis, and then analyze options to become more resilient against future disruptions.