The economic impact of the coronavirus pandemic came so quickly and hit so hard that companies worldwide are trying to stabilise their business to the point where they can recover.
When Deloitte surveyed CEOs, senior managers, and HR leaders in China, which was affected by the coronavirus first, 66% said they were unable to serve customers and clients because of the outbreak. Almost half of the respondents said they were unable to continue normal business management.
It’s a scenario that’s now playing out globally. According to projections released 14 April by the Organisation for Economic Co-operation and Development, the direct impact of shutdowns happening globally could see output drop 20% to 25% in many economies, with consumers’ expenditures potentially dropping in excess of 25% in Canada, France, Germany, Italy, Japan, the UK, and the US.
“With any disruption, the first priority is always ensuring that people, operations, customers, partners, and suppliers are safe,” said Keith Hausmann, chief revenue officer of Globality, a Silicon Valley-based tech company that facilitates the buying and selling of enterprise services through its artificial intelligence-powered platform.
“Once that’s done, leaders need to shift focus and get their services back online as quickly as possible to minimise disruption to customers and their overall business,” Hausmann said. “This is also a time for leaders to think about the operational changes they need to make, including utilising technology to gain a professional edge that will drive innovation, boost operational impact, and increase spend effectiveness.”
Steps finance can take to help the business survive COVID-19
The shutdowns are causing businesses complex and pressing challenges that require a swift and bold response. Follow these five steps to help companies get through the crisis:
Prioritise people’s health and safety. Companies everywhere have had to move rapidly to meet evolving public health regulations and amended workforce laws. Setting clear remote-working arrangements, establishing mental health supports, addressing employees’ concerns openly and regularly, and managing building access is critical to this process, EY suggests. It may also mean reorganising teams, reallocating resources as necessary, and providing infection protection measures where remote working isn’t possible.
Move quickly to understand liquidity. EY suggests companies adopt a strict approach to managing working capital, focusing on collecting receivables, and managing any build-up of inventory due to decreased demand. Meanwhile, Deloitte suggests businesses should immediately develop a treasury plan for cash management. “If you don’t have a robust cash flow, that is the first thing to get visibility on,” said Michelle Kvello, managing director and CFO of Lantern Partners, a Sydney-based advisory firm, which helps companies work out their cash flow projections, revenue profiling, and business modelling. “Ideally, three months of cash in bank lets you make smart decisions that don’t hurt you in the long term rather than short-term, knee-jerk decision.”
Ramp up digital transformation. “CFOs are aggressively prioritising strategic technologies that can drive efficiency and effectiveness, even in times of crisis, within finance, supply chain, and enterprise-wide,” said Hausmann. “By seeking a balance between business continuity, digitalisation, and reduced operational costs, CFOs can set their teams up for success while maintaining the bottom line.”
Kvello recommends triaging issues that may require action. For example, technology, processes, and team management should be assigned owners responsible for reassessment.
Seek government and insurance support. With a raft of stimulus measures being rolled out by governments, companies should monitor nationwide and organisational opportunities for packages that can assist with employee, supplier, or tax payments. Similarly, insurance may help limit or reduce losses. “Business interruption insurance is available but can be expensive, and it’s important to read the fine print to clarify exactly what you are covered for,” said Kvello. “What a lot of people are finding out right now is that there are pandemic exclusions. It’s important to weigh the cost of the insurance versus the likelihood of it happening.”
Document critical gaps. “You are in the middle of a live situation,” she said. “There is no better time to test the robustness of your responses than when things are very live and immediate.” To pinpoint potential gaps, EY suggests determining why something isn’t working. Causes could be a shortage of labour, lack of infrastructure, or something in the external environment.
Kvello added that “the potential gaps in how you are approaching the situation right now are something that you should be documenting and incorporating into the next round of your business continuity planning”.