Following the World Health Organization (WHO) declaration of the pandemic state on March 11 2020 number of countries and work leaders have initiated precedential measures, from soft guidelines in UK to country-wide lockdowns and holidays in Middle East (e.g. Kuwait, Saudi Arabia, Jordan).
Days later we get to face some macro-economic predictions that broadly illustrate short-term and long-term consequences. For instance, Center for Global Development study suggests that we should expect wages and income to fall, poverty to hike in short-term. Followed by severe loss of human capital and infrastructure deterioration in long-term. This is due to ‘aversion behavior’ that will drive supply / demand patterns.
What organizations can do minimize the impact on themselves and people?
Digital becomes the only ‘safe’ option of conducting the business in the near-term future. And a number of organizations do not seem to have basics ready. I want to briefly touch upon a few points, which I believe are fundamental to help us sustain.
- Respond to new resilience requirements strategically. Virus outbreak may not be part of your enterprise business continuity / disaster recovery plan. It is time to revisit, update and enact it accordingly.
- Set the communication straight. Have a permanent communication management office, make people aware of the incident and how you intend to respond. Explain your plan. This comforts employees and fosters loyalty.
- Interact with your customers. This is an opportunity to interact with your customers, show empathy, explain how your organization’s purpose will help them address their challenges in this particular moment.
- Revisit your policies. Make them work for this situation, you are operating during the crisis and there are things you can flex/adjust to help your employees and customers.
- Set your teams with all the tools and tech they need. Enable employees to work remotely, provide them with required tools and technology. From laptops, corporate email access, instant messages to video conference software. Maybe some wikis or help boards?
- Have critical resources and roles arrangement. There are various online freelance resource pools available to you at the fingertips (e.g. Upwork). Maybe it is a good time to complete paperwork and connect to freelance platforms? What would you do in case some critical employees are ill? Can you back them up with someone early on to minimize disruption?
Now, what about your finance/costs/inventory?
- Rethink your projects portfolio. You have very limited resources at your disposal. Unless you have a super steady cash-flow and COVID-19 insurance it is highly-unlikely lots of resources will be available to your disposal anytime soon. Defer and deprioritize projects that are not essential immediately.
- Manage inventories and service agreements proactively. You may want to inform your customers about certain stock more proactively. Communicate with your supply chain providers more often. Time to course-correct relations you are in, certainly not the best time to threaten anyone. Remember, without them your business is likely to collapse.
- Revisit your costs. Variable cost review is typically a quicker way to immediately optimize some of the outflows. Think of discretionary spend, including training, travel and other expenses. Typical organization would have significant labor costs. It is sensitive, and avoiding situation when lay-offs are required is one of the first things to keep in mind. Perhaps looking for opportunities to reduce contract labor, re-distribution of work to your permanent workforce, encouraging employees to take available leave balances may be the things to start. You can think of offering voluntary, or even involuntary leave without pay to preserve cash.
- Model your cash-flow scenarios. Whilst expediting receivables you may actively look for alternate supply-chain finance solutions. Would extending payables help your organization to overcome the situation? Does selling some assets and then leasing them back, help you get some cash? Can you discuss options with your upstream and downstream partners to understand what impact some of your actions may have on them and if you may come up with better options? It also appears that banks are looking more favorably to revisit some of the terms, perhaps it might be a good time to discuss some of those.
Once you are all set and ready, it is time to be creative …
- Find a new way to drive revenue. Did you have any products/services that you were preparing to launch digitally? Could be good time to do early trials. Anything that can reduce pressure on top line might be handy. Would it be possible to partner with someone who can get your products and services moving from physical to digital world?
- Align your marketing and advertisement complain. Perhaps a good time to build relations with digital marketing agencies or freelancers who can help you tune. Explore risk/revenue sharing options with them. More you sell through their leads better margin they get.
Remember, the crisis will go away and you have to survive then as well…
Governments (in particular central banks) exercise options to support organizations through capital injections and reduction of the interest rates. But we are ultimately about to hit another crisis state.
- Expect your industry/sector to consolidate. Once crisis is in the past some organizations are likely to be on the verge of being extinct. In others, CXOs and board members would have to demonstrate recovery, grows and prosperity very soon. How are they going to do it? In many cases, the answer would lay in Mergers & Acquisitions (M&A) domain.
- Watch your peers closely. Despite the outcome, you want to be prepared either to sell or to buy. Observing the situation on the market proactively can help to gear you up for the next move after the crisis. And btw, irrespective of which side of the deal you are one would want to assess how well you responded to the crisis.
Hope one would find this article useful. I did post some more on Digital, M&A, COVID-19 in my blog here. Any comments are welcome.