COVID-19 - It's Game Paused, Not Game Over

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. In light of these events, there were lot articles published around key areas that the leaders need to see through during the time of crisis for their businesses.

• People safety
• Communication Strategy
• Managing the Financial Risks associated
• Enabling Digital Transformation
• Business Continuity

Let's get to the business continuity in a while. If we look at the lessons from history in terms of the recent crisis that we faced. Prior to the crisis in 2008 there were around 750,000 businesses older than 1 year and by 2010 it went down to 550,000 in US. Right now there are more than 750,000 such establishments and we are facing a crisis bigger than the recession in 2008. So this leads us to a probable outcome of small to medium sized businesses going out.

So yes we can agree that there could be start ups which will be impacted by the COVID crisis. And furthermore small and medium businesses form the lifeblood of a nation. If you look at US, lending for small businesses has increased slightly, however overall lending has flourished during the last 6-7 years creating one of the most prosperous times on the planet earth.

So the small businesses and the large businesses are like to be financially impacted by this epidemic, most businesses are likely to experience significant disruption to their business-as-usual operations and will face business under-performance 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.

Every company is currently focused on the following in securing their positions in the crisis to impact in the next year or so.

• Evaluating short-term liquidity - Companies are turning to short-term cash flow monitoring discipline that allows them to predict cash flow pressures and intervene in a timely manner. They are also looking to maintain strict discipline on working capital, particularly around collecting receivables and managing inventory build-up.
• Assessing financial and operational risks and respond quickly - Companies are monitoring direct cost escalations and their impact on overall product margins, intervening and renegotiating, where necessary.
• Considering alternative supply chain option - Companies that source parts or materials from suppliers in areas significantly impacted by COVID-19 are looking for alternatives. E.g., A global apparel company may look to move production of its products from facilities in Wuhan to Vietnam, Indonesia or Sri Lanka. Such quick moves will create temporary capacity to meet customer obligations.

We made an Assumption

But there is an important piece in this business continuity domain where most of the leaders have forgo or in the bigger crisis of COVID lost in the bigger picture of securing financial position of the organisation. That's the part of the fundamentals of Business Continuity Planning (BCP). In Business Continuity, we agree on a timeline that a if any disruption occurs to the business how soon we need to have at least a skeleton operation up and running to meet the basic requirements of the business. (Technical Term - Recovery Time Objective (RTO)) E.g., If Core Banking systems are down in a bank it need to be up within 2 hours, If a manufacturing facility is lost to fire we will have a basic operation facility within 5 days. All our simulations, predictions were based on the fact that the rest of the world was moving and we are on disaster. on COVID-19 around March 16 we assumed that Disaster hit, but RTO is on pause. Yes, I can agree, its the total world on hold, and our Emergency Response Procedures to ensure the health and safety of our employees and their families is the number one priority. Now the the countries are on lock down and fighting COVID-19.

The ten most affected countries represent about 60 percent of global trade, 65 percent of manufacturing...Germany, the United States and China are the three biggest leaders of global value chains, so if these three countries are affected, automatically the global value chain will be affected.

However you may see these countries are already ahead of the response curve through different strategies and close to resuming. However the growing COVID-19 crisis threatens to disproportionately hit developing countries, not only as a health crisis in the short term but as a devastating social and economic crisis over the months and years to come. 

Income losses are expected to exceed $220 billion in developing countries. With an estimated 55 per cent of the global population having no access to social protection, these losses will reverberate across societies, impacting education, human rights and, in the most severe cases, basic food security and nutrition

When will the clock resume?

This is the question that everyone is seeking answers to. But with the current development what we can conclude is that, although the clock paused for everyone roughly the same time it will resume for us in different times. Government policies, Public support, health care systems, affordability and infrastructure in supporting social distancing to flatten the curve, economic/health resilience of the citizens of the country you operate in etc. So clock might resume for Italy sooner than US, while china may already have resumed the clock. Now this need to be given serious thought as you can't resume operations, violating health guidelines of the country that you operate in. Because what you need to understand is if you are back in operations and one of your employees health is put at risk exposing him to COVID, you are risking the entire workforce at that place, violating the first principle and ending up on square one resetting the RTO clock for the organisation. This is the operational issue that organisations need to give equal priority as securing financial positions.

Thinking of recovery strategies and workarounds to normal business operations is the key. E.g., Working from Home (WFH) is the workaround to face this disaster for the services like IT, Finance, HR, Treasury, Designers, Analysts, etc. In a similar way we need to find workarounds for operations which cannot be performed at home. This change of operations may require you to re-skill/up-skill your workforce. Use these weeks to work with L&D and IT to build up online courses and bring it to them. You might need to rethink the core operations and re-invent how the business has traditionally being operated.

Key component of the Business Continuity is not Emergency Response or Workaround. it's coming back to business as usual. If your organisations plan is to secure your financial position to survive till the end of government direction to go out there and operate after making the entire country secure, rethink.

Pause happened to everyone of us simultaneously, but resume depends on your ability to rethink, reinvent the Business As Usual.