The COVID-19 crisis has struck the world with stunning ferocity. It’s too early to say how it will affect the global economy in the long-term, but it’s probably safe to say that we have a tough road ahead of us in the short-term.
Finance professionals are now navigating unchartered waters, and they may have to make some tough decisions to ensure that their companies have a viable future. The situation is particularly concerning for small- and medium-sized enterprises (SMEs). Their resources are often more limited than those of larger companies and are therefore more vulnerable to volatile market conditions.
As businesses attempt to navigate this unprecedented global crisis, they must juggle a lot of priorities:
- Remaining financially viable — How can you ensure that your business remains solvent throughout the crisis?
You must prioritise cash control and cost reduction to preserve thinning cashflow. You will need to do some radical reforecasting from your initial 2020 business goals for the next three to six months, assess your current income and expenditures, and do some scenario planning.
You will also need to keep informed about all state-backed grants and loans you can apply for. If possible, access new credit lines through your bank or another financial institution. Keep in mind that you need to have basic liquidity to keep afloat, as quickly accessing government loans may prove to be challenging.
Not every business will be able to survive until new liquidity is injected into the company. You may want to consider other options, such as putting your business into hibernation. In short, suspend most business operations for a while to dramatically cut costs and keep functioning at minimal level. Once the situation improves, you can ramp activities back up.
Business continuity — How can you keep operating through the crisis?
Now more than ever, businesses must be agile, build resilience and embrace digitisation. This could even mean pivoting to a new business and operating model. For example, primarily brick-and-mortar businesses are looking into how they can increase their online operations, and wholesale food retailers are now switching to home deliveries.
Business continuity also means finding solutions to keep your supply chain open and manage business partners’ expectations to protect revenue and ensure you can keep operating. Business continuity is being tested on levels never seen before. Alongside an unprecedented relaxation of rules and regulations meant to build more agility within businesses, this could mark the start of extraordinary, long-term changes for the business world.
Maintaining trust and getting support — How do you maintain trust with internal and external stakeholders?
Everyone is anxious right now — even more so if you are running a business — trying to keep afloat and managing the concerns of both employees and business partners. We should not forget about the human side of the crisis. Keeping your employees safe and ensuring their well-being, whether that’s through implementing additional safety measures or offering flexible working arrangements, are paramount.
Maintaining trust with key suppliers throughout the crisis is also essential. Whether that’s supporting them with their own cashflow challenges or involving them in temporary business operations, it will benefit your post-crisis relationship.
For most businesses, the COVID-19 crisis will likely play itself out in four phases:
- Phase 1 (current) — Businesses are moving quickly to keep operating. However, this phase will not be sustainable if the crisis goes on longer than a few months.
- Phase 2 — In this phase, businesses will need to find ways to sustain measures adopted in Phase 1 and turn to new ways of working for the immediate future.
- Phase 3 — Businesses must assess possible long-term changes to their business operations and business models. This includes the acceleration of digital transformation, wider adoption of remote working and analysing changes in customer behaviours.
- Phase 4 — Businesses must adjust their business plan to scale out and properly implement changes brought by the crisis to their business models.
To navigate uncertainty, companies must not only focus on what lies ahead in the short term but also think about the future. They must devise a viable long-term business plan, accounting for the impact of the COVID-19 crisis, to help navigate new constraints, adapt to the external environment and continue operating.
About the author: Michael Von der Geest, CEO at EY Seren, has vast experience in the world of digital transformation and has run numerous successful transformation projects with some of the world’s leading brands.