By Harsha Basnayake
The COVID-19 crisis is presenting the greatest economic and social challenge the world has faced in a generation. The impact on business is profound. As companies navigate this rapidly developing crisis, ensuring business continuity and saving jobs to secure the talent when the window of recovery opens will be important.
Protect the workforce
Ensuring the safety and wellbeing of employees in the workplace is essential. One of the important adjustments that companies must make is to avail flexible work arrangements that allow people to work remotely and safely for a sustained period. Many companies have been quick to adopt technology platforms to connect, engage, and build visibility with each other and their business stakeholders. Where telecommuting or flexible work arrangements are not possible and onsite or direct contact with customers is required, it is important to provide employees with infection protection measures.
Review supply chains
Most businesses are likely to experience significant disruption to their business-as-usual operations. It is important for businesses to be agile and connect with customers and suppliers on potential impacts to product and service delivery. Companies that source parts or materials from suppliers in areas significantly impacted by COVID-19 will want to look for alternatives.
Such quick moves will create temporary capacity to meet customer obligations. Just as companies need to monitor their in-house vulnerabilities, they also will need to monitor the pressures that may be affecting customers, suppliers, contractors or alliance partners. In particular, companies will want to stress test any tier one and tier two suppliers that may be impacted. This is especially important for sectors such as automotive and pharmaceutical, which are highly dependent on third-party suppliers.
Build and secure liquidity
Building a portfolio of actions to improve cash position in the business is critical given that business underperformance throughout the duration of the COVID-19 crisis is inevitable. Companies will want to instill short-term cash flow saving and monitoring discipline that allows them to preserve cash as well as predict cash flow pressures and intervene in a timely manner. They will also need to maintain strict discipline on working capital, particularly around collecting receivables and managing inventory build-up. Companies should also stress-test financial plans for multiple scenarios to understand the extent of any potential impact on financial performance.
Maximise government support
Governments around the world are introducing stimulus and aid packages to help businesses tide over the short-term challenges and companies should assess how these may best serve their individual circumstances.
The Singapore government on 26 March unveiled a Resilience Package with measures worth S$48b to support Singaporeans and businesses. This is in addition to the S$6.4b committed earlier in the Unity Budget. The Resilience Budget focuses on the three key areas: helping enterprises to overcome immediate challenges; saving jobs, supporting workers and protecting livelihoods; and strengthening economic and social resilience to emerge intact and stronger. Among specific measures that companies can look to tap into include the enhanced Jobs Support Scheme, deferment of income tax payments, enhanced property tax rebate, and other targeted interventions for the aviation, tourism and land transport sectors.
Clear, transparent and timely communications with stakeholders to secure ongoing support from customers, employees, suppliers, creditors, investors and regulatory authorities is crucial. Having a cross-functional crisis management team will help address and respond to emerging challenges in a timely manner. If contractual obligations cannot be met as a result of supplier or production disruption, it is vital to maintain open lines of communication to revisit timelines. Companies will want to review terms and conditions on loan contracts to identify sensitive debts and avoid vital technical debt breaches.
Plan for recovery now, not later
The COVID-19 crisis was impossible to predict with conventional wisdom and forecasting tools. Corporate leaders should be proactive in their decision-making to preserve business continuity and build enterprise resilience.
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.
No doubt, the risks of the current crisis is considerable; yet it also reveals areas where companies can build resilience and reshape themselves for a post-crisis world.
Harsha Basnayake is EY Asia-Pacific Area Managing Partner for Transaction Advisory Services. The views in this article are those of the author and do not necessarily reflect the views of the global EY organization or its member firms.