By Vikram Chakravarty
SINGAPORE — Singapore’s circuit breaker measures to curb the spread of the COVID-19 outbreak will end on 1 June, with phased reopening of the economy. However, the pandemic will likely permanently reshape the way we live and work, and businesses can expect to operate in a new normal.
Understandably, many companies are focused on what is happening now and the immediate next, including pressing concerns such as crisis management, workforce welfare, business continuity and cash preservation.
Even as addressing current concerns is urgent and critical, making decisions on how to reposition beyond the COVID-19 pandemic is important. Such strategic decisions will determine who will emerge as the winners during this period where we can expect significant churn in company positioning.
Based on past experiences in the wake of the global financial crisis, early and bold choices on portfolio transforming investments, particularly acquisitions and divestments, have proven to be decisive. Those were brave choices in 2008-2010, given they often lowered near-term cash flows at a time when preserving capital was high on boardroom agendas.
However, there is compelling evidence that those proactive strategies paid-off. Similarly, transformational investment strategies in the same period — driving capital formation and embracing digital technology — have also proven to yield value.
Strategies to reshape, reimagine and reinvent a better future
As a result of this crisis, some companies will fail, while others may merge or be acquired. Some of these outcomes could have been inevitable even during good times but these have arguably been hastened by the pandemic.
This rapidly changing environment offers what could be once-in-a-lifetime opportunities for CEOs — how well they make smart, well-informed strategic choices will likely determine whether their companies will shape the future or be shaped by it.
There are four active steps that companies can take now to secure strong positions beyond the crisis:
1. Deploy dynamic scenario planning: Take a top-down approach, modelling the pandemic, assessing its economic impact, and creating working scenarios specific to the industry and current market position. While rigorous and exacting, this process should be flexible enough for changing conditions and will help companies understand the range of potential outcomes.
2. Build operational resilience: In this crisis, strategic and operational agility is a fundamental capability that companies need to build, and do so quickly. There is a possibility of a second or third wave of the pandemic. For a company’s strategy to be realised, it needs to be flexible enough to pivot at speed.
3. Understand the megatrends: While everything seems dislocated and different now, companies should distinguish between what has permanently changed versus temporary shifts in behaviour. Megatrends, which are deeper fundamental drivers of change, will always remain. Planning around those needs to be at the heart of a company’s long-term value strategy, regardless how immense the urgent pressures.
4. Be open to capital agenda options: While preserving cash is important for business continuity, for some, it is an opportune time to make critical investments or take decisive action to buy or sell assets. Any or all may accelerate the companies’ transformation journey.
Positioning for now, next and beyond
Leading companies are considering a two-pronged path of transformation and transactions when charting their strategy. For example, M&A and divestments are in the strategic toolbox of many executives. Would an acquisition future-proof growth? Can I transform my portfolio through divestments? Where do I allocate my investment capital?
Securing long-term value means finding the right answers to tough questions. Realising strategies will vary across industries and one size doesn’t fit all when dealing with this heightened uncertainty.
But one thing is certain — waiting it out is not the best option.
Vikram Chakravarty is EY Global Strategy Solution Leader and EY Asean Transaction Advisory Services Leader.
The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.