Businesses across the world and in India are facing unprecedented shutdowns and many may not survive the Coronavirus’ economic impact. However, those who remain alert and pliant will endure
Covid-19 has caused worldwide disruption and all countries are desperately battling this virus. From the most developed nations of the world to the least developed, all are sailing in the same boat. Businesses across the world, both small and large, are facing unprecedented shutdowns and many may not survive this global pandemic. Given the scale of the economic damage being inflicted by the Coronavirus, it is absolutely necessary to understand the risks faced by our businesses in these times.
Social distancing may become a norm: According to Centres for Disease Control and Prevention, most of the time flu-like activity peaks between December and February, although activity can last as late as May. So, in times to come, during the December to March period, it is possible that some virus or the other may rear its ugly head. We may have to get used to the concept of social distancing during these months, which means lower footfalls in malls and shopping areas and a decline in consumer purchases during these times.
Lower employee productivity: The World Health Organisation (WHO) estimated the annual mortality burden of influenza to be between 2,50,000 to 5,00,000 globally. Based on the 2019 research paper of Gianino and other researchers on the Italian industry, the economic burden of absenteeism due to influenza and other virus-related infections was studied. According to them, the highest number of working days lost were reported in the 40-49 age group, accounting for 37 per cent of the total costs. So, every business may be impacted with employees taking long leave due to sickness, either directly or indirectly. Businesses in future may need to adjust to flexible working hours due to several reasons — sickness and tending to children due to school or day care closures.
Stressed logistics network: Globalisation and integrated business have increased the length, complexity and vulnerability of supply chains. Now most companies rely on vendors located in Asia for their businesses to function normally. With the entire world affected by Covid-19, we are already facing delays in the logistics network and the same situation can arise in the future, too.
Economic instability: The world is going through major economic turmoil. Consumers have started spending less and industries are feeling the impact, particularly as more and more nations go into lockdown to prevent the spread of the Coronavirus. Investors are pulling money from markets and corporations are cutting back their investments. Since the economic engine of growth is driven by continuous investment as well as consumption, any cutback in any one or both aspects may lead to recession or economic instability. In fact, economists are already warning of the possibility of a recession in the near future due to the lockdowns.
With these risks facing the business world, how should organisations prepare themselves for these unpredictable times? Here are some strategies.
Safety first: Safety, of both employees and customers, should be the logical requirement of any organisation during any crisis, particularly during a pandemic like the Coronavirus outbreak. Even before the 21-day lockdown began in India, many companies began allowing people to work from home. Once the lockdown is lifted, people will return to their offices. Here are some of the strategies that businesses can employ to ensure that their employees are safe. They can spread the correct information about Covid-19 and the way to stop its spread in the office. Going forward, organisations have to make relevant changes in their sick leave policies and encourage people who are sick to take leave and not come to office due to anxiety over job loss. Formalise this situation by creating new policies for your organisation like an incubation policy, where employees suspected of contracting the Covid-19 virus, can take time off and quarantine themselves. This could be an added policy for your organisation to refer to during any future epidemics. Allow employees to take time off if their relatives or family members are sick. Consider all non-essential travel and use technology to its maximum potential. In addition, make sure that the entire workplace is sanitised before the employees start working again. Showing compassion towards your employees can help both the organisation and employees in these difficult times.
Business continuity: After ensuring the relevant safety for your employees, the challenge is to ensure the continuity of business operations during this pandemic. Some technology-driven organisations may continue operations from remote locations but other traditional manufacturing companies may have to shut their operations temporarily. The impact is not only economic but also social and cultural. For example, Ford, General Motors, Fiat Chrysler, Honda, Toyota and Hyundai have shut their factories in the US. Ford and Daimler have also suspended their production in European factories. The airline industry is bearing the brunt of this virus, with both international and domestic travel severely restricted. All industries are affected with sporting leagues across the world being shut down, the Olympics being called off, major gatherings, including technological events and music festivals cancelled and restaurants and malls closed. To make sure your business continues, establish a reliable communication process with your employees and actively involve them in developing and updating your plans. Unpredictability is the unfortunate reality of the pandemic that the world is facing now. The way it impacts your business is not known, it may show an immediate effect or the financial distress may take months to become apparent. Protection of your business should be the ultimate goal and a proper scenario analysis that addresses several situations should be created by business owners. Analyse how operationally efficient you are. Are you lean enough to pull this off without a severe impact? Identify your critical operations and key resources that would enable the critical business functions. So focus on mainly three things: Key personnel, important clients and raw materials/supplies required. After identifying critical success factors, create contingency plans for each category. Training of employees to act as back-up for key personnel is crucial and make sure that raw materials/inventory are stocked to tide over any disruptions in supply chain networks.
Prepare your organisation to survive: For many organisations, the first and foremost way to deal with any crisis is development of risk management policies which are detailed contingency plans to assess and respond to any pandemic/disaster. But in these VUCA (volatile, unpredictable, complex and ambiguous) times is simply having guidelines/frameworks/plans or policies sufficient? Or is there a need for companies to be ever-alert and agile, with a keen sense of the changing environment and the ability to respond quickly and efficiently?
The answer is that only companies that can respond quickly can survive in these unpredictable times. To do this effectively, the structure of the organisation may require some changes. An organisation which is hierarchical in its structure with centralised leadership, driven by strict policies with a concentrated workforce of specialists, will definitely have problems in changing, whereas a networked organisation with distributed leadership, driven by flexible and simple policies with dispersed workforce of generalists will be less rigid and springy and will be able to adapt and survive these unprecedented and unpredictable times.
Collaboration is the key: The uncertainty created by Coronavirus does not have any precedence in contemporary times. No one has any clue as to how long this crisis will continue and what would be the cumulative impact of this virus on the global economy. In this situation, collaboration, co-development and cooperation of organisations with other institutions and members of the community, would be the key to survival. All of us have to tide over this crisis together.
Add a new source of revenue: Winston Churchill once famously said “Never let any crisis go waste.” Organisations should take this opportunity and try and create new revenue streams. A cue can be taken from airports, which transformed themselves into entertainment hubs by adding restaurants, shops and so on, after the September 11 attacks and in the process added to their revenue streams. The same goes for banks as they added different fee-based services after the 2008 financial crisis.
Covid-19 has stopped the global economic, social and cultural wheel. As individuals are working from home, have stopped or cut down their social gatherings and binge-shopping to find solace at home in the company of their loved ones, business leaders have to take crisis management as a priority and work towards creating resilient organisations to withstand the unpredictability of the current economic environment. However, at the same time, they have to be flexible and agile enough to adapt to these fast-changing times. By doing so, organisations can try and protect themselves against a range of threats, both natural and man-made, including the Covid-19 pandemic that we all are facing now.
(Writer: Hima Bindu Kota; Courtesy: The Pioneer)