CORON­AVIRUS AND BUSI­NESS

What can busi­nesses do to limit the dam­age wrought by Covid-19?

CEO Middle East - - CON­TENTS - BY TOM DE WAELE, MID­DLE EAST MANAG­ING PART­NER, BAIN

AS THE NOVEL CORON­AVIRUS OUT­BREAK HAS UP­ENDED BUSI­NESSES AROUND THE WORLD AT ALARM­ING SPEED, ONE THING HAS BE­COME CLEAR TO EX­EC­U­TIVES GRAP­PLING WITH THE CRI­SIS: DO­ING NOTH­ING IS NOT AN OPTION. COVID-19 IS UN­LIKE ANY PRE­VI­OUS CRI­SIS AND TAK­ING TRA­DI­TIONAL CRI­SIS-RE­SPONSE AP­PROACHES WILL NOT BE ENOUGH. WITH OUR OPERATIONS RUN­NING SMOOTHLY AND BUSI­NESS RUN­NING EF­FEC­TIVELY AMIDST THE COVID-19 PAN­DEMIC, WE SHARE THE STEPS THAT CEOS NEED TO TAKE TO­DAY TO MIT­I­GATE THE EFFECTS OF THE PAN­DEMIC I. The sit­u­a­tion

The process of con­tain­ment and slow­ing the spread of COVID-19 in each coun­try will cre­ate ma­jor dis­rup­tion, ir­re­spec­tive of the se­ri­ous­ness of the virus spread. This should not cause ad­di­tional fear in a sit­u­a­tion that is al­ready fright­en­ing for ev­ery­one, rather, it is a sim­ple re­minder that dur­ing times of cri­sis, such as the fi­nan­cial cri­sis of 2008, the strong will get stronger and strength here will be de­fine by clear lead­er­ship, plans and ac­tions. The high like­li­hood of a sub­stan­tial rev­enue dis­rup­tion will lead to a po­ten­tial liq­uid­ity cri­sis for many busi­nesses. This could mean that the re­cov­ery may not be a quick bounce-back. Ac­cord­ingly, CEOs need to plan for mul­ti­ple quar­ters of lower rev­enue.

All stake­hold­ers in­clud­ing em­ploy­ees and cus­tomers are prob­a­bly ex­pe­ri­enc­ing fear or panic. Hence, you need to ap­point a se­nior, fully ded­i­cated COVID-19 war room team fo­cused on this all day, ev­ery day. As CEO, you must be out in front with a planned cas­cade of pos­si­ble ac­tions, prob­a­bly more ag­gres­sive than your team can imag­ine right now. Cus­tomers will change some be­hav­iours per­ma­nently, ac­cel­er­at­ing prior trends. Tak­ing bold ac­tion now can set you up for suc­cess through the down­turn and be­yond.

II. Six ur­gent pri­or­i­ties

1- Pro­tect your em­ploy­ees and cus­tomers

Im­ple­ment the best-known guide­lines avail­able for both em­ploy­ees and cus­tomers. This in­cludes mon­i­tor­ing global health guide­lines and other com­pa­nies – and con­tinue to fine tune. Don’t be afraid to over com­mu­ni­cate with full trans­parency and assist epi­demic-lim­it­ing ini­tia­tives in any way pos­si­ble. 2- Stress test P&L and liq­uid­ity

Out­line macro sce­nar­ios by mar­ket, trans­late into rev­enue-de­cline and P&L sce­nar­ios.

You should also build ex­treme down­side sce­nar­ios as this has the po­ten­tial to be a 100-year event. There­fore, an out­line of the ma­jor op­er­a­tional ac­tions should be in place.

3- De­fend against rev­enue de­clines

You need to take a cus­tomer-cen­tric view and ask your­self questions like how you will build trust, loy­alty and mar­ket share through and be­yond this cri­sis. Sim­i­larly, you should build spe­cific rev­enue-mit­i­ga­tion ac­tions for de­clines in core rev­enue streams.

4- Sta­bilise operations for the new nor­mal

Sta­bilise sup­ply chains of phys­i­cal goods from likely ge­o­graphic and labour dis­rup­tions while build­ing con­tin­gency

op­er­a­tional plans for all as­pects of the busi­ness

5- Plan ur­gent cost cuts to con­serve cash

You can con­trol the send­ing hand brakes by ini­ti­at­ing im­me­di­ate ac­tions (e.g. hir­ing freeze, opex, capex, work­ing cap­i­tal). Sim­i­larly, set ag­gres­sive break-the-glass cost ac­tions trig­gered by more ex­treme rev­enue sce­nar­ios. Out­line a medium-term plan to lean out the cost struc­ture for the fu­ture. It should be a plan that is more au­to­mated, more vari­able and, more shock re­sis­tant.

6- Play of­fense, not just de­fence

De­fine how you’ll out­per­form com­peti­tors and ex­pand share through and be­yond the cri­sis. This also means that you should pre­pare for bounce-back and re­cov­ery. At the same time, plan for and take ad­van­tage of a leapfrog change in cus­tomer be­hav­iour – es­pe­cially digital.

III. Ac­tions to take now

There are sev­eral moves that CEOs can take right now to help ease the im­pacts of the epi­demic and come through stronger on the other side. As the eco­nomic fall­out con­tin­ues, busi­ness lead­ers will want to first model their ex­po­sure to the coron­avirus fall­out and street test their P&L and liq­uid­ity. There will be crit­i­cal “trig­gers” where more ag­gres­sive ac­tions will be needed. We rec­om­mend im­me­di­ately launch­ing three ac­tions si­mul­ta­ne­ously:

1- Align your se­nior team with a wake-up call

• Get the full team aligned with the true sever­ity of the macro COVID-19 sit­u­a­tion and worst-case fi­nan­cial sce­nar­ios

• Set safety as the num­ber one pri­or­ity • Set cash con­ser­va­tion and liq­uid­ity as a se­condary pri­or­ity

• Avoid in­ac­tion; “wait and see” ap­proach could dam­age the com­pany

2- Es­tab­lish a ded­i­cated se­nior team in a war-room set­ting

• Set up a se­nior, ded­i­cated team from mul­ti­ple dis­ci­plines (operations, sales, HR, fi­nance)

• Prioritise and put ma­jor work streams into ac­tion; set a tone of daily progress us­ing an ag­ile method­ol­ogy

• Break the usual re­port­ing and up­date cy­cles; Ur­gency of the sit­u­a­tion re­quires a dif­fer­ent model, such as daily in­for­mal CEO up­dates

3- Out­line macro sce­nar­ios and trans­late to con­tin­gency plans

• Out­line spe­cific macro COVID-19 sce­nar­ios by ma­jor ge­ogra­phies

• Trans­late those sce­nar­ios into tan­gi­ble rev­enue-de­cline and op­er­a­tionald­is­rup­tion sce­nar­ios

• Be­gin to out­line no-re­gret moves. There will be an im­pact so start act­ing wisely

• This needs to be done in days, not weeks (and you can con­tinue to iter­ate) It is ob­vi­ous that the COVID-19 out­break is un­like any pre­vi­ous cri­sis. Hence, CEOs need a unique, tai­lored and im­me­di­ate cri­sis­re­sponse. A wait-and-see ap­proach has no chance of be­ing ef­fec­tive. CEOs should be aware of the sit­u­a­tion and up to speed with the lat­est up­dates. They should also un­der­stand that there are six main pri­or­i­ties to fo­cus on dur­ing this calamity and im­ple­ment a mapped out ac­tion plan.

Newspapers in English

Newspapers from UAE

© PressReader. All rights reserved.