The COVID-19 crisis is exceptional because of the human tragedies, the changing social behaviours and the severe economic crisis. As this crisis further unfolds, leaders and their teams are exploring ways to prepare for the upcoming period of volatility. It’s critical to navigate disruption and maintain business continuity. Business leaders have to be proactive in their decision-making, act fast and prepare for the new normal by reshaping their business.
The six main areas to improve resilience are:
1. People first
Guaranteeing people’s wellbeing and safety, as well as their livelihoods is vital. In the short term it’s important to:
- Establish and maintain a pandemic personnel plan to enable flexible work arrangements and implement safety guidelines for on-site work if homeworking isn’t possible.
- Use existing internal and external data to support, move or evacuate employees.
- Upgrade technologies to ensure stable connectivity and access to company systems, so that people can work safely from home.
- Temporarily adapt HR policies to comply with regulations and transitional measures such as temporary unemployment.
- Maintain employee morale and address employees’ challenges like impaired health, loss of pay and childcare.
In the long term, business leaders need to look at how they will ensure employees remain productive and engaged. Think about wellbeing programmes and code of conducts, so that people can maintain a healthy work-life balance. It’s equally important to remind people that you want to create a culture of respect and inclusion in your organisation. Now, more than ever, it’s crucial to be clear about the values that align with the company’s purpose. People need a sense of belonging and to feel part of something bigger.
2. Focus on effective cash and tax management
The world economic order has changed. The tourism and hospitality industry took the first hits. But increased shipment time, falling production capabilities and customers postponing purchases combined with delayed payments are putting tremendous stress on the short-term cash requirements of many companies.
Every company needs to:
- Assess its liquidity situation in this new and volatile market environment that is characterised by uncertain supply, diminishing or fluctuating demand and delayed payments.
- Make a 13-week cash forecast to identify possible cash requirements.
- Consider possible actions to improve working capital and other short-term mitigating measures to improve the company’s cash position.
- Explore government support like liquidity support and bridge loans.
- Think about capital requirements and consider potential additional cash sources, such as banks, bonds and/or private debt funds.
3. Build a resilient supply chain
The COVID-19 crisis has disrupted many lean supply chains with just-in-time inventory. Upstream, companies are struggling with stock-outs due to the closure of operations by suppliers, lack of suitable alternate sourcing options and closure of shipping routes. Downstream, companies that can still maintain full production capacity are facing restrictions in delivery routes and changes in buying patterns.
Start building a resilient supply chain by:
- Assessing your supply chain risks in the specific context of the COVID-19 crisis. Identify risks at external suppliers and single internal or external points of failure that may cause the entire collapse of your supply chain.
- Analysing and evaluating the disruptive impact of supply interruptions on fundamental business functions.
- Evaluating your current resilience and capabilities, as well as additional capabilities that may be necessary like organising different site cleaning intervals and disinfection.
- Identifying alternative sourcing strategies.
- Taking specific temporary actions to stabilise operations such as stock building and extra resources.
- Consulting with your suppliers and clients to develop alternatives.
4. Be versatile to respond to a rapid change in demand
These days, demand is marked by volatility. The hospitality and travel industries are reporting steep drops in demand, whereas e-commerce players can’t keep up with the sharp increase of orders. How to respond? Forget about traditional forecasting tools that take into account last year’s demand and traditional seasonality. Create instead several scenarios based on clear parameters. Choose one and update it weekly.
Also focus on:
- Performing frequent assessments of demand patterns and the impact on your scenarios to reduce the time horizon for production capacity planning cycles.
- Strengthening customer relationships, by reaching out to your customers, understand their needs and building solutions together.
- Assessing the impact that disruptions in other supply chains could have on customer demand.
5. Prepare a recovery plan now
The crisis will end at some point. Business leaders need to be ready to pick up signals from the market for when it’s time to switch to recovery mode. Time and agility are key to maintain or gain market share. Ask yourself: What does it take to resume operations? How much time will this take? Which ramp-up activities will be necessary? What are the new market conditions?
Start looking at:
- Measures to enable manufacturing facilities to remain available or to restart production quickly after the crisis.
- Potential indicators of an uptake of demand and the implications for your supply chain.
- Your manufacturing start-up process and procedures, including filling your supply chains and organising the necessary workforce.
6. Transform your business
Once companies have solidified their strategies to build a more resilient organisation, it’s time to prepare for the new normal. How will your company’s organisation structure, way of working, activities and assets fit into this new reality? Your ability to win in some segments may improve, while some parts of your business may have become redundant or less attractive. An agile mindset will help companies to reposition themselves for growth.
Prepare for future success by:
- Monitoring structural changes in customer attitudes and expectations.
- Assessing fundamental changes potentially required in your business model to address new opportunities and walk away from less attractive segments.
- Evaluating your capital structure amidst new economic realities.
- Anticipating and preparing the required structural changes for a smooth transition and steep recovery.