For now, Brazilian companies need to focus on resilience
The sudden and unexpected nature of the pandemic is compelling Brazilian executives to reassess their operating models and search for ways to become more agile and resilient. The unique nature of current events now demand that Brazilian companies take steps that they may still not yet be fully prepared for.
Although Brazil is less exposed from a global supply chain perspective — ranking 157th in the World Bank’s 2018 rankings for foreign trade openness — we expect many businesses will experience significant disruption to their operations. According to executives, the sectors most affected by COVID-19 in Brazil are advanced manufacturing, transportation and automotive, consumer and financial services. On the other hand, the least impacted sectors are telecommunications, media and entertainment and life sciences.
Ensuring liquidity and credit access will be essential for sustainability. The crisis also demands that all businesses provide more transparent and enhanced communication with their stakeholders.
With vulnerabilities in the supply chain due to interruptions of some services and sectors, 83% of Brazilian executives say they are re-evaluating or are already taking steps to change how they manage their workforce; another 61% are reviewing or are making changes to accelerate their plans for automation.
Preparing for what comes next, companies will restart their transformation plans
Consistent with what global executives indicated prior to the crisis, transformation was high on the corporate agenda in Brazil. These plans have been paused for many companies. Many companies have suspended these plans, but they should be relaunched — with more energy, if possible — as soon as the situation stabilizes.
M&A will play a role in transformation as companies look beyond the crisis
The pandemic will bring long-lasting change on many fronts, including customer behaviors. Business models will have to change, and we expect some companies will use M&A to help drive transformation. Some Brazilian companies will seek to acquire assets that fit new business models or are available at favorable valuation. Others will look to restructure by divesting of assets.