6 minute read 10 Jun 2020
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How to strengthen business resilience during disruptive events

The crisis scenario is dynamic and impossible to predict; however, an informed response could build trust and brand affinity.

This article is part of a series about COVID-19 enterprise resilience.

The coronavirus outbreak is causing unprecedented levels of disruption and uncertainty in both the industry and organizations’ unique ecosystems. Organizations require agile pandemic response plans to deal with longer-term disruptions and outages experienced during this pandemic. 

How could COVID-19 impact businesses?

The situation is dynamic and impossible to predict with organizational exposure uniquely impacted by industry, geographies and operating models. These factors are compounded by complex, international supply chains and global travel. Major areas for many businesses will include:

  • People

    Employee welfare and workforce management tops the list of business concerns. For those with frontline consumer interaction, there is an inherent risk of virus exposure in the normal course of work. Travel restrictions also impact normal ways of working and remote working is not always a viable option. Consideration must also be given to supporting globally mobile workforces, business travelers, international assignees and contractors.

  • Global trade and supply chain

    Globally interconnected supply chains meant the first shockwaves were rapidly felt from the initial outbreak in China. An immediate focus is short-term mitigations to minimize impacts such as alternative ports and component sourcing, but dual sourcing strategies and critical reviews of trade routes will likely increase.

  • Customer demand

    Consumer behavior and shopping patterns will impact demand. For example, an increase in online vs. bricks and mortar. Panic buying or supply chain issues may cause shortages or for certain products to become unavailable.

  • Legal and contracts

    Businesses will need to consider how they can best mitigate the legal risks of contractual non-performance, such as penalties, cancellation and termination, whether their own or in their wider supply chain. Understanding the risks in the contractual landscape and identifying preventative actions quickly will be key to minimizing loss and supplier dispute.

  • National government and global responses

    The World Health Organization provides guidance, but governments make decisions on how best to protect citizens’ and residents’ interests such as border closures, restrictions on travel or group gatherings and imposed quarantine. Leading businesses also predefine internal alert levels that dictate local response scenarios such as staff travel or meetings — to direct the efficient and consistent responses across their sites.

  • Finance management

    More frequent cost impact reporting and revenue forecasting may be required, given volatility and localized anomalies. Results and operational changes may generate a need for new funding or existing funding to be redirected. The knock-on effects could have consequences for pricing and tax strategies.

  • Organization disclosures

    The impact of share price and economic volatility may have implications for transactions, financial reporting, organization disclosure obligations and other statutory duties.

  • National and CNI Agenda

    Most of the countries in the Middle East are moving rapidly to implement their national agenda and vision for the future. The pandemic and the consequential lockdown will adversely impact the pace of implementing the national agenda in the short to medium term. In addition, the Critical National Infrastructure (CNI) of each country will be impacted and should be prepared to activate their response plan to continue existing operation.

Seven key COVID-19 response recommendations

Businesses will be judged in real time on how they manage the challenge, their behavior and strategic choices. An informed response could build trust and brand affinity, whereas poor decisions will pose a real reputational risk.

1. Build a trusted team

Bring together a crisis management team of key decision-makers, including but not limited to: leadership and strategy, operations, human resources, communications and corporate affairs, legal and risk. Empower the team to make and implement decisions quickly.

2. Review the current plans and capability

Perform an immediate review of any existing or activated business continuity or contingency plans. The situation is fluid and rapidly evolving, therefore internal and external assumptions will have moved on — plans will have to be refreshed and capability gaps bridged.

3. Utilize timely intelligence

Maintain situational awareness by gathering up-to-date and accurate information from trusted official sources and experts. Cascade the business-relevant facts to your teams and encourage them to not get distracted by media panic.

4. Operate a deliberate response to an agreed rhythm

Ensure your business response operates at a pace determined by the leadership:

  • Avoid waiting for new decisions or actions to be dictated by outside factors
  • Limit abrupt localized decision-making
5. Understand exposure to third party risks and impacts

Assess the reliance on third parties in your network, their vulnerability to failure and potential viability impacts. If possible, extend this risk review to their supplier networks. These factors may have commercial implications such as contractual liability for unforeseen costs, delay penalties or termination risk, insurance cover which include any limitations or exclusions, force majeure and hardship clauses.

6. Communicate and engage staff, suppliers and customers
  • Engage staff in a consistent dialogue about actions you are taking to protect and support them
  • Engage with suppliers to properly pinpoint the most material risk exposures and jointly define mitigations
  • Keep customers and wider external stakeholder groups informed and promote confidence in your business resilience through clear and consistent messaging
7. Establish or reinforce your crisis response process

Ensure that all functions, sites or countries in your network know the firm-wide approach to crisis management and the response protocols. Advise teams on who holds the mandate for decision making and communications at leadership and local levels, given the need to potentially act at a much quicker pace than is usually expected.

How can businesses better equip themselves to be more resilient to major disruptive events or rapidly evolving crises?

Further epidemics or major health emergencies are a given — indeed, there are likely to be additional phases of the current COVID-19 pandemic. A business continuity plan is therefore a basic requirement as well as an evolving resilience strategy.

To effectively build a resilient business, companies need to focus on certain key capabilities. This framework can be applied across all aspects of the business operating model or parameters, but specifically for people and physical supply chains.

Summary

The full impact of COVID-19 will not be understood for many months. It will vary both by industry and by a company’s unique ecosystem which includes its workforce composition, supply chain and operating model. Early decision-making will give businesses greater options when the impacts of COVID-19 become felt. Robust resilience plans will help them to respond to market demands actively.

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