4. Maximize the use of government support policies
Central and local governments in China have released several financial, social insurance and tax-related policies to support companies. This includes the China Securities Regulatory Commission’s (CSRC) interim policy on listed companies refinancing. Recently the US, UK and many other developed nations have announced amendments to tax and financing policies.
Companies should monitor nation-wide government and organizational opportunities for support and how they may best serve the individual circumstances of their situation. It is important to note that government support may differ based on jurisdiction and sector. Companies will need to identify and understand each offer of support and determine which ones are best for their organization.
The China State Taxation Administration (STA) has published a series of policies to provide support for preventing and treating the epidemic, including:
- Exempting and refunding value added tax (VAT) for enterprises providing certain services for epidemic control or manufacturing key epidemic-related necessities.
- Offering a full corporate income tax (CIT) deduction for purchasing equipment to manufacture epidemic prevention-related supplies.
- Providing an individual income tax (IIT) exemptions on bonuses and allowances relevant personnel receive for treating the epidemic.
- Issuing other policies that encourage public-benefit donations.
Temporary social insurance contribution reductions and exemptions the STA and Ministry of Finance (MOF) have introduced also have helped to ease the burden on companies.
Other countries impacted by the crisis, including Singapore and Japan, are introducing similar government policies. Companies should monitor the availability of these kinds of programs and use them to mitigate the risks they face.
5. Build resilience in preparation for the new normal
Once companies have solidified strategies based on stress tests and communicated any new directions with relevant stakeholders, they will need to execute based on revised plans while monitoring what continues to be a fluid situation. Senior management should report any material deviation from the plan in a timely manner so that their companies can take additional action to avoid further negative impact.
Once the COVID-19 outbreak is controlled, companies will want to review and renew business continuity plans (BCP). They’ll want to assess how existing BCPs are working. If there are deficiencies, companies will want to identify root causes, whether it’s timeliness of action, lack of infrastructure, labor shortages, or external environment issues. Companies will then want to consider putting new internal guidelines in place based on lessons learned, as well as solid contingency plans to build resilience and better respond to future crises.