4 minute read 17 Jun 2020
Architect reviews plans on a pinboard in an office

Why resiliency planning will strengthen your business after COVID-19

By

Rob Weber

EY Global Leader of Business Tax Services

Believer that exceptional client service is core to who we are. Passion for the importance of diversity and inclusiveness that leads to shared success. Husband and father of two. Avid golfer.

4 minute read 17 Jun 2020

Realigning business strategies, revamping the financial blueprint, and scrutinizing tax risk are key to long-term success.

While business leaders wrestle with the immediate impacts of the global COVID-19 pandemic — stabilizing operations, updating workforce strategies and addressing needs around supply chains, risk management, capital and financing — it’s also important to keep in mind the impact on longer-term enterprise resiliency. Proactive, nimble planning is needed now and in preparing effectively for growth and success in a newly defined future.

Following are three steps to take now to position the organization for tomorrow:

1. Realign the business strategy

After first ensuring the safety and wellbeing of the workforce, the next most pressing concerns are liquidity and revenue generation. Be open to adapting the business plan to keep revenue flowing. Many companies are finding success in moving to work-from-home models, using technology to keep people connected and productive. If employees must be physically present, but work flow is down, consider focusing those employees for now on secondary tasks, such as the inventory process or an early start to next-season production. Or, consider converting normal operations to other purposes that help fight the COVID-19 crisis, such as manufacturing companies that are producing medical equipment and supplies.

Now also is an opportune time to consider broader emerging trends in the changing economy and evaluate if the organization is prepared for the future. As tax administrations increase their technological capabilities, for example, does your company have the right talent and technology capabilities to meet new compliance requirements? In a recent article, Kate Barton, EY Global Vice Chair of Tax, outlines four critical steps every global business should take to get their tax operations on a resilient path, including the possibility of co-sourcing some aspects of the current tax and finance operating model.

2. Revamp the financial blueprint

As with revenue generation and expense control, improving cash flow should be a top priority. Many governments have introduced financial measures to help businesses respond to the current crisis — accessing cash through tax cuts, legislating investment incentives, offering grants and loans, extending filing deadlines. These stimulus measures often require significant analysis and documentation before acting. To assist, EY teams have created a government response tracker that helps companies assess measures available across hundreds of jurisdictions.

As immediate needs are met, companies also should evaluate longer-term liquidity needs and methods. While there are operational approaches to apply, such as discipline with working capital and expenses, collections and inventory management, there also are many tax-related approaches. Managing liquidity through intragroup debt reallocation, for example, supply-chain planning, evaluating tax incentives and modeling the timing of tax deductions and NOLs.

3. Scrutinize tax risks

While a global pandemic may not have been a top scenario in your company’s risk management plan, many of its consequences are issues that businesses typically face at some point in their history: business interruption, supply-chain disruption and staffing dilemmas. Dealing with all of them at once is what makes this challenge distinctive. Don’t let this extreme case overly influence future direction. As resource allocation decisions are made, for example, it is critical to avoid budget tightening today that leaves the entity unable to handle some other potential challenge tomorrow.

In addition, as government entities get back to full capacity, they will start addressing a backlog of audits and information requests as pressure builds to generate revenue for covering COVID-19 costs. Whether or not a company participates in an incentive program, many will face more aggressive audits and tax controversy risks. This is an area to plan with the potential to favorably settle long outstanding matters and ensure your internal and external resource needs are optimized for the expected focus.

As this crisis flattens and your organization moves from urgent response to routine business, ensure you have the right people and advisors, along with the right skills and tools to manage enterprise needs. By adjusting key strategies around talent, operations and risk management now, you can help ensure your organization is positioned to better weather the end of this current crisis and achieve new success in the changing economy.

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Summary

Proactive, nimble planning is key to surviving and thriving in turbulent times. Beyond the global pandemic, every organization will need to reposition itself for growth and resiliency in the newly defined future. By adjusting your business operations as well as your approaches to funding and risk management, you can position your business not only to weather the current crisis, but to achieve new success in the changing economy.

About this article

By

Rob Weber

EY Global Leader of Business Tax Services

Believer that exceptional client service is core to who we are. Passion for the importance of diversity and inclusiveness that leads to shared success. Husband and father of two. Avid golfer.