Now, the focus remains on human and financial health
As Canadians know, perspectives on our health, well-being and the economy have changed by the day since March 13. We now know more about the virus, and we’ve viscerally experienced the impact the pandemic has had on our lives and the economy. As some provinces begin to catch a glimpse of a flattening of the curve and consider plans to slowly reopen the economy in phases, Canadian executives know that a new normal is emerging, with sectors and companies affected by this crisis to varying degrees.
One of the hardest-hit sectors, of course, has been oil and gas — an industry that’s of significant importance to the Canadian economy. In addition to local issues, such as declining demand and stranded production, a disagreement between Russia and the Organization of the Petroleum Exporting Countries (OPEC) regarding supply further exacerbated the situation for Canada as global pricing for oil plummeted.
Canadian companies remain focused on the health and safety of their employees and customers, and on maintaining the health of their balance sheets. Given the timing of our EY Global Capital Confidence Barometer survey, the concept of “return to work” was not explored, as the full gravity of the shutdown was not known. However, this has to be a top priority for all companies in the post-pandemic world. How companies manage supply chains, customer experience, customer safety, employee safety, evolving regulatory environments and changing business models as the economy reopens will become the key questions all executives need to assess.
Next, the top three leading practices for Canadian companies post-pandemic
Companies in every affected sector, as previous editions of this report have revealed over the last decade, should consider three leading practices.
1. Reshaping results
As Canadian companies begin to emerge from the crisis and address immediate short-term priorities of keeping their employees safe, keeping their business open and securing enough liquidity to survive, they need to be rethinking their vision for what’s next and develop an action plan for sustained success in the recovery period.
Portfolio reviews should underpin the capital allocation process. They should also identify assets that are at risk of disruption or that face future growth challenges that may make them better off owned by another company or a private equity fund. While we were encouraged to see that more than one-third (35%) of Canadian respondents in our latest survey review their portfolios on a quarterly basis, in the face of this new world we expect portfolio reviews to be an even higher priority on board agendas.
It became evident following the global financial crisis that companies who made bold acquisitions in the recovering market outperformed their peers in the decade that followed. Similarly, Canadian executives have the opportunity, once the extraordinary challenges presented by COVID-19 are past them, to take decisive action, create a plan to reshape the results of their organization and implement a focused M&A strategy to fuel growth into the next decade.
2. Supply chain reinvention
Even before COVID-19, geopolitical, trade and tariff uncertainty had nearly one in five (18%) Canadian companies looking to reconfigure their supply chains. As companies realized the depth of the pandemic’s impact on their supply chains during the survey period, 96% said they needed to re-evaluate, or were already taking steps to change, their global supply chains.
Arguably, every Canadian company will be looking to reinvent its supply chain on some level in the wake of the pandemic. Some may look closer to home for suppliers, while others will seek alternative suppliers in multiple jurisdictions so they aren’t caught flat-footed again. Still others will move from linear supply chains to networked value chains that are data-driven and can react to events and make changes in real time. By sharing data in the cloud, or directly integrating with suppliers, Canadian companies can improve collaboration and supply chain visibility.