3 minute read 18 Mar 2020
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COVID-19 Crib Sheet - New Zealand

Authors

Darren White

EY Oceania Private Services, Tax Partner

Cultivates long-term growth for people and their businesses. Provides innovative tax advice. Family at the heart of it all.

Mark Dunwoodie

EY Oceania Growth Markets & Private Client Advisory, Associate Director

Blends real world business experience with EY’s extensive knowledge base, global network and areas of technical expertise to deliver solutions that add value.

3 minute read 18 Mar 2020
Related topics COVID-19

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While the world deals with the deeply complex implications of COVID-19, the following crib sheet will help you navigate your business through the crisis, by asking critical questions about your customers, suppliers, people, finances, technology and governance.

The World Health Organisation has declared COVID-19 a public health emergency of international scale. It is a crisis that has profound implications for companies globally, from the complete or partial shutdown of factories, to supply chain disruptions, labour shortages and cash flow stress, companies are feeling the business and financial shock of the outbreak.

The crib sheet below will help you put a plan together to navigate your business through the crisis:

People

Your people are your greatest asset. And the way a business deals with its workforce through the crisis will have a strong bearing on how quickly the business recovers once the emergency has passed.
  • How can you best support the wellbeing of your team?
  • Are you following the Government’s COVID-19 website (covid19.govt.nz) for latest updates, understanding the implications for your business and keeping your employees informed? Do you have a plan (for key staff) if one or all the team become ill?
  • Do you have a resource plan in place to maintain operations during the lockdown? Do you have a plan for closing during a lock-down and restarting afterwards?
  • Has communication gone out to employees about lockdown, remote working and what the process will be to return to work?
  • Can meetings be conducted using technology?
  • What is your organisation’s leave policy, have you considered potential and temporary changes to these policies, what is your ability to fund extended leave periods? 
  • What assistance will you need to provide to displaced employees whose affairs may be impacted because of border closures and restricted travel?
  • If your business can operate remotely, are critical technologies, processes and procedures in place to ensure quality is maintained and operations can continue?

Leadership

Strategic leadership is key to dealing with a the rapidly changing risk environment that COVID-19 has created.
  • Is your board engaged, in touch and responsive? What additional skills and connections can they bring during the crisis? What are your current messages to the business regarding their preparation, management and response?
  • Does your board have a succession plan in place? Who is responsible for key operational and strategic decisions? Who will take over the duties & responsibilities of these key individuals if they become unwell?
  • Has the risk profile of your business changed? Have you reviewed your risk profile and developed an action plan to identify inherent risk, address, mitigate and manage the residual risk?

Customer

While the COVID crisis roils around the globe, having clear sight of your customers is even more critical in a crisis than it is in a business-as-usual scenario.
  • Are you in direct ongoing contact with customers to understand and manage their expectations?
  • What will be the impact on customer buying behaviour? Is your business model flexible enough to meet shifts in demand?
  • Will there be potential impact on availability of your products, and have you communicated to your customers?
  • Do your contracts address what happens if you or the customer can’t meet their obligations under the contract due to the impact of pandemic.
  • What are the consequences when your customers go into lockdown or close up shop?
  • With the closing of shops and services can you pivot to meet increased needs from online customers?
  • Are you ready to make the most of opportunities in the market that are caused by the disruption? Can targeted spend on marketing boost you through a downturn?

Suppliers

The disruption to global and domestic supply chains has been in train for several weeks and will potentially continue for many months. It’s crucial to be in constant contact with suppliers, maintain a clear view of the options and embed contingency and flexibility into business operations.
  • Have you communicated with your suppliers about how this will impact your operations?
  • Have you reviewed your stock levels and expiries? Can your reorder instructions be reconfigured to take advantage of bulk buy opportunities?
  • Have your suppliers been impacted by supply chain or manufacturing disruption? Do you have contingency plans in place if your supplier stops operations? Are there local or regional alternatives?
  • What are your contractual obligations to suppliers – are you committed to purchase fixed quantities? Is there any flexibility if you can’t or no longer need to acquire those quantities?
  • Do your contracts address the possibility of suppliers undertaking a forced closure? Do you prepay your suppliers, can you renegotiate terms?

Technology

A sound technology plan will underpin your business’s ability to keep operating, maintain verifiable data points and connect your people.
  • Have you implemented your Business Continuity Plan (BCP)? Are your IT systems and processes able to support flexible and remote working if not will you need to consider closing during lockdown?
  • Do you know if your networks are secure? How will you support staff with IT issues as they work remotely, what process and communication do you have in place? Are your outsourced service providers (e.g. IT, phone) and other relevant third parties able to support your business?

Financial

Managing your company's financial position can be challenging especially when you have many other areas of the business to address, but it is essential. Ensure you are engaging with your banks and insurers to understand your position and the support available.
  • Have you spoken to your bank about your facilities? What are your obligations to the bank, specifically around debt covenants?
  • Have you contacted your insurance provider to understand what is covered and when its payments are received?
  • Do you prepare cashflow projections regularly, and do you understand the cashflow requirements of your business? Have you prepared forward scenarios based on best and worst-case outcomes?
  • Have you analysed your working capital requirements, have you forecast your cash flow requirements during reduced operations or lock down periods?
  • Have you run scenarios comparing the cost of continuing to operate with less staff/customers with to the cost of completely shutting down for a period?
  • Do you have alternatives planned if your business partners shut down or are affected? What happens if outsource services (i.e. payroll) can’t operate normally?
  • Have you considered any potential tax relief, such as instalment arrangements or tax pooling to ease the cash flow impact?
  • As cashflow tightens, are you leveraging government grants and incentives to support your R&D activities?
  • If you are an importer have you explored deferred payment arrangements with Customs or reviewed deferred payment reviewed limits already in place?
  • Are you eligible for a Government wage and leave subsidies? Do you qualify for a short term loan under the Business Finance Guarantee Scheme?

There are lessons companies can learn and carry forward once the crisis has passed, and they’ve had a chance to analyse their response. However, companies should be making decisions and taking actions during the crisis with recovery in mind, as it will become clear which companies have the resilience and agility to reshape their business strategy to thrive in the future.

Longer term, companies will need to consider how robust their business, management team and initiatives were in facing the crisis. It will also be important to consider and reset the business assumptions that underpin the supply chain and other concentrations that many businesses have been exposed to over time.

Our EY Private team are on-call to provide support:

Andrew Moorby | Auckland
+64 27 489 9949
andrew.moorby@nz.ey.com

Mark Dunwoodie | Auckland
+64 21 300 727
mark.dunwoodie@nz.ey.com

Rob Sewell | Wellington
+64 21 282 0227
rob.sewell@nz.ey.com

Liz Foxwell-Canning | Christchurch
+64 27 886 0016
liz.foxwell-canning@nz.ey.com

Summary

Getting through a crisis takes a well thought out, strategic response. It's important to start with the right questions. 

About this article

Authors

Darren White

EY Oceania Private Services, Tax Partner

Cultivates long-term growth for people and their businesses. Provides innovative tax advice. Family at the heart of it all.

Mark Dunwoodie

EY Oceania Growth Markets & Private Client Advisory, Associate Director

Blends real world business experience with EY’s extensive knowledge base, global network and areas of technical expertise to deliver solutions that add value.

Related topics COVID-19