How far can you flex in the wind while keeping your roots secure?

Authors

Oliver Jones

EY Global Strategy and Transactions Leader for the Government and Public Sector; Partner, Geostrategic Business Group

Passionate about providing outstanding support to governments and businesses. Deeply committed to excellence in public policy. Team builder. Mentor. Flexible worker. Married father of three.

Cathy Koch

EY Global Tax Policy Network and Americas Tax Policy Leader

Leader in US and global tax policy with an informed perspective on public and private sectors and a deep knowledge of the US legislative environment.

4 minute read 26 May 2020

As COVID-19 reshapes the role of government, business leaders must act decisively in a fast-evolving policy and regulatory environment.

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

In their response to the pandemic, governments have taken exceptional steps to preserve lives and livelihoods, such as asking citizens to stay at home and subsidizing private-sector wages.

As the focus shifts to reviving social and economic life, what role will governments play in the economy, how will they pay for economic support packages and what actions can businesses take as this process unwinds?

Adapting operations

Around the world, governments have acted with lightning speed to implement policies intended to protect lives and safeguard the economy in the face of the pandemic.

Now, many governments are loosening restrictions on social activity. But they may have to reimpose them if this leads to spikes in infection rates among their population. Restrictions will vary from country to country and even from region to region within a country. This will affect consumer activity, and the general uncertainty and restrictions will continue to depress demand.

Governments are continuing to refine guidance and regulations to help keep people safe at work, which includes limiting capacity levels and ensuring social distancing in workplaces. The evolution of the guidance and regulations varies from country to country, and even within countries, creating challenges for those businesses that operate in multiple jurisdictions.

During the crisis, many governments have also gone to extraordinary lengths to provide financial support to businesses and households. EY has tracked economic support programs in over 130 jurisdictions, which have collectively implemented over 2000 fiscal and monetary policy provisions. Across the globe, the value of these programs ranges from 3% to 39% of GDP¹. But this support cannot continue indefinitely and will likely be phased out before the crisis is resolved entirely.

COVID-19 impact

39%

Governments have allocated up to 39% of their GDP to COVID-19 support programs.

As businesses navigate the evolving role of government in the crisis, they will need to take a strategic approach to monitoring changes and adapting operations as appropriate. Key actions to take include:

  • Communicate with policymakers. Open a dialogue about the challenges the business faces in the current environment and the policies that will mitigate those challenges.
  • Proactively monitor political pressures, health data and scientific advice around social distancing guidelines across the different jurisdictions in which they operate. Anticipating the loosening or reimposing of restrictions can help leaders get ahead of government guidelines.
  • Establish an internal set of workplace safety standards that must be met across the organization, even if these standards exceed what is required by authorities in certain jurisdictions. Engaging with trade associations can enable businesses to mobilize more quickly and effectively when new policies or regulations are introduced.
  • Track and assess the evolution of economic support programs to understand continued eligibility for support, ensure they meet ongoing repayments and reporting obligations as the programs unwind, and monitor any conditions that come with support such as taking measures to promote sustainability.

Building resilience

The COVID-19 pandemic has reset priorities. The biggest tasks for governments everywhere are keeping people safe and building resilience in key sectors of the public and private economy, and restoring employment and essential public services. Governments will have to move quickly to show their citizens that they have learned lessons and are prepared for future risks, even if this means new regulations for the private sector. 

The crisis has exposed the risks of long supply chains for essentials such as medical equipment and pharmaceuticals, putting pressure on governments to shore up supplies: governments are ultimately held accountable for shortages, so expect them to boost resilience in particular sectors by encouraging or even mandating more localized production and supply chains.

And businesses are talking about moving from lean supply chain management to agile supply chain management to lessen reliance on offshore sources of production. 

For almost all governments, repairing public finances will be one of the most urgent and difficult tasks in recovery and beyond. As they take measures to do so, organizations should prepare contingencies for different post-COVID-19 tax and economic environments.

Business leaders will need to prepare to play their parts as governments work to build a more resilient society and economy in the face of ongoing uncertainty. Key actions to consider include:

  • Continue to communicate with government policymakers. Discuss with them the policies that would support your efforts to take care of your employees, create employment opportunities, serve your markets and customers, and innovate for the future – once the health crisis is resolved.
  • Be ready to act fast. Governments are expected to introduce laws and regulations much more quickly and with less opportunity for consultation than we have seen in the past.  A fast-moving regulatory environment underlines the need for better collaboration across the company. For example, close communication between procurement and sales can help avoid inventory mismatches.
  • Build resilience in the supply chain, moving to more agile supply chain management.
  • Assess the risks and opportunities that could arise from government following a more active industrial policy.    
  • Prepare for tax expansions in economies that are seeking to shore up public finances, and develop tax strategies that support the long-term health of the business.
  • Undertake contingency planning for different post-COVID-19 tax and economic environments
Understanding the policy environment can help business adapt faster

As the crisis evolves, governments will continue to make decisions quickly, generating more legislation and regulations with less opportunity for consultation. Businesses should plan for different legislative and regulatory scenarios, set up a dedicated COVID-19 monitoring team at the center of the organization, discuss actions at Board level and ensure a CXO-level individual is responsible for these actions.

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Summary

The COVID-19 pandemic has upended life in most parts of the world. The nature of the crisis has required governments to respond with almost every tool in their public policy arsenals. As the immediate threat to lives and livelihoods recedes, government boundaries will not return soon to the pre-pandemic status quo. Developing a deeper understanding of government policy and planning can help business leaders prepare for a more proactive government presence. Opening a dialogue with policymakers can enhance a mutual understanding and appreciation.

About this article

Authors

Oliver Jones

EY Global Strategy and Transactions Leader for the Government and Public Sector; Partner, Geostrategic Business Group

Passionate about providing outstanding support to governments and businesses. Deeply committed to excellence in public policy. Team builder. Mentor. Flexible worker. Married father of three.

Cathy Koch

EY Global Tax Policy Network and Americas Tax Policy Leader

Leader in US and global tax policy with an informed perspective on public and private sectors and a deep knowledge of the US legislative environment.