Over the next couple of weeks, and maybe even months, the focus of organisations will rightly be on looking after the welfare of our employees and indeed their families, whist finding ways to be able to continue to provide products & services to our customers and clients. However, notwithstanding the current crisis, firms should also, if or when they are ready, move to harness the learnings from the disruptive impact of Covid-19 to make their future business more resilient.
Most organisations will currently be under significant stress in managing:
- The Covid-19 crisis from workforce motivation and management; demand, supply-chain; and financial management and planning perspectives
- BAU’ and business operations to try to meet customer expectations and fulfil contract obligations – be that goods and / or services
- Financial headroom, cash, balance sheet and financial / debt covenants
- The forecasting of earnings, cashflows and workforce impacts over the next couple of quarters
However, the science is indicating that we should come to a point where the disruption from Covid-19 will abate and we can approach a ‘new normal’. It seems clear though, that the ‘new normal’ will be very different to the normal we were used to pre-Covid-19. For one, the dependency of supply-chains on a particular country and/or region has been exposed. Some business will be in financial distress or be in danger of going under as a consequence of the reduced demand (and hence cashflow deterioration) during the pandemic, and some sectors might require ongoing financial and/or government support. Also, our workforces are likely to challenge some of the notions of having to be in the office given that they will have been working remotely for an extended period of time.
So, what are the disruption lessons that we need to take on board as we move forward:
- Disruption needs to be an integral part of our strategic and risk management processes
- The employee and workforce response need to consider the wider ESG responsibilities of corporates – how do we look after and protect the workforce beyond their contractual obligations (e.g. sick pay, reduced hours, support to facilitate continued working)
- Predicting the what and how of disruption is challenging. However, by thinking about disruption from a strategic and operational perspective, we are more likely to both identify possible sources of disruption and indeed, be in a position to respond decisively when disruption happens
- The scenarios and / or impact analysis in relation to disruption tend to underestimate significantly the potential ramifications – many firms have been tricking themselves into believing that disruption is a severe outcome for a known risk. Covid-19 has demonstrated that the impact of disruption can be devastating and form an existential threat to businesses and entire sectors
- When considering the potential impact of disruption – are we taking into account more wide ranging and / or systemic impacts; e.g. how could the future of our industry be affected by the disruption of a virus outbreak such as Covid-19?
- Business Continuity Plans and Crisis Management Plans need to be designed to incorporate scenarios with the severity of impact that we have observed from Covid-19
- Plans have to been tested against very severe outcomes, and gaps and shortcomings identified before they have to be used in anger
- Stress test the we way we analyse and model longer term viability will have to make sure we incorporate more severe scenarios both in term of the scale and duration of the impact, whilst recognising that Covid-19 has unique characteristics in terms of the impact and potential duration of the risk.
However, few organisations will, unless they consciously dedicate management time and attention to it, be thinking about repositioning their business post Covid-19. In order to succeed post the crisis, considerations should be given to how we:
- Provide a better value proposition to existing and new colleagues – e.g. balance of home and office working, reducing unnecessary travel and commuting time, leveraging technology in a user-friendly fashion, providing safe and predictable work environments?
- Leverage the learnings of remote working and other countermeasures to increase efficiency and potentially lower costs?
- Structure our business and our teams to increase the resilience to future disruptions (be that pandemic or other market/competitive/technology/business propositions)? This could include:
- Responding to the workforce and financial impact of Covid-19
- Maximise the performance of the core business – managing cash shortages, managing supply-chains and bottlenecks, delivering excellent customer service
- Develop the post Covid-19 business structures and offerings – pricing, delivery models, logistics & sourcing solutions, new propositions and/or products, hedging and other risk transfer arrangements
- New strategy, risk management and financial planning processes
In conclusion, there are no easy fixes however, being able to operate and plan on different time horizons will be key. As set out in the diagram above, crisis management, business restitution and planning for the future all need to be given the right resourcing at the right time!