COVID-19: Systems resilience in times of unprecedented disruption

In the unfolding COVID-19 crisis, systems resilience is being tested like never before. IT and business leaders must ensure that their organizations can continue to operate through this unprecedented disruption by quickly addressing the stability of critical business processes and underlying systems. Systems resilience describes a system’s ability to operate during a major disruption or crisis, with minimal impact on critical business and operational processes. This means preventing outages, mitigating their impact, or recovering from them. Our definition of systems includes applications, architecture, data, cloud, infrastructure and network.The immediate challenge: Operating in a new reality
Companies are operating under a new reality that puts great strain on their systems.

  • Business continuity risks including supply chain disruptions, shifts in customer touchpoints, unavailability of critical resources, and gaps in business continuity protocols.
  • Surges in transaction volumes (for example, because of a shift from physical to digital purchasing) or precipitous declines in demand.
  • Monitoring, reporting, and decision-making with real-time data to respond to immediate business needs in a dynamic environment.
  • Workforce productivity challenges due to employees working remotely, associated with connectivity and security.
  • Security risks including countering bad actors who will inevitably seek to take advantage of individuals and organizations.

Most companies face a significant gap
Based on our research, most companies are already starting with a significant gap in systems resilience. In 2019,  MWC conducted a vast survey of 8,300 companies that revealed only a small minority have cracked the code on systems resilience.

10%

Only the top 10% of 8,300 companies surveyed have cracked the code on systems resilience.

For the rest, the gap has become more acute. Now is the time to take action to address systems resilience issues today and lay a foundation for the future. The leaders today and those who act quickly to address the immediate challenge will successfully navigate the crisis and emerge stronger.
Actions to take Now and Next

We’ve outlined clear steps companies can take to bring stability, reliability and resilience to systems, fast.

MOBILIZE: WITHIN 72 HOURS

  • Establish a lean governance structure for dynamic decision-making.
  • Create an empowered resilience response team to address immediate issues.
  • Proactively identify vulnerabilities and quick wins using toolkits.

NOW: 2 WEEKS AND BEYOND

  • Establish small scrum teams with autonomy to execute point solutions using the six building blocks of systems resilience:
    • Elastic Digital Workplace
    • Hyper Automation
    • Architecture & Performance Engineering
    • Cloud Acceleration & Optimization
    • Service Continuity
    • Cybersecurity
  • Capture remediation actions in the form of 30, 60, 90 day plans.

NEXT: AN EYE ON THE FUTURE

  • Establish a structured intake process and platform to capture areas that need ongoing attention.
  • Scale to the new normal by defining long-term transformation strategies that drive towards a more resilient IT landscape.
  • Focus on small, incremental programs to self-fund transformation.
  • Optimize ecosystem partnerships to shift to an asset-light model and mitigate vulnerabilities.

Mobilize: Prepare to take swift action

CIOs and IT leaders play a central role in ensuring their organizations can continue to operate through disruption, by taking the following steps in the first 72-hours:

  • Establish a lean governance structure with representation from business and technology for dynamic prioritization and decision making.
  • Create an empowered resilience response team that immediately mobilizes resources to focus on business continuity in critical areas.
  • Proactively identify vulnerabilities and quick wins to address current challenges using toolkits such as the Accenture Systems Resilience Diagnostic.

Now: Apply the six building blocks of systems resilience

Accenture has identified six resilience building blocks that will enable a quick response to critical systems vulnerabilities.

01Elastic Digital Workplace

Quickly enable remote work with a focus on culture, technologies, communications and policies—at extraordinary speed and scale.

  • Immediately help employees adapt to remote working (e.g. effectively run virtual meetings).
  • Deploy or scale collaboration tools and provide guidance for operating in a remote connected workplace.
  • Organize an Elastic Digital Workplace Task Force including business, HR, IT and security leaders.
  • Equip traditional desktop workers with mobile solutions and implement virtual desktop solutions.

02 Hyper Automation

Accelerate existing automation investments to mitigate the impact of systems disruption, free up human resource capacity and streamline IT workforce management.

  • Identify and prioritize bottleneck areas.
  • Implement automation to immediately resolve high-volume tasks by leveraging techniques like machine learning and AI models.
  • Augment that which cannot be completely automated with digital co-workers.
  • Optimize the deployment of human talent to focus on high touch activities.

03 Architecture & Performance Engineering

Quickly resolve critical systems availability and performance constraints and scale applications to meet business demand.

  • Set up a triage room to get quick consensus on problems and priorities to address first.
  • Identify and implement quick performance engineering wins such as optimizing application memory, architecture-caching and data-indexing.
  • Quickly scale application capabilities through configuration or commercial changes.
  • Apply rapid architecture remediation techniques, such as streaming data, to offload demand on critical systems.

04 Cloud Acceleration & Optimization

Navigate extreme surges or drops in demand, manage risk, deploy instant innovation and optimize cloud costs.

  • Reconfigure traffic to maximize capacity for critical applications and infrastructure.
  • Leverage the power of cloud to deploy instant innovation through new cloud-native solutions.
  • Take advantage of cloud’s pay-by-the-drink model to align technology costs to drops in demand.

05 Service Continuity

Quickly source and onboard skilled resources to support critical in-flight services or deliver new IT projects.

  • Find the right skilled resources and initiate knowledge transition.
  • Enable accelerated service readiness.
  • Support service continuity through fit-for-purpose modern engineering practices and lean governance.

06 Cybersecurity

Secure your customers, people and systems wherever they are to counter the bad actors who seek to take advantage during a crisis.

  • Rapidly deploy a Zero Trust model for multi-cloud solutions, individually-owned devices (BYOD) and third-party technologies.
  • Identify security abnormalities and events.
  • Institute daily situational threat intelligence briefings virtually.
  • Remind employees and third parties to remain vigilant as cyberthreat tactics increase.
  • Build analytics and automation for monitoring solutions.

Next: An eye on the future

Even before COVID-19, many organizations faced considerable challenges to their resilience. Once we reach the other side of this pandemic, it will be important to establish long-term strategies for greater resilience. Apply lessons learned from the experience to create a systems and talent roadmap that better prepares your company for future disruptions.

  • Define long-term transformation strategies that prioritize and address antiquated applications, architectures and infrastructure, highly manual processes and underfunded cyber resilience.
  • Self-fund your transformation through small incremental programs that drive efficiency and free up capital.
  • Leverage ecosystem partners to shift to an asset-light model and mitigate vulnerable dependencies, choosing partners resilient to global risks.
MWC can help you quickly diagnose critical business processes and systems, identify potential vulnerabilities and take practical and timely action to minimize risk and loss.As the situation unfolds, we will continuously update our materials, so please check back regularly.

We are here to help you navigate so schedule a call to discuss your specific business goals

COVID-19: Managing the human and business impact of coronavirus

The COVID-19 pandemic remains a health and humanitarian crisis, but the business impact on organizations is now profound.

What to do now. What to do next.

 

As governments make significant interventions in response to the coronavirus, businesses are rapidly adjusting to the changing needs of their people, their customers and suppliers, while navigating the financial and operational challenges. MWC is helping enterprises address the short- and long-term consequences. Among the top priorities are protecting their people, building resilient supply chains and putting in place new ways to serve their customers.

Here we address specific business impacts across a range of function areas. We will update these pages as the crisis evolves and as companies seek to address subsequent challenges.

Impact on Customers: Acting to maintain responsive customer service

The impact of the coronavirus outbreak requires brands to move at unprecedented speed to serve their customers with quality while caring for their employees with compassion. That means re-evaluating how contact centers are leveraged, how employees deliver relevant customer experiences, where they work, and how digital channels can be used to support the increase in contact center volume.
Leaders that can make the shift to new ways of working will help reduce potential revenue loss, forge new levels of trust with their workforce, and position their businesses for renewed growth once the pandemic subsides.We recommend that contact center executives address three critical areas:

Impact on Supply Chain: The need for supply chain resilience

The impact of COVID-19 on supply chain disruption was already clear when the coronavirus outbreak was confined to parts of Asia. With the virus spreading rapidly, and several economies and regions now in lockdown, the severity is greater still.
The supply chain is critical in getting goods and services quickly, safely and securely to those at risk of infection or who are working at the frontline of the medical response. Companies have a responsibility to protect the health and welfare of their employees, their supply chain workers, and the wider communities they operate in, while maintaining a flow of products and materials.Companies should consider executing the following short-term tactical plan:

  • Within 72 hours: Assess current operations and outline initial recommendations
  • Within 1 week: Establish command center and begin rapid response deployment
  • Within 2 weeks: Rapidly adjust operations and continue response cycle
  • Within 4 weeks: Establish an ongoing operating capability

A continuous cycle of risk sensing, analysis, configuration, response and operation will help to optimize results and mitigate risks:

Impact on Leadership: The need to build human resilience

The greatest immediate impact of the COVID-19 outbreak is on workforces. Organizations are therefore focusing on their primary responsibility: caring for their people while rapidly managing the shift to new patterns of work.
At this critical time, they must see through these changes in ways that gain and maintain the trust of their people. That trust depends on leaders demonstrating their care for individuals as well as the wider workforce and community. It means sharing a clear plan and transparently showing how decisions are made. And it requires leadership teams who can proactively respond rather than react, anticipating their people’s changing needs.MWC analysis shows that even in the best of times, people’s trust and engagement at work is a function of three human needs: physical, mental and relational. These needs are magnified during times of crisis. Leaders who rise to the challenge by meeting them will build higher levels of human resilience that, in turn enable their people to adapt, engage and serve customers.
It does not fall to Chief Human Resources Officers to create the right environment to satisfy these human needs. All members of the C-suite must actively play their roles. We suggest 10 immediate steps that C-suite leaders can take to build human resilience.

Impact on the Workplace: Creating a digital elastic workplace

One of the immediate impacts of COVID-19 is higher rates of sick leave. Another is the need to manage an immediate shift to remote working. These challenges can be addressed by creating an Elastic Digital Workplace. Interventions will differ for each organization, but they should be based on the following foundations:

  • PROTECT AND EMPOWER YOUR PEOPLE:
    Adjust your workplace to enable your people to work remotely through digital collaboration tools. Build the necessary skills around these new ways of working. Start cultivating a digital culture. Construct a workplace of trust.
  • SERVE YOUR CUSTOMERS’ CORE NEEDS:
    Adapt to changing global and local conditions by serving your customers’ core needs, including being transparent in your operations and compassionate in your engagements all of which will create deeper, more trusted relationships.
  • ESTABLISH BUSINESS CONTINUITY:
    Ensure supplier relationships and business to business processes are effectively supported. Develop new business processes to adapt to new ways of collaborating and decision-making.

An Elastic Digital Workplace is enabled by policies and culture, technology and communications. The fundamental elements include collaboration tools, robust network connectivity to enable virtual working and advanced security procedures. As important are clear business continuity working protocols and communications, as well as guidance for employees, partners and customers.

We are here to help you navigate so schedule a call to discuss your specific business goals


The heart of resilient leadership: Responding to COVID-19

A guide for Leadership in the crucible of crisis

Five fundamental qualities of resilient leadership distinguish successful CEOs as they guide their enterprises through the COVID-19 crisis. Learn specific steps that can help blunt the crisis’s impact—and enable your organization to emerge stronger.

Therapid global spread of COVID-19 has quickly eclipsed other recent epidemics in both size and scope.In addition to the deadly human toll and the disruption to millions of people’s lives, the economic damage is already significant and far-reaching.

In the face of certain challenges and a still-uncertain set of risks, business leaders are rightly concerned about how their companies will be affected and what they have to do next. In the heat of the moment, there are a number of lessons from history that can be applied now. We have pooled the insights of Deloitte leaders in affected areas around the world to provide practical insights for chief executives and their leadership teams in taking appropriate action.

We recognize that companies are in different phases of dealing with the outbreak, and therefore the impacts vary by geography and sector. But regardless of the extent of the virus’s impact on an organization, we believe there are five fundamental qualities ofresilient leadershipthat distinguish successful CEOs as they guide their enterprises through the COVID-19 crisis:

  1. Design from the heart … and the head.In crisis, the hardest things can be the softest things. Resilient leaders are genuinely, sincerely empathetic, walking compassionately in the shoes of employees, customers, and their broader ecosystems. Yet resilient leaders must simultaneously take a hard, rational line to protect financial performance from the invariable softness that accompanies such disruptions.
  2. Put the mission first.Resilient leaders are skilled at triage, able to stabilize their organizations to meet the crisis at hand while finding opportunities amid difficult constraints.
  3. Aim for speed over elegance.Resilient leaders take decisive action—with courage—based on imperfect information, knowing that expediency is essential.
  4. Own the narrative.Resilient leaders seize the narrative at the outset, being transparent about current realities—including what they don’t know—while also painting a compelling picture of the future that inspires others to persevere.
  5. Embrace the long view.Resilient leaders stay focused on the horizon, anticipating the new business models that are likely to emerge and sparking the innovations that will define tomorrow.

We believe that a typical crisis plays out over three time frames:respond, in which a company deals with the present situation and manages continuity;recover, during which a company learns and emerges stronger; andthrive, where the company prepares for and shapes the “next normal.” CEOs have the substantial and added responsibility to nimbly consider all three time frames concurrently and allocate resources accordingly.

Within the framework of these broad imperatives, resilient leaders can take specific tactical steps to elevate these qualities during the current crisis, blunting its impact and helping their organizations emerge stronger. With the right approach, this crisis can become an opportunity to move forward and create even more value and positive societal impact, rather than just bounce back to the status quo.

Design from the heart … and the head

An essential focus in a crisis is to recognize the impact the uncertainty is having on the people that drive the organization. At such times, emotional intelligence is critical. In everything they do during a crisis, resilient leaders express empathy and compassion for the human side of the upheaval—for example, acknowledging how radically their employees’ personal priorities have shifted away from work to being concerned about family health, accommodating extended school closures, and absorbing the human angst of life-threatening uncertainty. Resilient leaders also encourage their people to adopt a calm and methodical approach to whatever happens next.

In everything they do during a crisis, resilient leaders express empathy and compassion for the human side of the upheaval.

The first priority should be safeguarding workers, ensuring their immediate health and safety, followed by their economic well-being. A survey of human capital policies and practices in China at the onset of the COVID-19 outbreak, conducted by Deloitte China in January 2020, revealed the following steps companies and not-for-profit organizations were considering in response:

  • Ninety percent said that it was an urgent requirement to provide their employees with remote and flexible work options.
  • Companies in industries facing the biggest constraints on providing flexible and remote working options—such as energy, resources, and industrials—were focusing on providing stronger physical protection in the form of cleaner and safer work environments and personal protective equipment.
  • More than half of government and public service entities were focusing on addressing employees’ psychological stress.

Designing for the customer’s heart starts with understanding how that heart may have changed dramatically from what you perceived before. Consider that in crisis, customers often revert down Maslow’s Hierarchy of Needs to basic desires such as safety, security, and health. How does the nature and tone of your customer communications and the sensitivity of your customer experience need to shift in the midst of the COVID-19 crisis? Customers relish the same kindness and grace toward them that you show your workers—they are struggling through the crisis, too, and expect empathy. Simple things can be big things. UberEats is asking customers if they want food left at the door rather than passed by hand. Many airlines have emailed customers to describe their enhanced plane decontamination efforts. Some restaurants have encouraged their wait staff to visibly use hand sanitizer to assuage patron concerns.

Yet for the sake of those same employees and customers—as well as creditors and investors—resilient leaders must stay vigilantly focused on protecting financial performance during and through the crisis … and making hard, fact-based decisions. The adage “cash is king” is most real in the midst of an existential event. There are several critical steps in protecting performance:

  1. Centralizing decision-makingin fewer nodes for consistency, speed, and especially decisiveness—especially since uncertainty can paralyze some decision-makers.
  2. Cataloging the sources of cash the company has available, including unused credit lines (committed and uncommitted), revolving credit facilities, and related borrowing restrictions; new sources of credit, such as fixed credit facilities to refinance existing revolvers; excess working capital (e.g., via inventory reductions, extended payment terms); equity infusions; etc.
  3. Rapidly articulating economic scenariosacross all served markets, generally scaling scenarios from mild to moderate to severe.
  4. Modeling the projected financial impactof the scenarios on profitability and especially liquidity. This includes assessing the probability of violating debt covenants and terms, and determining when available cash sources should be drawn.
  5. Defining the non-negotiables:Which products, services, customer segments, business lines, employee segments, and so on are the most critical to ongoing and future cash flow and should be preserved, although even those non-negotiables may be impacted if scenarios tend to the more severe.
  6. Identifying the levers leadership has available(within the boundaries of the non-negotiables) to impact financial performance, such as discretionary expense reduction, hiring freezes, or temporary plant closures.
  7. Determining the actions to take now, and agreeing in advance on the hierarchy of levers to be pulled as the severity of scenarios unfolds.

Companies that have developed a downturn planning playbook have a head start, since many of the scenarios, projections, non-negotiables, and levers already have been articulated and may just need to be adjusted for present circumstances.

Yet amid the crisis, a company’s purpose should remain steadfast: It’s never negotiable. Purpose is where the head and the heart unite. While many organizations today have articulated a purpose beyond profit,purpose risks getting ignored in day-to-day decisions. In a recent survey, 79 percent of business leaders believe that an organization’s purpose is central to business success, yet 68 percent said that purpose is not used as a guidepost in leadership decision-making processes within their organization.

Making decisions that tie back to the organization’s purpose is particularly important during a crisis, when companies are under increased pressure and stakeholders are paying close attention to every move. We know from research on purpose-driven organizations that they tend to thrive during challenging environments:

  • Purpose cultivates engaged employees.When companies are centered on an authentic purpose, employees feel that their work has meaning. Research shows that employees who feel a greater sense of connection are far more likely to ride out volatility and be there to help companies recover and grow when stability returns.
  • Purpose attracts loyal customers who will stick with you in a downturn.Eight in 10 consumers say they are more loyal to purpose-driven brands, which can help sustain customer relationships in a downturn and beyond.
  • Purpose helps companies transform in the right way.Companies that are guided by their purpose when they face hard decisions have a sharper sense for how they should evolve, and their transformation is more cohesive as a result.When purpose is put first, profits generally follow; when profits are first, the results can be more elusive.

Amid the crisis, a company’s purpose should remain steadfast: It’s never negotiable.

Put the mission first

Organizations in the middle of a crisis are faced with a flurry of urgent issues across what seems like innumerable fronts. Resilient leaders zero in on the most pressing of these, establishing priority areas that can quickly cascade.

Based on our analysis of the leading practices of multinational companies in business continuity planning, especially related to major emergency management of infectious atypical pneumonia, H1N1 influenza, Ebola hemorrhagic fever, and other major infectious diseases,we have identified a number of key actions resilient leaders can take that can be grouped into the following categories:

  • Launch and sustain a crisiscommand center
  • Supporttalent and strategy
  • Maintainbusiness continuity and financing
  • Shore up thesupply chain
  • Stayengaged with customers
  • Strengthendigital capabilities
  • Engage with yourbusiness ecosystem

See the appendix,Action guide—putting the missionfirst, at the end of this article for detailed activities and priorities for each.

The recommendations in the action guide are further informed by Deloitte’s on-the-ground experience serving clients and supporting Deloitte professionals in the China market (see sidebar, “Key learnings from leading companies in the Chinese market”).

Apple provides an integrated case study. Its decision to close retail stores in affected areasdemonstrates a number of these principles:

  • Empathizing with the needs and concerns of its employees, including continuing to pay hourly workers as though operations followed a normal schedule and amending its leave policy for COVID-related health issues
  • Reducing further shocks to an already depleted supply chain
  • Staying connected to—and overtly demonstrating concern for—its customers and local communities
  • Leveraging its at-scale digital presence by keeping its online store open and running
  • Continuing to engage its business ecosystem via new channels, shifting the annual Worldwide Developers Conference in June to a digital-only gathering

Finally, Apple’s bold decision-making demonstrates the courage inherent inAim for speed over elegance, the next quality we discuss.

Aim for speed over elegance

Perfect is the enemy of good, especially during crises when prompt action is required. Most companies do not have the infrastructure to deliver perfect information or data, in real time, on operations that could be affected during an epidemic. There will be many “known unknowns” in the days and weeks ahead. Are you ready to accept that you’ll need to act with imperfect information? Collect as much proxy data as you can to inform your decisions so you’re not flying blind. When the crisis is over, you will have the opportunity to conduct a thorough review to see how to improve information quality in future crises—but during this one, you will likely have to set aside that kind of analysis.

Perfect is the enemy of good, especially during crises when prompt action is required.

As leaders confront situations that were never anticipated, this is also a time to encourage more initiative and decision rights at all levels of the organization, trusting that the teams and individuals who are deeply embedded in a specific context may be in the best position to come up with creative approaches to addressing unanticipated needs. Make the objective clear, but allow more flexible local autonomy. To achieve the overall objective of reducing disease transmission risk in its stores, for instance, one coffee shop chain gave store leadership the flexibility to reconfigure tables to maintain social distancing.The key, of course, is to ensure that all workers are clear on the objectives that matter and the guardrails that cannot be crossed. This approach may have value beyond the current crisis as organizations learn to conduct business in more and more uncertain times.

Own the narrative

As we have seen, there is a fine balance between communicating in advance of having all of the facts and being late to comment. We have seen leading companies adopt a policy of shorter, more frequent communications based on what they do know and filling in details later. In the absence of a narrative from you, your teams and stakeholders may start to fill the void with misinformation and assumptions. Setting a regular cadence with a clear voice is critical. Incomplete or conflicting communications can slow the organization’s response rather than providing better guidance.

In a time of crisis, trust is paramount. This simple formula emphasizes the key elements of trust for individuals and for organizations:

Trust = Transparency + Relationship + Experience

Trust starts with transparency: telling what you know and admitting what you don’t. Trust is also a function of relationships: some level of “knowing” each other among you and your employees, your customers, and your ecosystem. And lastly, it also depends on experience: Do you reliably do what you say? In times of growing uncertainty, trust is increasingly built by demonstrating an ability to address unanticipated situations and a steady commitment to address the needs of all stakeholders in the best way possible.

It’s also important to recognize and address the emotions of all stakeholders. This is not just about charts and numbers. Narratives can be powerful ways to acknowledge the fears that naturally surface in times of crisis, while at the same time framing the opportunity that can be achieved if stakeholders come together and commit to overcoming the challenges that stand in the way.

In the midst of crisis, Marshall McLuhan’s famous observation that “the medium is the message” rings even more true. Many psychologists assert that the majority of communication is nonverbal. Emails, texts, and tweets miss the voice intonation, eye contact, and body language essential to trust-building communications. Encourage the use of video—especially to connect emotionally with your teams—instead of emails and other forms of communication. Just as you may feel overwhelmed by your inbox, so do your employees.

This is not just about charts and numbers. Narratives can be powerful ways to acknowledge the fears that naturally surface in times of crisis, while at the same time framing the opportunity that can be achieved if stakeholders come together and commit to overcoming the challenges that stand in the way.

Embrace the long view

Any period of volatility can create opportunities that businesses can leverage if they are prepared. In the case of the COVID-19 outbreak, organizations that take a more assertive and longer-term approach can spark innovations that will define the “next normal.”

AHarvard Business Reviewassessment of corporate performance during the past three recessions found that, of the 4,700 firms studied, those that cut costs fastest and deepest had the lowest probability of outperforming competitors after the economy recovered.In other words, the group most likely to emerge from the recession as winners were those that struck the right balance between short- and long-term strategies by investing comprehensively in the future while selectively reducing costs to survive the recession.While the importance of this balance may appear obvious when the economy is strong, amid the pressures of a downturn, companies are particularly susceptible to a short-term mindset.

Anticipate structural changes and their lasting effects

COVID-19 is likely to accelerate fundamental and structural changes that were inevitable in any case—but are now likely to occurfarfaster than they would otherwise. Consider that the “virtualization” of work—undertaken from home or elsewhere, with remote collaboration and reduced travel for physical colocation—has been evolving steadily. Today, all around the world, businesses—and their talent—are learning to communicate, collaborate, and coordinate on virtual platforms, and understanding the increased efficacy and efficiency such modalities of work can provide. Virtual work and collaboration tools are likely to create a booming new market space.

The necessity of operating differently gives businesses the opportunity to understand what theycando.

These structural changes also may require you to alter your strategy and planning. For instance, if you shift your staffing model to allow more telecommuting or remote work, how could that affect your real estate portfolio? Are there cost savings you can achieve by shrinking your organization’s physical footprint? What sort of new liabilities or challenges might develop if you adopt a decentralized work model? Will you need stronger cybersecurity protocols? What changes will you need to make to management training and communication policies to run a more distributed workforce? What upgrades are required for video conferencing and network availability?

The necessity of operating differently gives businesses the opportunity to understand what theycando. One company, for example, tested the ability of its finance staff to perform their monthly close while working from home to determine if the company could meet its quarterly financial reporting requirements if conditions persisted.Once you discover that you can do things differently, you may want to consider whether you should continue doing so.

Become a market shaper

Shaping strategies can become a significant source of new value creation emerging from unanticipated crises. The market shapers—those that shape the future of their industry rather than adapt to it—will emerge stronger. Companies emerging from this crisis and shifting into the “thrive” time frame will take part in this reinvention, either by identifying and solving for new opportunities, aligning themselves with the future-shapers of their industry, or actually becoming the nexus of the next ecosystem while their competitors focus on the crisis.

Consider the promise of additive manufacturing. Although 3D printing has been growing, existing global supply chains and the wage arbitrage opportunities they provide have provided powerful economic advantages. The status quo has already been tested by growing geopolitical tensions and protectionism, and growing concern about carbon footprints. Now add the impacts of COVID-19, and it is easy to anticipate huge investments in new additive manufacturing technologies that bring production back much closer to consumption—creating entirely new markets to be shaped.

Build future business models

Likewise, structural market changes and newly shaped markets prompt new business models. Imagine the creation of public-private partnerships to provide redundant infrastructure in a particular geography—an initiative at least one government agency already has sponsored in anticipation of circumstances such as these. How will emerging trends, structural changes, and new markets redefine how your company and industry will be organized tomorrow?

For example, many have long realized that education was ripe for significant changes enabled by digital technologies. With over 290 million students out of school globally due to COVID-19, according to the United Nations,the demand for online offerings, curricula, and platforms will likely accelerate. Yet some universities and faculty are just beginning to improvise remote offerings.Designing around the massive COVID-19 constraint demonstrates the real promise of potentially revolutionary changes in how we structure, locate, and operate our approaches to learning—which are likely to lead to dynamic new market-making opportunities in this area as well.

How will emerging trends, structural changes, and new markets redefine how your company and industry will be organized tomorrow?

As another example, consider the growth in adoption of AI and robotics, which already are playing a key role in detecting and treating COVID-19. AI-equipped tools are scanning social media to analyze virus progression in real time, recognizing viral pneumonia in chest CT scans 45 times faster than humans with 96 percent accuracy, and conducting molecular synthesis and validation in days rather than months or years.Meanwhile, robots are disinfecting quarantined patient rooms to reduce possible transmission.AI also could accelerate drug discovery, preclinical drug development, and phase 1 clinical trials in which safety and toxicity could be tested with DNA-on-a-chip. Imagine how future health care models might change if the typical decade-long pharmaceutical research and development cycle could be slashed by over half. What’s more, post-COVID shifts in popular opinion could suddenly enable changes in the regulatory framework concerning fast-track approvals.

A test of resilient leadership

COVID-19 is a crucible within which resilient leadership is refined. Acting without perfect information, often with only a few hours or days to spare, CEOs will have to guide their organizations through myriad decisions and challenges, with significant implications for their company’s whole system—employees, customers, clients, financial partners, suppliers, investors, and other stakeholders—as well as for society as a whole.

Clarity of thinking, communications, and decision-making will be at a premium. Those CEOs who can best exhibit this clarity—and lead from the heart and the head—will inspire their organizations to persevere through this crisis, positioning their brand to emerge in a better place, prepared for whatever may come. Crises like these, with deep challenges to be navigated, will also lead to opportunities for learning and deepening trust with all stakeholders, while equipping organizations for a step change that creates more value not just for shareholders, but for society as a whole.

Appendix: Action guide—putting the missionfirst

Launch and sustain a crisis command center

Most organizations in the affected regions have launched some form of crisis response unit, either as a result of a preestablished crisis response plan or on an ad hoc basis, in order to gain an enterprisewide understanding of the impact and coordinate their efforts across functions. Subteams have been created to manage specific workstreams such as communications, legal, finance, and operations. They are operating with a clear mandate provided by executive management and have been empowered to make swift decisions in the areas that follow.

Such a command center doesn’t have to be entirely on the defensive: It can also help to break traditional orthodoxies. Airlines that are canceling flights, for example, are making the downtime more productive by prioritizing scheduled maintenance for grounded aircraft—and reallocating larger planes to space-constrained routes—enabling them to make more efficient use of resources.

Such a command center doesn’t have to be entirely on the defensive: It can also help to break traditional orthodoxies.

Support talent and strategy

The key to supporting your talent while they support your strategy involves focusing on thework, theworkforce, and theworkplace.

First, evaluate the actualworkof your company and how it might be changed. Resilient leaders rapidly assess what work is mission-critical and what can be deferred or deprioritized, and then help teams understand where their focus needs to be (including what work is not strategically critical). Allow your people to focus on the most important tasks and empower teams to be creative in how they deliver nonessential work in ways that minimize unnecessary risk or exposure to your employees and your customers. Where work has to be onsite, evaluate what safeguards can be put in place, such as revised cleaning protocols or personal protective equipment.

The next focus is theworkforce. The most effective plans encompass employees—as well as contractors, vendors, partners, and unions—who need to be included to keep the entire workforce safe. Address the immediate COVID-19-related human needs for information, including education on COVID-19 symptoms and prevention and access to employee assistance resources. As the work itself contracts and/or expands, ensure that you have operational plans for site disruption and reactivation, including communicating to affected employees. While assessing possible changes to leave policies (such as for employees caring for affected family members), also prepare for potentially higher absenteeism, lower productivity, and even work refusal until the situation ultimately normalizes post-crisis.

Theworkplaceand its culture are also critical. Companies need to prepare worksites for containment and contamination, and ensure the safety of working environments by thoroughly cleaning and disinfecting workplaces. In the event that an employee is suspected of being infected with COVID-19, a clear process must be in place for adhering to local health care requirements for isolating and/or treating the employee at the facility.

COVID-19 may fundamentally change the culture of the workplace, how you distribute work and deploy your workforce, and how you engage your people. In the longer term, this situation may present an opportunity to think about how you elevate communications, create a more resilient workforce, and build more focus on health and well-being.

Maintain business continuity and financing

In almost every financial crisis, preservation of cash and liquidity is a top priority. When challenges impact all industries simultaneously, even the most financially stable can struggle. For example, companies with strong balance sheets in the 2008–2009 recession were among the many that still experienced liquidity constraints when commercial paper markets were suddenly interrupted. In some cases, this compromised their ability to meet basic short-term obligations.

The current crisis will be no exception, and it could even be more trying for many. A large number of companies now face weeks, if not months, of disrupted markets. For many industries—such as travel and hospitality—the revenue lost during this period may be permanent, rather than made up later. That’s putting sudden, unanticipated pressure on working capital lines and liquidity.

Some companies may be able to maintain adequate flexibility by making drawdowns on their revolving credit facilities. Others are finding that they need to approach their banks to arrange temporarily larger facilities and/or covenant resets/waivers. Such efforts could prove unsuccessful, however, since banks may have reached their risk tolerance limits for a single credit. Revolving credit facilities may be frozen due to covenant limits and/or cross-defaults. Security packages hastily assembled to support new funding may be insufficient due to limited collateral availability or prolonged economic distress. Or companies may be looking for a highly customized, rolling short-term facility on terms that do not naturally fit into a bank’s standard product suite.

Beyond immediate cash needs, the finance function also must respond to potential accounting and financial reporting implications—if they can even get their books closed and/or audits completed in affected areas. For instance, some corporations implementing first-ever (and quite appropriate) remote work arrangements may face unexpected tax challenges when they are paying employees in a different local tax jurisdiction than their main office.

Shore up the supply chain

As the “world’s factory,” any major disruption in China puts global supply chains at risk. The COVID-19 crisis, originating from the highly industrialized province of Wuhan, highlights the potential perils of this dependency: More than 90 percent ofFortune1000 companies had Tier 1 and/or Tier 2 suppliers in the most-affected China provinces.

A decades-long focus on supply chain optimization to minimize costs, reduce inventories, and drive up asset utilization has improved many companies’ supply chain efficiency. But COVID-19 illustrates that many companies are not fully aware of the vulnerability of their supply chain relationships to global shocks when optimizing for efficiency over resilience. Further, COVID-19 demonstrates that a global outbreak can have much longer-lasting impacts than a local epidemic on a supply chain, which endures foreshocks and aftershocks as hot spots evolve around the globe.

Without a comprehensive plan or playbook—and most organizations lack one for addressing a global outbreak—companies can overadjust, causing greater disruption and incurring unnecessary expenses. For example, some companies have responded to the COVID-19 crisis by imposing across-the-board inventory increases out of fear of running short of necessary supplies.Such decisions need to thoughtfully consider the unintended consequences and shocks. For example, a bulge in retail apparel inventory concurrent with a rapid drop in consumer spending can exacerbate cash needs.

See the sidebar “Strengthening the supply chain” for important actions to consider to strengthen your global supply chain.

Stay engaged with customers

This is a critical moment that matters in the relationship with your customers, and it is a time for your company’s brand to lead. Customer needs can shift dramatically during crises such as this one, often from the rational to the emotional, and it is important for companies to intercept that shift. A study of consumer behavior found that a business’s traditional customer segments are at risk during a downturn, as their purchasing behavior is driven more by their emotional response to the economic volatility than by the characteristics businesses typically consider when defining their customer segments.

Particularly important is to take care to consider how your own sales efforts will appear. If you’re going to offer price cuts or marketing promotions, some might see that as an attempt to capitalize on a crisis—or worse, undermine public health efforts to encourage people to stay out of stores and other public places. Look at other benefits you can offer customers that help to sustain the customer relationship. For example, some hospitality companies are deferring the expiration of loyalty points.

Strengthen digital capabilities

Recommendations for “social distancing” have led organizations to expand their operations in the virtual, digital sphere. For many, this means asking their workforce to work from home. If you are preparing for increased remote work, ensure that the organization has the technology capacity to support it. Bandwidth, VPN infrastructure, authentication and access control mechanisms, and security tools all must be able to support peak traffic demands. Provide VPN/remote access to contractors and third parties who are supporting critical services, and purchase additional licenses for collaboration tools.

The sudden increase in online activity can have big implications on system stability, network robustness, and data security, especially in parts of the world where telecom and systems infrastructure are not as well developed. Companies will need to act quickly to ensure they have the systems, and support staff, in place to ensure smooth operation as the workplace and workforce evolves.Also consider the often-overlooked impact of such arrangements on employees who may feel socially isolated—or the potential loss of innovation when you limit in-person interaction.

If you’re going to disperse your workforce remotely, make sure you have the protections in place to safeguard your networks and data.

A particular concern is that cyber risk multiplies when the workforce is suddenly distributed. Although many companies may be set up for remote work, far fewer have the proper cybersecurity protocols in place. Since the crisis began, phishing scams and other attacks have been on the rise, targeting employees working from home … from the coffee shop … from any open network.If you’re going to disperse your workforce remotely, make sure you have the protections in place to safeguard your networks and data.

Maintaining customer connections virtually amid shifting behaviors also has challenges. As COVID-19 fears rose in the United States in early March, online sales increased 52 percent year over year, and the number of online shoppers increased 8.8 percent.While retailers may want to move more sales online to offset declining store traffic, they should ensure that their team has tested a scaled capability before making such a shift. Providing substandard service could do more damage to your brand long-term than the lost sales in the short term.

Engage with your business ecosystem

Finally, as new business models emerge from the crisis, can you become the nexus of a new, emerging ecosystem that’s built for the “next normal”?

Most companies’ networks—suppliers, vendors, customers, investors, employees, and other stakeholders—have grown exponentially since the last economic downturn. In a crisis, these massive global ecosystems add another layer of complexity and potential vulnerabilities—but they can also offer opportunities. Questions to consider include:

  • How can we lean on the ecosystem to improve the resilience of individual organizations during periods of disruption?
  • How am I extending my stakeholder communication to embrace ecosystem partners that have become critical components of the business model?
  • What additional data might my partners have to improve my own operations? For example, one B2B technology supplier is seeking to augment its short-term inventory planning by increasing transparency with its manufacturers.
  • For the investor community—the more traditional “econosystem”—what level of communication is appropriate? Some companies have stopped offering financial guidance to investors in light of the crisis,but organizations should not stop all communication. Keep your investors updated with as much information as possible.

Finally, as new business models emerge from the crisis, can you become the nexus of a new, emerging ecosystem that’s built for the “next normal”?

 

We are here to help you navigate so schedule a call to discuss your specific business goals

10 Ways To Use Working Remotely Or Self-Quarantining As An Opportunity

 

Amidst the things you cannot control, what you can control is your attitude.

Even in this crisis we can be grateful for all the things and people we tend to take for granted – like our families and friends, teachers and coworkers, fellow students, the coffee people we see every day, our health, fresh air, and the freedoms we have to go places and the abundance of places we could normally.

Being “stuck” at home gives us the gift of time, since we don’t have to commute or take our kids to soccer, school or events. So, it’s an opportunity to use this time to be creative and productive in other ways.

 

Here are 10 ways you can leverage the time you’re home and unable to socialize normally – and most are free*:

1. Call people you haven’t spoken to in a while: Take the time to reach out and see how people you care about are doing across the country or even across the globe, since you can use Skype or Zoom video conference for free.

2. Catch up on webinars and online courses: You may have webinars or free online courses you’ve thought would be great but haven’t had time to do, or you may find some in a brief search of your favorite sources. Edx and Coursera offer free courses from top universities, including Harvard, Stanford, or the University of London, on everything from business to health to diplomacy, for example. You can use this time at home to enhance your knowledge your skills.

3. Do arts and crafts projects: From knitting to scrapbooking to organizing photos (even putting printed ones in albums) to mending socks, or painting a chair you’ve always wanted to paint, now you have the time to do it. Jack Canfield is a fan of vision boards, which he says help you visualize and focus on your goals, so you might make one of those.

4. Listen to podcasts or audio books: There are zillions of podcasts and audio books out now, many with very useful information about careers, health, business, relationships, industries, or you can listen to a novel….pick your topic. I have a podcast too, called Green Connections Radio, where I interview innovators and leaders in the energy-climate-sustainability space about careers, innovation, leadership, their industry and business – who happen to be women.

5. Start the book you’ve thought about writing: If you’re just starting your book, don’t overthink it or worry about your writing skills at this point. Just jot down notes about what you want to write about and potential points you want to make or sources you might want to include. Nothing is committed at this stage. Start writing! Once you have some prose, what you think you want to say for a while, and you decide to take a break from writing, draft an outline of potential chapters. If you’ve already started a book, here’s the gift of time to keep writing.

6. Journal: Write about your experience managing this crisis in your work or school life, or with your family or community. You can publish it for free on Medium or LinkedIn, or Facebook, or many other platforms. Be sure to write it in Word on your computer and keep it for yourself too. Even if you don’t have a computer or internet access, you can write with pen and paper. Some best-selling novelists only write that way to this day.

7. Cook or bake new recipes: If you like to cook or bake, now you have a bit more time to try new recipes. I like to read a few recipes and take ideas from each one and then get creative – unless I’m making something that requires me to follow the recipe exactly. Baking generally requires more precision, for example.

8. Read a book: There are so many great books out to read. Whether you want to be transported into a story with a novel, or back in time through a history book or biography, or to get a new perspective in a business or self-help book, there are plenty of choices. You can find ebooks, or order them online to be delivered, too. I am a major bibliophile, aka book freak, and have lots of bookcases, so I am entirely biased on this one – and have lots of suggestions. If you want ideas, ask me via Twitter.

9. Clean and/or declutter your home: While you’re wiping down every surface multiple times a day anyway, now you have the time to do some deeper cleaning. Maybe wash floors, windows, clean out your closets, discard clothes you don’t wear anymore, clean pictures on the wall, dust furniture you haven’t touched in a while, clean out your refrigerator or pantry. You might also tackle your 2019 taxes and organize your finances.

10. Go for a long walk, just to walk: Walking is one of the best ways to clear your head, enjoy fresh air, get some exercise and explore your neighborhood. You don’t need to know where you’ll go, just head out and follow sidewalks. Maybe listen to podcasts or music along the way. I’m a big walker every day, so I admit my bias. And smile at people as you go by, acknowledging them, too. We’re all in this together.

So, you can choose. You can either think of yourself as trapped, isolated and miserable, or you can be grateful you’re healthy and have the freedoms you do have, and you can use the time to do things you’ve wished you had the time to do.

 

We are here to help you navigate so schedule a call to discuss your specific business goals

 

 

Bravely face the epidemic, resume work calmly

As enterprises start resuming work in various regions, they need to consider how to restart business operations amid ongoing epidemic prevention and control measures and ensure they can return to a normal, healthy work rhythm as soon as possible.

MWC recommends that within a week before work resumes, companies should establish specific responsibilities during such a special period to ensure the calm resumption of work.

 

Board and senior management should stabilize employee morale and ensure flexible and correct decision-making

Board of Directors:

  • Together with senior management, the board should evaluate possible major losses during the epidemic, predict and list major incidents the epidemic might cause.
  • Based on the degree of loss, review the enterprise’s annual plan and financial budget, promptly organize discussions among senior management about whether annual goals can be achieved, develop an adjustment plan on the basis of objective assessment results, and make reasonable estimates for next year’s goals.
  • Actively communicate with related shareholders, and promptly disclose fact-based information.
  • Grant management appropriate authority promptly to flexibly deal with and decide various emergency matters in an outbreak situation.

Senior management:

  • Immediately establish a core, cross-function team in response to the management during epidemic; continue to monitor the situation closely and actively cooperate with related regulatory requirements to collect and report relevant information promptly.
  • Organize all departments of the enterprise to ascertain the business and management processes affected by the epidemic, assess the losses, and make measures to minimize these losses, as well as take responsibility for tracking and implementation. It is particularly important to clearly identify trigger events and metrics for initiating different levels of response actions.
  • Ensure adequate communication both inside and outside the company, assist employees, customers, and other parties to understand the company’s actions to enhance their understanding and confidence.
  • Initiate assessment of budget objective and specific scenario analysis, and reasonably adjust business plans based on the results.

 

We are here to help you navigate so schedule a call to discuss your specific business goals

10 Key Actions for Enterprises in An Epidemic

At this moment, with China fighting an epidemic, many enterprises are actively fulfilling their social responsibilities. As key contributors to the country’s economy, the basic social responsibility is to conduct business well and organize employees properly. In the face of the current epidemic, MWC believes that the greater the urgency, the more rules need to be in place to face challenges calmly.

The ongoing development of the new coronavirus has prompted the World Health Organization (WHO) to discuss whether the epidemic is a Public Health Emergency of International Concern. (PHEIC). Meanwhile, enterprises could face various strategic and operational risks, such as delayed or interrupted supplies of raw materials, changes in customer demand, cost increases, logistics shortages leading to delays in delivery, employee health and safety protection issues, insufficient manpower, and logistics and settlement challenges related to import and export trade.

Based on our analysis of the leading practices of multinational companies in Business Continuity Planning (BCP), emergency and major emergency management of infectious atypical pneumonia, H1N1 influenza, Ebola hemorrhagic fever and other major infectious diseases, we recommend Chinese companies take the following 10 actions to address future uncertainty:

1. Establish emergency decision-making teams.
  • An enterprise should immediately set up decision-making teams for temporary major issues, such an “Emergency Response Team” or “Major Emergency Management Committee”, to build the whole objectives and emergent plan and ensure the fastest possible decisions can be made in various situations.
  • For committee members, enterprise should evaluate its own professional strengths and, if necessary, bring in professionals to match its business and regional characteristics.
2. Assess the risks and clarify emergency response mechanisms, plans and division of labor.
  • Many multinational companies have established “emergency contingency plans” or “business sustainability plans”, usually implementing these immediately in the event of a major emergency.
  • If a company has no such plan, it should conduct a comprehensive assessment of all risks straight away, including employee, outsourcing, government, public and supply chain issues. According to risk assessment, the company should respond to issues around office space, production plans, procurement, supply and logistics, personnel safety and financial capital, as well as arrange other major matters related to emergency plans and division of labor.
3. Establish a positive information communication mechanism for employees, customers and suppliers, and create standardized communication documents.
  • It is important to stabilize supply chains and the mindsets of internal employees and external partners, as well as strengthen the management of publicity and customer services to avoid negative public opinion caused by negligence or inconsistency.
  • At the same time, a company’s existing information system should be used to collect, transmit, and analyze epidemic information and issue prompt risk warnings.
4. Maintain the physical and mental wellbeing of employees, and analyze the nature of different businesses and jobs to ensure appropriate resumption of work.
  • According to MWC’s latest human resources survey on epidemic responses, 82% of companies believe “flexible work arrangements” are now the most important means of employee management. We recommend companies immediately establish flexible vacation and work mechanism, using technical means to establish non-face-to-face or off-site work parameters during special periods.
  • Besides enterprise should establish a staff health monitoring system and keep employees’ personal health information confidential.
  • Enterprise should ensure the safety of working environments by strictly cleaning and disinfecting workplaces in accordance with national and regional public health authorities’ hygiene management requirements for periods of major infectious diseases.
  • Enterprise should strengthen epidemic safety education, establish fact-based employee self-protection guidelines, and increase awareness of safety and risk prevention.
5. Focus on supply chain risk response plans.
  • Multinational companies usually arrange to utilize “redundant” office facilities, production capacity plans, and raw material procurement channels in multiple countries or regions in advance, so the work in the “infected area” can be quickly undertaken or production will not be stopped due to lack of capacity or raw materials.
  • In inventory management, organizations must consider the prolonged inventory digestion cycle caused by blocked consumption, the corresponding increase in financial costs, and pressure on cash flow. At the same time, in industries with long production cycles, organizations must prepare in advance for a rebound in consumption once an epidemic has eased to prevent the risk of insufficient inventory.
6. Develop solutions to compliance and customer relationship maintenance risks arising from the inability to resume production in the short term.
  • After an outbreak, organizations should cooperate with downstream customers to understand changes in client and market conditions, and confirm the impact of resumption, order delivery, demand, and market changes.
  • Laws around the performance of civil and commercial contracts may come into play, as not all non-performance during an epidemic can have no legal consequences.
  • Enterprises should identify and evaluate those contracts whose performance could be affected, and promptly notify the related party to mitigate possible losses, as well as assess whether it is necessary to sign a new contract, and retain evidence to use in possible civil lawsuits.
7. Practice social responsibility and stakeholder management, and incorporate sustainable development strategies into decision making.
  • Enterprises should obey the unified planning and arrangements of the government.
  • Proper corporate information disclosures can enhance an enterprise’s public image.
  • For Chinese companies, the most important leading practice is being able to implement corporate social responsibility from the perspectives of the environment, society, economy and employee stability, as well as coordinate relationships with the community and supplies. They should assess the possible impact and duration of the epidemic, adjust plans, and, at the shareholder or board level, communicate proposed measures and assessment results.
8. Build management plan of employee master data, information security and privacy.
  • Enterprises should establish good employee master data management mechanisms, and register internal and outsourced personnel, suppliers, partners, and other personnel with whom they have contact.
  • They should also formulate timely information security emergency response plans to ensure the security, stable operation. To arrange remote and on-site staff to carry out their duties, establish 7*24 hours remote and on-site support to ensure the monitor on computer rooms, networks, systems, applications and resources.
  • Companies should also protect personal privacy and clinical trial data, especially to those patients (whether customers or employees), strictly control access to, transmission and usage. For clinical and medical data, access control and protection level should be set up.
9. Companies need to consider adjusting their budgets and implementation plans, cash flow plans, and early warning mechanisms for international trade.
  • According to MWC data, 46% of companies plan to lower their performance hurdles for 2020. At the same time, we would advise companies to pay attention to cash flow, arrange cash scheduling to ensure the safety of funds according to the rhythm of upstream and downstream suppliers and employees’ work plans.
  • In addition, they should pay close attention to the international import and export trade situation, particularly sudden changes or disasters in locations from which major products originate, which will impact trade and potentially give rise to huge losses at the company itself. To prevent such incidents, companies should establish emergency “scenario plan” responses for basic providers as soon as possible, which can include plans for hedging using futures, international trade and transportation, and alternative suppliers.
10. Upgrade enterprise’s risk management mechanisms.
  • MWC’s Enterprise Risk Management Survey report for global entrepreneurs shows that 76% of risk managers believe their company could respond effectively if a major emergency occurred tomorrow. Yet only 49% of enterprises have developed relevant manuals and conducted pre-tests based on emergency scenarios, and only 32% of enterprises have conducted “major emergency simulation exercises” or training.
  • We believe most enterprises could face unexpected risk events at any moment —it’s a question of when, not whether. Enterprises should establish or upgrade their risk management systems to identify the key risks and build risk mitigation plan. Strengthening risk management system is just as important as dealing with negative events when they arise.

 

We are here to help you navigate so schedule a call to discuss your specific business goals

Addressing the financial impact of COVID-19

Navigating Volatility & Distress

The number of new infections and deaths continues to rise rapidly and, as yet, there are no signs of
COVID-19 being brought under control. While the vast majority of infections and deaths have thus far
occurred in China, concern is rising across the world that a global pandemic is upon us.
Business in China has been severely impacted. Shopping malls and restaurants are deserted, while
travel and tourism revenues in China have collapsed. The return to work after the Chinese New Year
has been slow and people are being encouraged, where possible, to work from home. Moreover, as the
outbreak and growth of COVID-19 has been centered around the key manufacturing hub of Wuhan,
global supply chains are being severely affected. Automotive plants in Japan and Korea have already
closed due to a lack of parts. You can’t assemble a car with 99% of the parts.

It is possible that COVID-19 may burn out as temperatures start to rise during spring and
into summer in the northern hemisphere, but at this point nobody knows. It is therefore
important that businesses are proactive in assessing their capability to withstand disruption
from both an operational and a financial standpoint, and that they act decisively to mitigate
actual or potential issues.

Liquidity forecasting and headroom

Reforecast trading and cash flows. Test and challenge all assumptions. Ensure trading and cash flow
forecasts are integrated. Model a downside scenario to understand actual/potential needs.

Review cash flow forecasts. Some businesses’ cash flows are already being devastated as revenue
evaporates. Review in detail cash flows for the next 3 months, and identify what mitigating actions can be taken
to preserve cash in the short/medium term.

Review your lending documents. Understand the key terms, covenants, baskets of headroom and flexibility
in your banking and finance documents.

Remain in contact with key stakeholders. Businesses should communicate regularly with key stakeholders
including their lenders and investors in order to retain their confidence and support.

In the event COVID-19 extends into medium term

Seek out additional sources of capital early. Should cash flow forecasts suggest that liquidity will become an
issue, assess options for raising funds including asset based financing, RCF, alternative debt funds and also
equity markets and M&A.

Keep plans and options actively under review. Sustainable financing is an iterative process.

 

Working capital and supply chains

Working capital: Working capital management is
likely to be challenging:
– Businesses impacted by lower Chinese demand
may experience overstocking that could persist
until production reduces or demand picks up.

– Chinese customers are likely to delay payments
to preserve cash, while Chinese suppliers may
be desperate to be paid for shipped/ordered
goods.

– Non-impacted counterparties may offer early
payment discounts or factoring opportunities.

Affected operations: Assess ability of own
affected operations in China to continue production
and supply. Make contingency plans for alternative
supply as required.

Engage with critical suppliers. Assess key
trading terms and communicate regularly with
critical suppliers to understand their ability to
maintain and/or negotiate for continuity of supply.

Alternative suppliers. Identify which of your key
suppliers may be exposed. Make contingency plans
for alternative supply as appropriate.

Customers: Frequent engagement with customers
at an executive level is key to manage
expectations.

 

We are here to help you navigate so schedule a call to discuss your specific business goals

COVID-19: Navigating volatility and distress

Addressing the financial impact of COVID-19

This piece from MWC  provides guidance for companies experiencing significant operational disruption due to public policy measures put in place to contain the spread of COVID-19.

The number of new infections and deaths continues to rise rapidly and, as yet, there are no signs of Covid-19 being brought under control. Whilst the vast majority of infections and deaths have thus far occurred in China, concern is rising across the world that a global pandemic is upon us.

Business in China has been severely impacted. Shopping malls and restaurants are deserted, whilst travel and tourism revenues in China have collapsed. The return to work after the Chinese New Year has been slow and people are being encouraged, where possible, to work from home. Moreover, as the outbreak and growth of Covid-19 has been centered around the key manufacturing hub of Wuhan, global supply chains are being severely affected. Automotive plants in Japan and Korea have already closed due to a lack of parts. You can’t assemble a car with 99% of the parts.

It is possible that Covid-19 may burn out as temperatures start to rise during Spring and into Summer in the northern hemisphere, but at this point nobody knows. It is therefore important that businesses are proactive in assessing their capability to withstand disruption from both an operational and a financial standpoint, and that they act decisively to mitigate actual or potential issues.

Liquidity forecasting and headroom

  • Reforecast trading and cash flows. Test and challenge all assumptions. Ensure trading and cash flow forecasts are integrated. Model a downside scenario to understand actual/potential needs.
  • Review cash flow forecasts. Some businesses’ cash flows are already being devastated as revenue evaporates. Review in detail cash flows for the next 3 months and identify what mitigating actions can be taken to preserve cash in the short/medium term.
  • Review your lending documents. Understand the key terms, covenants, baskets of headroom and flexibility in your banking and finance documents.
  • Remain in contact with key stakeholders. Businesses should communicate regularly with key stakeholders including their lenders and investors in order to retain their confidence and support.

In the event Covid-19 extends into medium term

  • Seek out additional sources of capital early. Should cash flow forecasts suggest that liquidity is or will become an issue, assess options for raising funds including asset based financing, RCF, distressed M&A and alternative financing options (through our funds network) and also tapping the equity markets.
  • Keep plans and options actively under review. Sustainable financing is an iterative process.

Working capital and supply chain

  • Working capital:Working capital management is likely to be challenging:
    – Businesses impacted by lower Chinese demand may experience overstocking that could persist until production reduced or demand picks up.
    – Chinese customers likely to delay payments to preserve cash, whilst Chinese suppliers may be desperate to be paid for shipped/ordered goods.
    – Non-impacted counterparties may offer early payment discounts or factoring opportunities.
  • Affected operations:Assess ability of own affected operations in China to continue production and supply. Make contingency plans for alternative supply in short and medium term as required.
  • Engage with critical suppliers.Assess key trading terms and communicate regularly with critical suppliers to understand their ability to maintain and/or negotiate for continuity of supply.
  • Alternative suppliers.Identify which of your key suppliers may be exposed and consider scenarios for supply being partly/fully restored. Make contingency plans for alternative suppliers as appropriate.
  • Customers:Frequent engagement with customers at an executive level is key to manage expectations.

Impacted sectors

  • China
    – Heavily impacted (almost all sectors impacted): Airlines, Hotels, Restaurants, Hospitality, Retail, Manufacturers – particularly those with complex supply chains: Automotive, Technology etc.
  • Rest of Asia Pacific
    – Exporters, specifically from Japan & Korea, with a significant exposure to the Chinese market.
    – Business dependent on Chinese tourists: Hotels, luxury goods retailers.
    – Transportation: Airlines, Cruise operators, Shipping companies.
    – Manufacturers dependent on parts from China, notably Automotive and Technology.
    – Oil & Gas and Mining & Metals due to fall in both demand and commodity prices.
    – Agriculture and related businesses, including Ports and Shipping and their working capital Financiers.
    – Education: Dependent on Chinese students.
  • EMEA and Americas
    – Business dependent on Chinese tourists: Hotels, some Airlines, luxury goods Traders & Retailers.
    – Manufacturers dependent on parts from China, notably Automotive and Technology.
    – Oil & Gas and Mining & Metals due to fall in both demand and commodity prices.

 

We are here to help you navigate so schedule a call to discuss your specific business goals

COVID-19: Managing cash flow during a period of crisis

Coronavirus cash flow implications across extended supply chain

This piece suggests ways organizations can mitigate damages to their business during this volatile event.

As a typical “black swan” event, COVID-19 took the world by complete surprise. This newly identified coronavirus was first seen in Wuhan, the capital of Hubei province in central China, on December 31, 2019. As of March 2020, the virus has infected over 90,000 people, and led to more than 3,000 deaths. More importantly, more than 75 countries are now reporting positive cases of COVID-19 as the virus spreads globally, impacting communities, ecosystems, and supply chains far beyond China.

The focus of most businesses is now on protecting employees, understanding the risks to their business, and managing the supply chain disruptions caused by the efforts to contain the spread of COVID-19. The full impact of this epidemic on businesses and supply chains is still unknown, with the most optimistic forecasts predicting that normalcy in China may return by April,1 with a full global recovery lagging depending on how other geographies are ultimately affected by the virus. However, one thing is certain: this event will have global economic and financial ramifications that will be felt throughout global supply chains, from raw materials to finished products.

Responding to the immediate challenge

Borrowing from the lessons learned from the SARS outbreak in 2003, the 2008 recession and credit crunch, and the last black swan event to significantly impact global supply chains–the Japanese earthquake of 2011–we offer the following practices and strategies for consideration:

  • Ensure you have a robust framework for managing supply chain risk
  • Ensure your own financing remains viable
  • Focus on the cash-to-cash conversion cycle
  • Think like a CFO, across the organization
  • Revisit your variable costs
  • Revisit capital investment plans
  • Focus on inventory management
  • Extend payables, intelligently
  • Manage and expedite recievables
  • Consider alternative supply chain financing options
  • Audit payables and recievables transactions
  • Understand your business interruption insurance
  • Consider alternative or non-traditional revenue streams
  • Covert fixed to variable costs, where possible
  • Think beyond your four walls

What’s next: Recovering and returning to normal business operations

Cash flow management needs to be an integral element of a company’s overall COVID-19 risk assessment and action planning in the near term. Even for companies that have not yet been adversely affected, we recommend management teams with concerns about COVID-19 actively evaluate their cash flow requirements, develop appropriate actions under various scenarios, and assess potential risks in and to their customer base and supplier network.

 

We are here to help you navigate so schedule a call to discuss your specific business goals

Willing and able – Building a crisis resilient workforce

Most crisis response planning assumes that people will turn up for work when they are needed, even during some of the most extreme events. But will this fundamental assumption really hold true? This is the question MWC, in association with King’s College London and Public Health England explored to suggest a model and recommendations for organizations to develop a more crisis resilient workforce.

 

Most existing crisis response plans focus on structures, protocols and processes of an organization’s response whilst leaving the human aspect of response to chance assuming that people will turn up for work even during the most extreme events.

But our research uncovered that in certain more severe scenarios, this assumption may not hold true and organizations need to find ways to improve the situation.

To do so they should consider the following points to build a crisis resilient workforce:

Human factors – understand how people may respond and why

Organizations should remove any assumptions about employees’ willingness to come to work in a time of crisis and recognize that risk perception is a key determinant of willingness. To palliate this issue organizations should make sure that people understand the importance of their role and adopt an inclusive approach when developing the crisis response plan to embed and address employees’ concerns.

Information and communication – tell them what they need to know

Organizations should ensure they educate their employees on the actual risk presented by different crisis. When a crisis does occur it becomes important to provide accurate and authoritative information about the situation. Organizations should consider what the authoritative sources of information might be and where or how they can be accessed and used as part of their planning considerations. Also, they should provide staff with recommendations and give clear reasons for those recommendations.

Organizational interventions – provide practical support

In order to increase employees’ willingness to come to work during a crisis organizations need to consider remote access availability, logistical support that could make it easier for employees to get into work as well as provide incentive such as psychological care or medicine to help them cope with the crisis.

 

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