Tag: COVID-19

16 Jun 2020

COVID-19 Pandemic & Business

2020 has become a worldwide crisis because of COVID-19 that has been evolving at an unprecedented speed and scale. None of the industries has left immune from this pandemic. Both the manufacturing and supply chain operations of industrial companies are being disrupted due to the immediate impact of COVID-19 and their customers’ own operations are facing similar challenges. This is having an exponential effect down the whole supplier network, hitting Industrial companies with a lag, but at full force, nonetheless.

To keep the financial wheels turning for many businesses during the lockdown period, has become challenging due to less revenue churn and the general uncertainty within the global financial environment. This comes at a time when companies were already facing severe economic headwinds with clear signs of a recession in their main markets around the globe. The global economy was cooling down and Industrial production in most global markets has strongly decelerated. Another vast layer of complexity is being added by the COVID-19 crisis to an already hugely challenging environment.

The industry is critical to the world’s economy with over US$3 trillion in revenues it represents about 25% of the manufacturing GDP with a significant workforce, up to 30% of all manufacturing employees across the globe.

To preserve the integrity of the operations and protect their people, Industrial manufacturers must take actions and prepare the ramping back up of their operations and the future post-COVID-19. Some companies have already started responding to the immediate crisis by taking steps to protect their workforce, supply chains and operations. However, fewer have started to face the equally important challenge of planning for the new ways of working which will emerge as COVID-19 infection cases start to decrease significantly, and we come to grips with new norms such as social distancing and Self-isolation. The focus in this pandemic is the business continuity and prioritization. Most of the industrial companies will have to deal with the impact of this pandemic on their supply chains that is why companies must ensure the most resilient supply chain possible whilst protecting their workforce.

This requires them to:

  • Establish a command center and begin rapid response deployment,
  • Rapidly adjust operations and continue the response cycle,
  • Establish an on-going operating capability.

Specific focus and prioritization should be on the customers’ core needs and client-centricity continues to be of the essence. the virtual work must be enabled by the companies whenever possible and required to protect their people that can also ensure continuous productivity. The potential of an extended lockdown is looming and based on current cash reserves, Companies can only afford a full lock-down of business for a maximum of 2-3 months. This requires companies to reprioritize investments and put on hold all non-essential investment programs, and launch cost reduction initiatives across the enterprise with both immediate and longer-term impacts.

Survival Strategies for Businesses During COVID-19 Lockdown

Unfortunately, the impact on start-ups or small businesses can be way more brutal as they have scarcer cash reserves and a smaller margin for managing sudden slumps. The shutdown will give a ripple impact on India’s economy. All business sectors have already been affected and resulting in low revenue generation due to an eventual halt/slump on the sale of products and/or services. It is expected that India’s growth rate in FY20-21 will be down to 2% from a range of 4.7%5.2% as was predicted earlier by the rating agency Investment Information and Credit Rating Agency (ICRA) of India Ltd. So, during such testing times, start-up entrepreneurs will have to adapt to a new set of rules and be mindful of the following aspects to alleviate risks and to survive the slowdown caused by the impact of COVID-19.

The companies should follow the following steps:

  • Tracking expenses against the Revenue Status
  • Checking the feasibility of the business mode
  • Plan policies for next 3 months/ 9 months/ 18 months
  • Be patient in securing investments

However, we might witness a dip in VC/HNI funding in the short run. Investors will be more vigilant and may take longer than usual to make funding decisions after following stringent diligence procedures. But there is nothing to worry about because if we look at the previous economic downfalls, we can notice the market eventually bounce back after the end of an epidemic crisis. To extend the runway, businesses can even approach existing investors for additional funding. Since they are already invested and have their skin in the game; they are more likely to help during this time.

Small businesses should be on the look-out for borrower-friendly loans rolled out by government authorities. The US govt. has rolled out a US$350bn fund for direct business loans under the Small Business Administration (SBA) as part of its larger US$2trillion COVID-19 Stimulus Package. These are interest & tax-free loans with a deferred repayment period, to adjust to the business owners’ needs. Moreover, businesses already having sizeable loan commitments can request lenders for moratoriums on repayments owing to halted operations& dried-up cashflows.

This is the time when understanding the gravity of the situation and turning it favorable for the business is all that matters to let it sail smoothly in these difficult times. Here are a few tips to stay connected and afloat during the shutdown:

  1. Communicate transparently with your customers
  2. Maintaining a healthy relationship with contracted parties
  3. Managing employees & related optimization
  4. Keep Service Team Engaged
  5. Communication to stakeholders

In these difficult times, it is important to stand united and help one another in whatever way we can. Stay safe and stay healthy. Please remember that some of the best initiatives are built-in trying times. Like all difficult situations, this too shall pass.