A plan of action for businesses to consider during the lockdown
The new Coronavirus, COVID-19, is like nothing we have ever experienced in our lifetime. Countries around the world have gone into lockdown, with governments directing their citizens to stay home. Like a natural disaster, the effects of the outbreak are far-reaching and will be deeply felt. Businesses in particular are reeling from the effects, with a high level of uncertainty surrounding when things will return to ‘normal’. Although business owners and leaders may feel overwhelmed, there are lessons that can be learned from how businesses in China responded to the initial outbreak of the virus. This article will examine some of the steps businesses can take in order to mitigate the effects caused by the Coronavirus pandemic.
The effect of the Coronavirus on business
The expected impact of the COVID-19 on businesses and the economy is continually evolving. Due to the pace at which the virus continues to spread, there is no certainty when the pandemic will come to an end. COVID-19 will undoubtedly have a commercial impact on all industries, especially those in manufacturing, events, F&B, retail and entertainment.
There are a multitude of problems that arise, from cash management, to performance of contractual obligations, and the suspension or termination of contracts, among other things. Businesses should carefully analyze and assess the potential impact the virus will have in the short, medium and long term.
Business owners and managers should address the cash management situation and outline a course of action in the event the lockdown is prolonged. It may be necessary for managers to rework operations and establish various ways through which business can be conducted, considering the current circumstances. A plan of action is also necessary in case the lockdown period remains ongoing for an extended period.
If an end to the lockdown is in sight, it is imperative for managers to lay out a blueprint in order to cope with any knock-on effects, such as reduced demand, problems with supply chain, new regulations, etc.
How can businesses reduce costs?
It is important that businesses try and survive their respective lockdown periods. Even though there is uncertainty regarding the duration of the lockdowns, there is hope that once the spread of the virus stops, everything will return to normal. There are various ways in which businesses can reduce costs in order to ensure they are able to withstand the challenges brought about by the COVID-19 pandemic.
Reduction in working hours/flexible schedules
Laying off employees should be considered a last resort during this crisis. As an alternative, you can negotiate with staff and ask them to accept reduced salaries or take unpaid leave for the duration of the lockdown. Be sure to familiarize yourself with local employment laws, as in some jurisdictions you may not be able to direct employees to work adjusted working hours or flexible schedules (e.g. take unpaid leave).
Seek financial aid
In response to the heavy economic implications for individuals as well as SME’s, and to prevent their respective financial systems from seizing, many governments are rolling out stimulus packages. Governments such as the USA, Japan and Malaysia, among others, are attempting to mitigate the effects of the COVID-19 pandemic on their economies through large stimulus packages that are provided to their citizens through cash handouts, subsidies, loan relief and coupons.
The US government has signed into law a $2 trillion stimulus, of which $500 billion dollars will be provided to businesses in the form of loans, loan guarantees and investments. Contract workers and part time workers will also be eligible to receive aid. While Japan is planning to inject a $1 trillion stimulus, of which a significant percentage will be handed out to the public in cash and subsidies. Although the exact details have not yet been provided, the Japanese government had already introduced a $239 billion stimulus in December of 2019 to assist businesses and workers that have been affected by the virus. Shinzo Abe, the Japanese prime minister, stated that a large portion of the package would be offered to small firms hit by a slump in sales.
Businesses leaders and managers should stay up to date with any information regarding a possible stimulus package and whether they qualify for relief.
Stay up to date with regulation
It is important to stay up to date with any guidelines or regulations provided by the government. Many governments have been recently forced into changing regulation. In the UK, for example, lawmakers have announced new insolvency measures in order to prevent business from filing for bankruptcy. The purpose of the change is to assist UK companies which need to undergo a restructuring process or financial rescue, in order to keep trading.
The outbreak of the COVID-19 pandemic has, for many business leaders, brought forward the notion of structural change and innovation. Many leaders and managers are now forced to find alternate means to facilitate operations, reduce costs and optimize their supply chains. Many are looking at digital tools to assist them to reconfigure and adjust their supply chain, marketing approaches and overall strategies.
Communication with your local authorities
It is important to stay in communication with your landlord and local municipality. You may receive reductions in rent or subsidies from the municipality during this time. Depending on how the system is designed, your landlord may receive relief from the banks or government.
What comes next?
China is slowly recovering from nearly two months of lockdowns and business closures caused by COVID-19. Although some businesses were unable to survive this unprecedented period of disruption, more than 70% were able to resume operations by the first week in March. Operations in China are returning to normal, however the global spread of the virus is causing problems for those outside of the PRC. Although the current outlook may be grim for many business leaders and managers, with China in mind, there is a glimmer of hope for those that are able to withstand the duration of the lockdown. Therefore, the most important thing to do right now is to plan, prepare and ensure you, your staff and family are safe and healthy.