Toolkit: Getting through the COVID-19 business crisis
April 22, 2020
A ten point plan for navigating turbulent commercial waters not just to survive, but to thrive
As the sheer scale of the economic havoc being caused by Covid-19 becomes clear, we now know for certain that all businesses need to prepare for the most extreme of disruptions the world has known for over a hundred years. This is like no change management case study we have ever seen. Time frames are being compressed. Uncertainty is ramping up. Government action is welcome, but the credibility gap between the good intentions of the many announcements and their understandably patchy delivery is only making matters worse for business owners and managers. They must deal with the immediate emergencies and concerns, prepare for all manner of scenarios and somehow keep the business operating, while always remembering not to compromise its future just to survive in the short term. Our plan draws on tried and tested crisis management principles. It is designed to chart a course to stability and eventual recovery.
DO IT NOW | DON’T PANIC | REMEMBER THE FUTURE
This is an emergency, this is not business as usual and some things must take absolute priority
1. SET UP A CRISIS MANAGEMENT TEAM
Create your own COBRA structure and dedicate people to managing the crisis and adapting the business to new information, changing risks and opportunities.
Think about:
- Appointing an outsider with restructuring or change management experience as Covid-19 supremo, so that existing management can focus on running the ongoing business
- Having a dedicated crisis team and giving it the powers necessary to override your normal processes, reporting routines and authorities all of which may be unsuited to the crisis
- Having independent crisis teams in each business unit or main activity, with their own delegated powers but a reporting line up to the supremo or members of his central team
- Make sure you have emergency succession plans in case senior leaders get ill
2. STRESS TEST & IDENTIFY EXTREME SCENARIOS
Detailed planning based on a range of scenarios can become spectacularly ineffective when there are high levels of volatility. A better approach is stress testing, which focuses on key aspects of your activities.
Think about:
- Testing your overall cash position, profitability and debt servicing for different periods and intensities of disruption
- Testing your supply chain and key stakeholders for different geopolitical and mobility restrictions, especially for potential price hikes or supply strikes as national and international competition for scarce resources increases
- Comparing the impact of different strategies on short term survival and stability as against medium term value protection
3. SIMPLIFY SUPPLY CHAINS & CONSIDER PERFORMANCE & POLICY CONSTRAINTS
The only certainty in this crisis is supply chain disruption, caused by geography, regional events and financial stress. One way to combat this may be to lower requirements on some quality and performance measures, or to relax restrictive procurement policies no longer appropriate in this crisis. You really need to be proactive, not reactive.
Think about:
- Reviewing suppliers and ranking them from most to least critical and most to least exposed to disruption
- Duplicating some supply sources or replacing those least critical but most likely to be disrupted
- Encouraging smaller vendors to cooperate and share scarce resources (like inventories, logistics and funding) for their mutual benefit
- Looking for the potential bottlenecks in the supply chain and how your own processes can help to ease or circumvent them, such as by changing production mix or scheduling
- Identifying where your inventories are dispersed geographically and whether you can work with your suppliers and your competitors to minimise disruption
4. ASSESS & MINIMISE IT RISK & FACILITATE PRODUCTIVE REMOTE WORKING
Make sure your staff can work remotely in an efficient and, crucially, a secure way. Figure out how you are going to prioritise scare access or capacity.
Think about:
- How secure your network is for remote working, especially after the Cabinet Meeting Zoom debacle
- Whether your staff need training on remote working, especially the risks of using public wifi or external email accounts
- Setting behaviour and etiquette standards for video meetings to avoid the risk of remote anger and frustration
- Do you have an IT continuity plan and whether it has been tested
- Do you have sufficient remote working capacity and of not, how will you control/prioritise access to systems and data
- Avoid the ‘video meetings, bloody video meetings’ syndrome by discouraging unnecessary video calls
- Maintaining the sense of teamwork by using the relevant teamworking and collaboration software tools
DON’T PANIC
Once emergency plans have been made and are being implemented, it’s time to deal with the changed realities the crisis has imposed on your business
5. CASH IS KING
It’s easy to say that cash must be the priority and to set minimum liquidity levels. In reality, there will never be enough cash, so it must be rationed for the critical aspects of the business.
Think about:
- Why your working capital is changing? Is it falling because of reduced customer demand or supply chain disruption? Is it rising because demand is falling but your production hasn’t adapted
- If you use receivable financing, what impact will lower sales have on cash flow
- How the crisis will impact your cash interaction with trading partners and stakeholders: will your customers pay more slowly; will your suppliers need paying more quickly; might your lenders restrict your existing facilities
- Planning your cash flow and liquidity needs in detail on a rolling weekly basis looking two or three months ahead and testing them for changing scenarios in the crisis
- Accessing all and any relevant government emergency funding schemes, but remembering always the impact of extra debt on the future of your business
- Preparing for emergency funding calls on existing shareholders and identifying potential new investors
6. PRIORITISE THE WELFARE OF EMPLOYEES
As a leading industrialist said recently: you can rebuild profits, replacing people is hard. Keeping in contact with your employees (current as well as those who’ve been furloughed) and encouraging them to still feel ‘part of the family’ is critical. You need them to stay motivated and fully committed to whatever the future holds for your business.
Think about:
- How you play a role in preserving their physical and mental health and their morale.
- Monitoring employee or past employee comments about your company on social media or on specialist sites such as Glassdoor or Vault
- Creating an HR help desk function offering support and advice on the issues worrying staff: such as advice on parenting and home working, dealing with fear and depression, financial advice
- Encouraging staff to use their increased spare time to learn new skills, upgrade existing ones by either providing that training inhouse or introducing staff to trusted external providers
- Regular updates for staff on developments at the business, using open and down to earth language, not dull corporate platitudes. Tell it how it is and never promise what you’re not absolutely sure you can deliver.
7. PRIORITISE STAKEHOLDER COMMUNICATIONS & PROMOTE YOUR BRAND
There have already been numerous examples where high profile businesses have enhanced or severely damaged their reputations and their credibility through their actions during the crisis. However severe the commercial pressures or how strong the profit motive, this is a time when decision need to be taken against the ‘bigger picture’ background.
Key commercial relationships and business partnerships need to be protected and nurtured as never before, with demonstrations of commitment and support even where there is a short term financial pain as a result.
Think about:
- The potential medium and long term damage of using your commercial muscle to reduce your problems by brutalising suppliers or staff, especially of being branded in public as a crisis villain
- Setting up dedicated teams to stay in touch with your key relationships with a particular focus on sharing your realities and carefully asking how things are with them, whether and how they might need support
- Monitoring content on social and other media about your business and its behaviour, considering the impact of miscommunication and correcting public perceptions where necessary and possible
- Ensuring you have access to PR crisis management resources in case of a significant problem
REMEMBER THE FUTURE
Every crisis produces opportunities. The winners are usually those who spot them and exploit the new realities.
8. DON’T ABANDON ALL INVESTMENT IN YOUR BUSINESS
Continual investment in a business is what drives growth and preserves efficiency, competitiveness and productivity. Of course some capital and operational projects will be delayed and some must be downsized, but the temptation to just ban all capex until further notice will very likely condemn a business to failure and will certainly damage staff morale and hurt future performance.
Think about:
- Reviewing all capex and operating budgets to allocate priorities based on:
- cash requirements and ROI (as adjusted for the change caused by the crisis)
- satisfying amended working safety requirements
- eliminating or reducing operational bottlenecks
9. WHO WILL SURVIVE?
Not every one of your customers, suppliers and stakeholders will come through this crisis. Trying to support all of them may threaten your own business. Abandoning some may reduce the size of your business and its profitability, but it help you through to the other side of the crisis.
Think about:
- Identifying the weakest links in your business by both sector and individual stakeholder, applying hard-nosed and strictly unsentimental judgment
- Rating the likelihood and the extent of financial and operational impairment suffered by your key stakeholders and assessing how you are going to mitigate the impact on your business and operate without them if they fail
- Considering the most effective ways of ending relationships where it is best for your business
10. DON’T MISS OPPORTUNITIES
This crisis will be a once in a career opportunity to find and exploit short term opportunities: acquiring weaker peers, forcing others out of the market altogether, disrupting and redesigning markets, targeting worthwhile new customers being underserved by struggling competitors.
Think about:
- Targeting investment or joint venture opportunities that were too highly priced before the crisis, but are becoming more sensible in these changed circumstances
- Reconfiguring your own business model to adapt it to new realities
- Exploring new markets or customer opportunities previously over served or supplied