ARTICLE: How to strategise business survival in the COVID-19 pandemic
For many businesses, a pandemic can derail company strategy and cause a range of unforeseen challenges. So how should organisations respond?
The news is dominated by details of the COVID-19 pandemic. New, conflicting information is available daily. The number of confirmed cases continues to grow, as does the number of countries affected. The impacts on human health and the ultimate scale of the crisis are still being determined.
The flow-on impact to business and the economy is even less certain. Travel bans and trade restrictions will undoubtedly impact many sectors, but by how much? And for how long? Government responses around the world are also varied and unpredictable. With low interest rates, central banks have fewer options to stimulate a slowing economy and many countries are relying more on fiscal policy, with less predictable outcomes.
An unpredictable future
This all creates an increased level of uncertainty and unpredictability – the exact opposite of what is required for strategic planning. Strategies set only a few months ago are being disrupted by the rapidly changing and uncertain environment.
For many businesses, particularly small and medium enterprises (SMEs), the challenges go beyond strategic planning. The inability to manage cash flow, financing and resourcing in the face of sudden and unpredictable change can put the future of an organisation at risk.
So how can organisations act strategically through a pandemic?
Steps to business survival
The solution is to be prepared and create an agile and flexible organisation. This is not as difficult and disruptive as it might sound. In fact, for many organisations, undertaking some additional analysis, scenario planning and changes to monitoring will have a significant impact.
There are four key steps organisations should take to help them prepare for any future changes. These are:
1. Scenario analysis. Consider a range of likely scenarios and the impact of each. For example, consider a prolonged period of infection with the economy slowing into a recession as well as a shorter, more intense infection period followed by a quicker economic rebound. Next, consider the financial, operational and organisational impact of each, as well as external factors, such as government and competitor responses. Judge how likely each scenario is and how it will develop over time. For each scenario, if there are any areas of unpredictability where a range of outcomes are possible, these should also be considered. A retail client, for example, might consider a range of scenarios from business as usual through to extended periods of store closures. They might also consider how their suppliers and customers will be impacted and how this might affect their business.
2. Organisational review. Undertake a detailed review of your own organisation to understand its strengths and vulnerabilities in facing those various scenarios. Consider the organisation holistically, including: governance; organisational structure and operations; risk appetite and management; finance and resourcing; and culture. Think about how suited your current approaches are to respond to each scenario and whether there is alignment across the organisation.
The types of questions to consider in undertaking this review, include:
- How quickly will we need to respond? Who will make the key decisions?
- How will our organisational structure and process support or impede our response?
- How will staff be affected and what support do they need?
- What new risks will emerge and how do we manage them?
- Can we manage changes in cash flow? Will our financing arrangements be impacted?
- In what ways will our customers and suppliers be affected? What does that mean for our organisation?
- Do we need to engage with stakeholders? What is our communications strategy?
- Is the culture one that will support or impede required changes?
Answering those questions will help you focus your efforts in the most critical areas. For a client in the childcare sector, for example, this will mean a greater focus on cash flow and communications as they seek to prepare for possible closures and reassure parents about the safety of their children.
3. Preparation and change. The above analysis is likely to highlight a number of areas where change is appropriate, regardless of the scenario. These areas should be identified and appropriate changes made now. For example, if cash flow and debt servicing is likely to become challenging, it would be worth introducing tighter cash controls now. It may also be worth engaging in some preliminary discussions with your bank. The current panic buying situation is creating a short-term benefit for a client involved in food manufacturing. However, they will also be preparing for the inevitable downturn. They should be developing revised investment strategies to ensure the cash they accumulate now can last through a range of future slowdown scenarios.
4. Monitoring. After identifying a range of possible scenarios and developing plans to respond, it is important to monitor the situation to determine what reality is emerging. The board and executive team, for example, should consider each scenario and determine the level of reporting and analysis that is required.
Most strategic planning relies on a high degree of certainty and predictability, however the COVID-19 pandemic is allowing for neither of these. The longer term sustainability of organisations is at risk. However, those that act now and prepare early have a much greater ability to survive and thrive.
“Most strategic planning relies on a high degree of certainty and predictability, however, the COVID-19 pandemic is allowing for neither of these.”
This article was originally published in Acuity Magazine – you can read the original article here.