In less than three months, the spreading of the coronavirus has proven to be catastrophic for hundreds of thousands of people. At the time of writing, April 4th, the cases of COVID-19, the disease caused by coronavirus (SARS-CoV-2), have spread to over 205 countries and territories and account to over 1,100,000, out of which nearly 60,000 have resulted in fatal consequences. The pandemic has led governments worldwide to take unprecedented social, economic and public health measures to limit spreading and prevent the collapse of their economies.
Uncertainty makes looking ahead particularly trivial, and countries’ imperative goal is now to join those few that managed to control the epidemic. Some of these are South Korea, Singapore, and Taiwan, which have implemented a combination of technology, fast, widespread and reliable mass testing from early infection detections, targeted quarantined, rigorous contact tracing and real-time integrated tracking and analytics. The future outlook in countries that are now experiencing exponential growth will depend on factors such as the development of the virus and eventual seasonal slowdowns, the impact of social distancing measures, the preparedness and response of public health to the initial spreading and the emergence of herd immunity.
While some companies might be looking at the next normal, it is crucial to start taking action now to limit the negative impact on their organizations. Bold and immediate responses are required to ensure the safety of people, secure short-term liquidity necessities and react to value chain disruptions by reimagining business models and value propositions. We identify 5 Key Response Actions that businesses should take as a response to the ongoing crisis:
- Employee protection: first and foremost, follow the most recent guidelines by global and local health organizations such as the WHO and CDC to ensure your people’s safety. Reduce travel where possible and shift to a virtual work setting. Provide support for affected employees in the form of health guidance and psychological advice.
- Crisis response team: actions need to be taken quickly, and speed must prevail over precision. In a highly unpredictable environment in which information is changing by the hour, a crisis response team is crucial to define priorities, make smart trade-offs, name the decision-makers and embrace action without punishing mistakes.
- Scenario planning and cash and liquidity crunch avoidance: understand the impact of the crisis through different scenarios and model how cash flows, P&L, and balance sheet will change in the short and medium-term as a consequence of the drop in demand. Ensure liquidity as a mean to stabilize your business and mitigate short-term earnings impact by pursuing cost reduction strategies.
- Contingency plan and prevention of supply chain disruption: understand how the different scenarios are projected onto shocks in your supply chain by categorizing suppliers in different tiers according to the extent of the economic and social impact of the virus on their geographies. Leverage inventory and after-sales stock and prioritize production. Evaluate new suppliers and partnerships to safeguard time-to-market and reduce risks.
- Long term adjustments and rethinking of business purpose: analyze the medium to long-term feasibility of your value proposition and business model. Consider different rebound scenarios (slow, normal and quick) and adjustments in supply and eventually shifted customer needs. Reconsider your competitive advantage by rethinking your purpose and strategy.
The situation is changing quickly, and immediate decision making is vital not only for the short-term safeguarding of your business’ stability, but also for the medium- and long-term success. Several outcome scenarios have been built to understand what the post-crisis recovery will look like as a consequence of combinations in the effectiveness of the public health and government economic policy responses. However, it is imperative for companies to start taking actions now to navigate the crisis successfully and minimize the social and financial impact of the ongoing pandemic.
The author of the text is Francesco Spolaor. Francesco is CDMO & Junior Consultant at Vinco Innovation Consulting. You can get in touch with him at firstname.lastname@example.org