The Covid-19 pandemic continued it onslaught and expanded over 200 countries and regions around the world since its outbreak in China on December last. In case of pessimistic scenario assuming that the virus is not highly seasonal and that cases continue to grow throughout 2020, there will be a significant impact on economic growth throughout the year resulting in a global recession. By facing the consumer-demand headwinds, companies will need to navigate supply chain challenges.
Bangladesh started reporting cases of coronavirus infection on March 08, 2020, and since then it has experienced a significant spike in the number of cases and has evolved its response strategy, including an extension of the nationwide lockdown.
In the country, reduction in demand from the end of the third quarter (Q3) of the current fiscal year (FY20) to the Q4 which may extend to Q1 of the new fiscal year, starting from July 1, 2020.
Due to reduction in demand all business sectors will be affected to different degrees. Some sectors, like aviation, tourism, and hospitality, will see lost demand (once customers choose not to eat at a restaurant). This demand is largely irrecoverable. Other sectors will see delayed demand. In consumer goods, for example, customers may put off discretionary spending because of worry about the pandemic but will eventually purchase such items later, once the fear subsides and confidence returns.
These demand shocks-extended for some time in regions that are unable to contain the virus-may mean significantly lower annual growth. Some sectors, such as aviation, will be more deeply affected. And companies of these different sectors need to navigate through supply chain challenges as well as the demand reduction.
All organisations must develop robust and flexible business continuity arrangements and crisis management system that will help to minimise the impact of disruptions. Amid the chaos and all the incoming advice, it's hard to know exactly what leaders should do today. Business leaders may, however, focus on the following things.
PROTECT EMPLOYEES: The Covid-19 is challenging day-to-day life of many people appallingly. The companies and business are not beyond this as the runners of the companies are people. Companies need to increase communication and change working norms, making work-from-home, practical and simple whenever possible. And of course, they must protect people's health - positive hygiene habits, personal protective equipment, amended sick-leave policies -whatever it takes to ensure health and safety.
RESPONSE TEAM: Companies should nominate a direct report of the chief executive officer (CEO) to lead the effort and should appoint members from every function and discipline to assist. Further, in most cases, team members will need to step out of their day-to-day roles and dedicate most of their time to virus response.
DEFINING THE FUTURE: It is the time to rethink for using virtual workspace as it is not certain when the world and the country could get rid of the impact of this virus. The crisis has propelled new technology across all aspects of business life, from e-commerce to remote-working and e-learning tools, including Google Meet, We Chat Work, Microsoft Team, Zoom Meeting and Tencent Meeting etc. to name a few.
ENSURING SUFFICIENT LIQUIDITY: Effective cash flow analysis and forecasting and maintaining adequate liquidity is more than anything needed for the continuation of any business. For the critical variables that will affect revenue and cost, they can define input numbers through analytics and expert input. Companies should model their financials (cash flow, P&L, balance sheet) in each scenario and identify triggers that might significantly impair liquidity. Companies should also consider the stimulus package announced by the government for this crisis management; check the feasibility of applying for the finance and availability of liquidity; consider what to do next as Bangladesh Bank freeze loan repayment up to June; put a priority on tax payment, employee payment, supplier payment; and apply for a soft loan if fulfil the criteria.
STABILISE THE SUPPLY CHAIN: Companies need to define the extent and likely duration of their supply chain exposure to areas that are experiencing community transmission and inventory levels. Most companies are primarily focused on immediate stabilisation, given that most Chinese plants are currently in restart mode. They also need to consider rationing critical parts, pre-booking rail/air-freight capacity, using after-sales stock as a bridge until production restarts, gaining higher priority from their suppliers, and, of course, supporting supplier restarts.
STAY CLOSE TO YOUR CUSTOMERS: Companies that navigate disruptions better often succeed because they invest in their core customer segments and anticipate their behaviours. Companies should invest in online as part of their push for omnichannel distribution. This includes ensuring the quality of goods sold online. Customers' changing preferences are not likely to go back to pre-outbreak norms.
REVISE THE PLAN AND PRACTICES: Business plan drawn up during pre-pandemic time will no longer be effective to implement in current situation even post-pandemic stage also to some extent. So, rapid change in the business plan is required for both short term and long term and making investment decision would be critical.
DEMONSTRATE PURPOSE: Businesses are only as strong as the communities of which they are a part of. Companies need to figure out how to support response efforts-such as by providing money, equipment, or expertise.
ACCELERATE DIGITAL TRANSFORMATION: In the global scenario, many companies have already undergone digital transformation except some SMEs .whereas the cases in Bangladesh are not notable. It's time for the board to decide the future of the business considering digital transformation.
PLAN FOR THE NEXT PHASE: Every assumption underpinning a business is open to question. To take one example, we might be amid the largest drawdown in demand since the Second World War. The pendulum might not swing back fully once the outbreak has relented. Having experienced a new way of living, consumers are recalibrating their spending, increasing the likelihood that spending may permanently shift between categories and that online services could get adopted far faster
Maria Howlader, FCA is Founder & CEO, Howlader Maria & Co (HmAC), Chartered Accountants.
