Today, we are witnessing, unprecedented situations, for the businesses, as the pandemic has recessed the global economies into a complete lock down. Although anticipated, yet, the extension of lock down till 3rd May’20 has started to test the most important human virtue- “Patience”. The uncertainty of ‘what after’ that comes along with such necessary mandates put a big question mark on the revival of momentum for businesses across sectors and geographies. The relayed impact on working capital cycles can see many business houses, irrespective of size and scale fighting the existential threat.
Moving away from being a Cassandra of Doom, the crystal ball gazing also reflects on opportunities that come surface up during these churning times. Although difficult for many to look at the opportunity side these days, but this write up makes an effort to analyse certain strategies, which can be used to minimise the damage or to take up the advantage of certain opportunities in these challenging times.
Of course the situation is different for different businesses and one solution does not fit all. Hence it is not intended that all the points mentioned would equally apply to all business. However, it is left to readers discretion, to filter out the matter of relevance applicable to their context.
The response to this unprecedented situation demands innovative and unique ways depending on your industry and size of business. These can be divided into two broad categories depending on the timelines of response
A. Immediate Response
B. Strategy Response
A. Immediate Response:
The Businesses are inherently designed to respond to this situation. Some business are responding faster, whereas some businesses are waiting for more clarity to come. Businesses have taken their regular decisions in the past based on their historical experiences. Since the current situation has changed our decision parameters to a large extent, some of the decisions taken in Pre Corona world would not stand in good stead. For example: the previously approved business plan and the Budget may not be relevant now. The business need to re-evaluate the situation in the light of its own strengths and weaknesses. If some tough decisions need to be taken they should be taken fast, there is no need to wait for the storm to get over.
Normally business have a long term strategy which gives them a purpose. However to be able to serve our purpose, it is necessary to sail through this storm and see tomorrow. Hence it is important to become more flexible in these days and focus on survival. For example: if there is no demand for the products of your company, but the company can get involved in certain other products or services which can give some revenue, it may not be a bad idea to temporarily deviate from your long term strategy.
Another arrow in the quiver could be, the Company may give priority to liquidity instead of profitability. Options range from deferring making capital investment which may not yield immediate results. It may opt for the clients with lower margins but better realisations etc. New innovative ways of funding like bill discounting through online portals etc. can be used.
Economically, the COVID-19 crisis is affecting the liquidity and putting cash flows under severe stress. As the crisis goes, supply chains are going to be disrupted along with financial position of the business. The business leader’s need to focus on optimizing cash reserves, assessing the company’s liquidity, and keeping internal and external communications in place.
4. Avoid Debt Trap:
In order to maintain liquidity in the organization, the business managers tend to cling on to low hanging fruits of raising additional debts from the Banks or Financial Institutions. They are willing to put their hard-earned credibility built on past performance or the Collateral support they leverage upon.
But it is advisable to be mindful that the business should be able to service the additional debt. Sometimes the debts becomes so disproportionate to the business, that the business will not be in a position to service the debt in future. Therefore, the business may adopt alternate strategies to avoid going into debt trap. In order to service the liquidity need, the Company should look to dive deeper to change its business plan, curtail its overheads, improve efficiencies, and reduce the less profitable ventures etc. to avoid the debt trap.
5. Banking Management:
6. Credit Control:
Businesses provide credit based on the credentials of their customers established over a period of time. Hence many times they ignore the importance of evaluation of credit worthiness of the client before extending the credit. Also the practice of taking credit insurance is also not prevalent. This situation exposes the businesses to the risks of high bad debts. We have to understand that the businesses are going to work in a very different situations and many cases of defaults may occur. There is a need to give more attention to the credit analysis, fixing of credit limits for clients, disciplined approach to the collections and recovery and taking of credit insurance wherever practicable.
7. Active HR Communication :
Communication is the thread that binds the organization together. It gains further pertinence in such times, where clear messaging and goal setting is the antidote to worry and anxiety setting into team’s minds. It is important to keep the team engaged and confident. An active HR communication helps in keeping the employee morale high. It is important to define and communicate the ways to make them feel secured and engaged. The tougher decisions need even more direct and clear communication. If the company is compelled, to delay their salaries, or to take some more tough decisions, it is important to keep communicating with the employees.
Some companies are also communicating with their past employees to check if they need any help, these kind of gesture calls goes a long way in creating goodwill for the company.
8. Marketing & Sales:
These are critical to the business as they directly contribute to the revenue generation. The marketing efforts should not be slowed down under these circumstances. While the demand and supplies both seem uncertain; yet the marketing team should be actively communication with the customers and the supply chain. Further the sales strategy should shift your sales to online as far as possible.
9. Managing Compliance:
The government has been emphasising on strict regulatory compliance since last few years and all the benefits are being provided only if the beneficiaries are in compliance with the required norms. Hence do a review and check for compliance matters to be in order and fill the gaps if any.
10. Be Updated with new information
Uncertainty will remain around the impacts of this pandemic and how long these impacts will last. The government, social, business and economic policies are changing rapidly during these times. Therefore, it is imperative to get the new information quickly and act swiftly as circumstances change. Businesses should check the veracity of information available from various sources and rely on reputable ones. (You may check updates & Insights on various aspects of the pandemic –see Solvera Covid Updates)
B. Strategy Response
Every Organisation tries to sync its systems and procedures with its long term objective or “PURPOSE”. However the exercise becomes difficult, since the operations are continuously running and introduction of new system requires an extra effort and sometimes the rebooting of some critical functions. The Human Resources is occupied with the routine work, that they get insufficient time and energy to discuss and actively work on setting up of more efficient systems.
Imagine the business is like an old car, which need repair of some critical parts, but for that you need to put the car in the garage for some days and you can’t afford that. Now the car is already sitting in garage and if we don’t care to repair it, we are sure to work with the risks of failure in future.
To exemplify, Once a Motor Mechanic asked a Heart Surgeon, that, “we both do the same thing, I repair the engine and you also repair the engine of body (heart), whereas our remuneration is so different.” The Doctor smiled and replied, that, “try once to repair the engine while it is still running.” The moral of the story is that it is difficult to repair the engine while it is still running.
This lock down situation has given an opportunity to businesses to work on the System Development and Improvements. It could be development or review of SOPs for your company, evaluation of Organisation Structure, undertaking feasibility exercise like ERP Implementation, revamping the CRM system, Company Website, introduction of new technologies, new platforms etc. This is a good time to do these activities. The best part is that most of us are paying the salaries of our staff without having enough work for them, putting focus on these exercise now can help us in getting productive use of our staff.
Fortunately, the online channels have now made it feasible to hold meetings, discussions, deliberations without actually physically coming together.
Due to the change in the global thread of businesses, it becomes essential to review the long term business strategy as well. Some business may find that the long term business plan is not feasible unless they make substantial changes in the plan, some new opportunities can be captured by modifying the business strategy and the business can survive through these challenges. The essence is to be nimble footed and seek inspiration from this mutating virus to keep itself active and dominant.
The Business may try to use this time in extensively allocating its available resources in doing the research and innovation. Their best talent is sitting idle these times. The essence is to create a stimulating environment to conduct brainstorming sessions, to invigorate innovation in the products and services, to improve the efficiency etc.
Knowledge generation and innovation has become very important in the current times, and only the most efficient units can survive in the long run.
Drawing a leaf from our own book, Team Solvera, have initiated research in our areas of operations and the write up you are reading is a product of simulation of best minds in think tank. Be mindful that such actions may not be yielding immediate revenue, but these efforts makes us stronger to provide better services to your client in the longer run.
Businesses provide credit, based on the credentials of their customers established over a period of time. Hence many times they ignore the importance of evaluation of credit worthiness of the client before extending the credit. Also the practice of taking credit insurance is also not prevalent. This situation exposes the businesses to the risks of high bad debts. We have to understand that the businesses are going to work in a very different situations and many cases of defaults may occur. There is a need to give more attention to the credit analysis, fixing of credit limits for clients, disciplined approach to the collections and recovery and taking of credit insurance wherever practicable.
The supply chains around the world were already witnessing alterations and the current events have further aggravated the problem and cause interruptions. It has opened up the opportunities for interventions and innovations in the way the distribution has been happening in the respective industries.
The recent crisis and its response is expected to see drift in the consumer behaviour. This will open up opportunities for new product developments, exploring alternative marketing channels and also review the focus on Quality and Brand.
If you have restricted your insurance needs to just insuring the assets then it is time to evaluate the requirement of Business and Loss insurance. Apart from these you may also try and look for credit insurance in these turbulent times to keep your business insulated from such crisis situations.
Conclusion:
To conclude, no business is insulated from the impact of the virus in the current environment. We all have to look the storm in its eye and weather out the challenges it brings along. Unfortunately, many businesses may not see the light of the day. Continuing to draw a parallel to our nemesis, The Virus, when attacks a healthy body with good immunity, it does less damage and probably the patient may survive the attack. The probability and speed of survival would depend on the level of strength and immunity of the person. One can’t develop the healthy body and immunity overnight. If the person was having previous disease, it makes it difficult to recover this attack. The same principle applies to the businesses. The businesses which were earlier healthy and developed good immunity are in a much better situation than the one which were financially stressed, overexposed, insufficient systems.
Hence the challenges does not end when the situation gets normal, but we need to prepare our businesses for better immunity so that we can face the challenges in a better way and create opportunities out of these unwarranted situations. As Winston CHURCHILL, once said, “ If you are going through hell, keep going.”
There is uncertainty about how long the pandemic will last, but with times, business and daily life will find stability. Business leaders need to ensure that their organizations not only survive the current crisis but thrive well in the post crisis era.
