COVID-19 is a serious contagion. As of yet, humans have little recourse to limiting the danger posed by this virus, though one tactic that most governments have relied on to various degrees of enforcement is isolating people from one another. A predictable outcome of such prohibitions against social interaction has been commerce calamity.
During a seven-year period between 2011 and 2018, the World Health Organization cataloged 1,438 virus outbreaks that it classified as epidemics. Everyone affected by a virus such as this suffers, as do friends, family members, and employees of businesses forced into limbo. Responsible action is vital to help lessen the impact.
Managing A Crisis
Historical data suggests that the economic effects of widespread illnesses are short‑term. During the worst of an outbreak, some products and services experience temporary booms, while other markets come to a veritable standstill until conditions improve. Individual businesses might collapse, especially when management panics, but, eventually, other entrepreneurs will come along to take up the slack in supplying those goods and services that consumers demand.
A lingering effect of any crisis is the uphill struggle that new businesses face to gain market share, achieve sustainability and contribute to a revival of the overarching economy. Obviously, it is preferable in the first place to never face bankruptcy. Crisis management is what separates the resilient from the collapsed, so managerial prudence is necessary to address key enterprise elements such as:
The labor force: A crisis will introduce mobility concerns as employees and contractors become unable to show up to the office, factory or farm.
Daily operations: Approved plans for material substitutions or changes to production processes will help keep an enterprise operational.
Supply chains: Managers with foresight will have in place contingencies for acquiring necessary production inputs from alternative sources.
Financial liquidity: An assessment of immediate cash flows and expected sources of income (including crisis grants or loan guarantees from the government) is important for understanding both current impacts on liquidity and projections of future impacts.
Governance and compliance: Companies must continue managing taxes and regulatory submissions, plus temporary relief packages that might come from government in the form of grace periods or similar payment deferments.
Brand strategy: Disruptions to established workflows can often provide opportunities to explore new methods of design, production and marketing.
During a crisis such as COVID-19, the most important consideration for entrepreneurs and managers is business continuity. Practical measures that might not be standard procedure can help an organization weather a proverbial storm (or sometimes a literal storm) and can include:
Creating a secure infrastructure for remote work: Enterprise success depends upon team collaboration, so remote teams need tools and network connections that allow them to meet online in ways that promote the sharing of information while minimizing the risk of leaking such information to criminals or competitors.
Executing a plan for operational shocks: Solid planning for a crisis is based on thoughtful risk analysis, and mitigating those potential risks during a crisis entails implementing a relevant plan.
Giving back to the community: Large or small, a business that can think outside the box to help society get through a tough time will earn consumer loyalty.
The future is always uncertain. When any crisis hits, entrepreneurs must assess its potential blow to the organization’s business model. To that end, many analysts are taking a survey approach to understanding the impact of COVID-19, although, in the end, each individual business must determine ahead of time its best plan for survival.
Circling The Wagons
One option for a business that wants to survive is a merger. During times of economic uncertainty, entrepreneurs need extra credibility with investors and potential buyers. This, in turn, obligates them to make their enterprise not only attractive, but also visible amid society’s focus on the personal urgency of the crisis.
As with most global health emergencies, the economic impact of COVID-19 is leaving some companies desperate for help while infusing others with extra revenue. Currently, private equity has an advantage (subscription required) over entrepreneurs, with venture capital firms waiting in the wings to finance businesses that appear to be emerging from the contagion with the fewest persistent issues.
In China, which can be considered a leading indicator of fallout from the 2020 health crisis, merger activity is down by one-half from the same period last year. Around the world, more managers are invoking clauses that allow them to back out of deals when material adverse change (MAC) has a quantifiable effect on market conditions. On the plus side, 56% of executives surveyed globally are planning to make acquisitions over the next year, suggesting a general consensus that the virus will dissipate and economies will rebound.