Kris Keane: Emerging from lockdown stronger - four principles for businesses to adopt today
Kris Keane, director at big-four audit firm Deloitte, details how firms can emerge from lockdown stronger than when they entered it.
A typical crisis plays out over three time frames: ‘respond’, in which a company deals with the present situation and manages continuity; ‘recover’, during which a company learns and emerges stronger; and ‘thrive’, where the company prepares for and shapes the ‘next normal’.
The spread of COVID-19 has impacted the global economy in unprecedented ways. For many businesses, the shutters have come down and revenue has collapsed. These enterprises have been scrambling for liquidity and struggling for survival. Others are coming through relatively unscathed. A select few businesses have seen a spike in demand, which can bring its own risks and rewards.
While each industry, sector and business will face a unique set of challenges, as we move through Phase 1 of the Scottish Government’s route map out of lockdown it is critical they use this time wisely and lay the foundations that will allow them to thrive in the next normal.
These four principles, if adopted sensibly, will help businesses navigate through the recovery phase and emerge stronger, more agile and prepared to take advantage of the opportunities that will come.
Understand that reality has been reset. Businesses need to recognise that a return to the pre-crisis normal will not happen. The environment they will operate in going forward will be different, radically so for some sectors. Moreover, the contagion threat will linger, fear of the virus will persist, and customer behaviour will change. It is important that businesses take into account how new and previously unimagined scenarios may unfold and forecast based on them.
The next normal is what matters. There will be one-time opportunities that emerge from the disruption of this pandemic. It is important to view changes as an opportunity to reshape and restructure. In the next normal it will be vital to monitor fast-moving trends, learn from countries, sectors or competitors who are further ahead in the cycle. Now is the time to rebuild business, operating, and financing models that are geographically agile. Design more flexible operating models and capital structures, and ensure digital technology is at the heart of your post COVID-19 plans.
Appreciate that businesses are in it together. Companies moved fast to add liquidity headroom as the crisis emerged, and they must continue to closely monitor and control their cash. The UK and Scottish Governments, recognising the crisis facing the economy, have provided unprecedented support to households and businesses. Still, some companies will fail. Therefore, it is crucial to monitor the whole commercial ecosystem, have contingency plans ready to deploy and be prepared to facilitate financial support to ease supply chain and go-to-market disruptions. Expect to work more than ever before with government organisations and be alert to M&A opportunities. Examine your business through an activist lens.
Financing for the future. Businesses need to develop robust, realistic business and capital plans. Take into account how new and previously unimagined scenarios are going to unfold; explore these scenarios and forecast based on them. Financing challenges will vary dramatically, depending on whether a business is emerging from hibernation or has come through mostly unscathed. Proactive and clear communication with financial stakeholders will be key, while ensuring your business has sufficient liquidity for the long term will help your organisation endure through the uncertainty that will persist even as the economy recovers.
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