Corona event is unprecedented & has caught the world including all governments napping for this disastrous impact recently. Everyone including all corporates are forced to be under lockdown to limit the virus impact. None can fairly estimate how far and how long it will be with us and how it will affect our businesses in days to come. We will surely recover from corona crisis. However, how our businesses will recover from its impact will certainly depend on how well we prepare for it during the lockdown.
I am sharing my thoughts on how businesses should prepare themselves during lockdown for early recovery post lockdown!
1. Protecting business assets / resources
All businesses are heavily dependent on tangible assets/resources like factory, building, plant & machinery. Effective use of lockdown time for repairs & maintenance can prove useful for efficient working conditions post lockdown.
There may be potential business losses from idle time due to lockdown. It’s worth to check insurance policies to check for possible claims under such calamity. If it's not covered, ensure to include the same with help of insurance advisor.
Employees, bankers, shareholders will need constant communication during lockdown to avoid productivity loss from lack of business momentum during the lockdown. Open communication with employees, bankers, shareholders will help you seek their support post lockdown recovery & even better ideas for recovery. Effective communication during lockdown with ensure continuing engagement with them & early recovery through their productive time. Employee trainings & informal discussions over web conferences could be the best method to engage with them.
Businesses can sanitize workplaces to ensure a safe working environment for returning employees post lockdown.
2. Restoring business operations
a. Vendors / suppliers / customers
Contracts with vendors / suppliers / customers need to be evaluated for possible impacts due to non-performance under the lockdown situations. Consult applicability of “force majeure” clauses in the lockdown scenario with business lawyers.
Recovery post lockdown for various businesses could be different and will also cause an impact on dependent businesses. To avoid delays, knee jerk reactions post lockdown, get in touch with your vendors / suppliers / customers to understand their challenges, impacts of lockdown & their recovery plans.
It’s is advisable to sympathize with your vendors / suppliers / customers under this scenario and focus on strategizing business plan for early revival rather than indulging in avoidable disputes & business disruptions.
b. Focus on customer needs
Different businesses will need different timelines for full business recoveries post lockdown. It will heavily depend on customer demand. It's extremely important to reach out to the customers and industry experts to understand the possible scenarios for the generation of demand from customers post the lockdown. B2B businesses need to engage with key customers directly to understand their demand-supply understand & align the recovery plans.
Businesses may face a sudden increase in demand (like restaurants, logistics, essential commodities, etc.); the back-end plan needs to be ready before the end of lockdown. Understanding the demand-supply trade-off post the lockdown scenario is key for recovery.
With slow recovery may need to plan for efficient use of resources, cash flows, etc. Phased out recovery plan could be the outcome.
3. Business development / marketing
The lockdown has disrupted how sales channels work for every business. Businesses may have to look for new/alternative sales channels for CRM (Customer Relationship Management). Especially retail businesses; may have to motivate the customers for healthy & corona safe business environments. This could be achieved with changes in business procedures to ensure customer safety & promotional offers.
Businesses may have to strategies internet-based marketing model to reach out to prospective customers for need generation & drive your customer back to businesses. Corona crisis is expected to disrupt the way businesses are conducted. Businesses need to adopt procedures that support social distancing, work from home choices, remote business accesses, etc.
4. Financial / Commercial Operations
a. Cash flows & liquidity management is the key concern for all the businesses. Promoters need to carefully drive through liquidity concerns & need to plan this proactively with investors, lenders & shareholders. The lockdown period can be utilized by finance teams to estimate liquidity requirements and work on sourcing the same.
b. The finance team needs to put in place a key recovery plan for the economic viability of business & demonstrate the same to all stakeholders for continued support through revival.
c. Communication with lenders/investors is key to ensure a clear understanding of such a recovery plan & committed cash inflow. Deferment of short-term obligations & reduction in the rate of interest in the near term is the key focus to be targeted by the finance team.
d. Communication with consultants engaged with the businesses is key to understanding their perspective about the impact & possible recovery plan. This will bring more clarity for promoters/decision-makers to chalk out the plan of action.
Conclusion
It’s not all bad/scary, even lockdown might bring a silver lining to the businesses as it has resulted in compulsory low working capital levels due to the lockdown on account of future low inventory levels, targeted debtor recovery & modification in supplier terms. Our businesses should never be the same again after this crisis as it should target to achieve just in time supplies, analysis of customer creditworthiness, identification of non-core assets/resources, prioritizing of the business plans and lean work ethics which could result in long term positive business impacts.
Promoters / CEO’s / Board of directors could use this lockdown time to bring clarity in the long-term view, align board objectives towards a common goal. I suggest forming a board-level team of 4-5 department heads to collate information to bring recovery tactics and help the board implement it. Information technology will play a vital role in the future survival of the business. Execution is key.
Finally, the long-term sustainability of businesses will be a key priority for all businesses in the future.
Written by
CA Dhananjay Walke
dhananjay@ap-india.in
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