As the world finds itself in the grip of a worldwide viral outbreak, an overwhelming sense of uncertainty is felt everywhere. The nature of the crisis is nothing we have ever seen and even the biggest companies and their crisis management team find themselves unprepared. While the safety and well-being of people are always at the forefront of concerns, the economic consequences of the global pandemic are not far behind.
Businesses all over the world are faced with numerous problems caused by the COVID-19 outbreak. To make matters worse, the pandemic has yet to reveal its full impact on business operations. As the nation, and the entire world is put on lockdown, we can only speculate what will result from reduced travel, social distancing, quarantine, suspended events, event cancellations, and disrupted supply chains. Many CEOs and CFOs are bracing for impact and looking for steps and measures to put into place to protect their businesses. We are here to provide a framework for disaster recovery, crisis response communication, and business continuity management that can help lead you through economic hardship.
Facing the Unknown
We find ourselves in uncharted waters, which means that we have little certain information to go by. Many governments are doing their best to adjust and adapt to the effects of the virus. As a worldwide crisis of this magnitude has never happened before, no company had developed a continuity and disaster recovery plan to survive the business impact of a global pandemic. And when it comes to business continuity and disaster recovery, testing your business continuity and recovery strategies beforehand would have been ideal. However, because COVID-19 blindsided businesses worldwide, many companies never tested their senior management and their ability to execute the emergency response plan to ensure critical business functions remain intact.
Despite the lack of preparation, this doesn’t mean that we can’t develop and implement a business continuity program as new data on the pandemic and its economic impact comes to light. After all, there is no clearly defined timeframe for how long this will last. The only sure thing is that it will not blow over in a week or two. Predictions from specialists say that it could last for weeks, if not months. As a business, you need to prepare for a wide range of scenarios.
The best case we can hope for is an affected second quarter (Q2), after which we pick up the pieces in the third quarter (Q3). While this is the best-case scenario, it is crucial to consider that the situation can drag out for much longer. Businesses need to look into both short-term and long-term recovery procedures when protecting themselves. Before you begin the disaster recovery planning process, take a closer look at how to approach the following:
- Crisis management
- Business continuity planning
- Modifying plans
Crisis Management Blueprint
A lot of businesses have experienced the stress of cash shortages and financial pressure. On the other hand, given the agreeable economic situation in recent years, there may be many newer businesses experiencing this for the first time. Whatever the case is, you will need to look into crisis management. While each company has its unique set of challenges, this can serve as a blueprint for putting together a detailed crisis management plan.
Have a Clearly Defined Goal
Most businesses will be focused on just surviving the economic consequences of a global pandemic. However, this is not the case for everyone. Certain businesses might even see an opportunity for growth during this period, creating a different vision, along with new daily actions.
Look at your situation and decide if you are fighting for survival, looking to capitalize on potential growth, or just planning on waiting things out. Whatever your defined goal is, remember to commit to the outcome and be flexible in achieving it. The sooner you have a clear goal, the sooner you will start making important decisions that will shape your company.
Identify Stakeholders and Control Communication
To develop a crisis communication plan, consider those who have an interest in your business. This includes anyone who can either affect or be affected by it. Identifying all key stakeholders and being proactive in terms of communication is key in times of crisis. People who depend on you will want to be on the same page with you throughout this pandemic. Take the first step and let people know what your plans are, where you stand, and what is possible. Taking the initiative and controlling the message will stop people from creating their own scenarios. An internal and external communication plan should be developed and implemented on all levels – external and internal.
When it comes to your business, try to set up weekly calls in which all events, good and bad, are discussed and communicated. This will ensure everyone in the company works towards a common goal, but it will also build up morale. When it comes to clients, let them know what they can expect when it comes to your services in the coming weeks or months of the pandemic.
Get External Advisors
Businesses with the means (access and funds) to employ external advisors should definitely consider this option. Working with bankers, lawyers, accountants, etc. will ensure that you have expert opinions on important aspects of your business. The more precise your information is during this crisis, the better decisions you will make. In addition to providing information, external advisors can even take on some of the work and allow you to focus on other aspects of your business.
Get Creative With What You Have
As the pressure builds, you will need to get creative with what you have. Do this by dedicating and prioritizing resources to meet upcoming challenges and developing alternatives to business practices. Utilize your experience and ingenuity to come up with ways to get jobs done. While this is a difficult time for many, it also carries some potential benefits. The crisis can prove to be the perfect time to develop your staff and give them more responsibility.
Assign your top people to important tasks and use their experience, knowledge, and skills to the benefit of your business. You can assign them temporary positions and additional duties to handle during this period. Just remember to maintain communication and not overwork them. This is a stressful period for everyone, especially those who are assigned more responsibility. Alleviate some of the stress by providing support and encouragement when needed.
Lead By Example – Set the Tone
As someone who makes critical decisions in your business, you must embrace the leadership role and everything it entails. This includes remaining calm in the face of adversity and being positive for the sake of the business. The fact of the matter is that circumstances are going to get tough for most businesses. Management will need to maintain a good narrative for the sake of everyone involved. If you can remain calm and collected in the face of challenges, your employees will follow suit. If you panic and fall into despair, then chances are employees will as well.
Be the voice of reason and keep people motivated and encouraged. This goes for people in your work environment and your family back home. The last thing you want to do is transfer the stress you experience at work to your family. Be mindful of what you bring home to avoid making matters worse in an already stressful situation.
Take Action – Focus on Speed and Simplicity
The final thing to consider when it comes to effective crisis response is the importance of taking action and keeping things simple. Do not fall into the trap of trying to create a foolproof plan. There are simply too many variables and unknowns in this situation. Waiting for the perfect moment or circumstance can lead to paralysis by analysis and, consequently, missed opportunities. Instead, focus more on consistency and less on perfection. Taking action with imperfect results is far less risky than trying to execute every plan flawlessly.
While this applies significantly to your work, it also goes for money. If you have access to a line of credit, it might be best to draw on it before creditors tighten up. Having a readily available cushion on hand can make all the difference when things get tough.
Business Continuity Planning
Face the fact that your business has been disrupted. Admitting and accepting this will help you focus on what matters – keeping your business running. Focus your energy on preparing and executing a plan that will get you through this difficult time. The situation around the virus is continually changing, and we must follow all the latest news about the outbreak. This is the best way to get an idea of how long COVID-19 will directly affect business. These are some of the important things you should factor in when putting together a business continuity plan.
Can You Continue to Operate?
Many businesses are being affected by disrupted supply chains and quarantine measures. You need to consider if your business can continue to provide products and services in the current circumstances. Do you have the necessary resources to continue working? Is it possible to find suppliers with better terms? In addition to supply, you need to think of your workers. Most governments are requiring businesses to work from home during the outbreak. Offices and businesses provide a wide range of resources and structure, and the lack of these elements might affect productivity. You really need to take into account workers’ local conditions and geography when factoring this in. This is especially true for businesses that have outsourced work to other parts of the world.
Work From Home – What Can Affect It?
As employees begin working from home, it is important to understand that they might take some time to adjust to the new conditions. If employees are forced to work from home for an extended period, will they be effective? Numerous things can affect productivity when working from home. These include:
- People: Unlike workspaces that share a common goal and work together on projects, the home is more chaotic. Your employees could be living with roommates, spouses, children, family (extended, multi-generational families), etc. They will surely have numerous distractions when working from home.
- Tech support: The typical work environment has a team on hand to fix technical issues that arise. It is important to make sure that employees have someone to turn to should they experience technical difficulties when working from home.
- Lack of WorkSpace: Not all homes will have the ideal work environment. Understand that some people will have to get creative to get work done, which might affect their output when working from home.
Schedule a call with employees to see what kind of problems they might experience when working from home. Remember that the employees make or break a company. The way you treat them during the pandemic will influence their productivity. Supporting them through this challenging situation will enable them to work to the best of their ability and strengthen company culture later on.
Are You Secure?
With so many people working from home, there is an increased risk of online fraud and cyberattacks. The last thing you want is to experience a cyberattack amid a crisis. Avoid this massive headache and make sure employees are up to speed with necessary cybersecurity measures. Doing so will ensure that all employees are mindful of their electronic dealings.
Make Sure Employees Coming Into the Office Are Safe
While working from home is a must in the majority of places, there might still be instances where people are allowed to go to work. In such cases, it is vital to do everything we can as owners to keep people productive and prevent the spread of the disease. These steps include educating employees, cleaning the workplace, and practicing social distancing. The best way to practice social distancing in the workplace is with alternating shifts. This will improve spacing while still maintaining a sense of community.
Assess Operational Risks
Make a list of potential risks your business can face during the economic crisis. Start with cash collections and blown covenants (if you have debt); these are things that can impact you immediately and in a severe way. Once you have listed these financial risks, think about critical aspects that ensure you can continue serving customers.
Money Is Going to Get Tight
Anyone who is expecting financing, investment, or an M&A deal to close soon needs to prepare for those deals getting pushed back. Counting on that money is a long shot, so you must look for other ways to secure cash or financing. The same goes for businesses that depend on external sources of funding. Venture-backed businesses that have projected a plan for the next couple of months need to understand that the economy is going to take a big hit. Make sure you use the money you have available to get the most out of your businesses.
Certain businesses, especially those dealing in B2B, depend on an AR line to continue working. These kinds of businesses live on what they ship. They rely on this to make payroll and pay the bills. Without an AR line, these businesses lack liquidity. You need to assess what will affect your ability to ship. Look into supply chain issues and contemplate how you are going to get through that. Whatever your business model is, it is important to keep an eye on your finances in the next couple of months.
What Is the Lay of the Land
While it is important to create a plan of action for your business, it is equally important to keep an eye on the world around you. Look at your key suppliers, customers, and competitors. How are they reacting to the situation? Are they facing liquidity issues during the crisis? Assessing your ecosystem will allow you to notice opportunities and threats that could affect your business.
Modify Operating Plans
1. Flexibility – Be Willing to Rework Plans
Operational plans are crucial for businesses looking to move forward and grow. While many business owners enjoy the comfort of a well-established plan, it is essential to know when to modify operating plans. Times of crisis are an acceptable period in which you should reset operating plans. Do not forget to run plans past your boards and the bank. You might need to get permission to act fast.
2. Prepare for All Scenarios
As a person who is calling the shots, you will need to consider all the inevitable outcomes. This means modeling out potential revenue scenarios. Sit down and go over minimum impact, medium impact, and disaster scenarios. Consider the customer and vendor demands that will be in each, as well as the cuts that will be required to meet those demands.
3. Set Clear Metrics
When preparing possible outcomes, get a clear idea of what events dictate what actions. In order to do this, you need to consider timeframes and key milestones that define each scenario. At what point does your minimum scenario transition to the medium scenario, and at what point does it go from the medium scenario to the disaster scenario. Plan out key decision points and determine the steps you will take when those levels are reached.
4. Cash Impact in All Scenarios
Evaluate the cash impact of each scenario against your cash reserves and available financing. It is important to know where you stand with your money at all times. This will give you insight into your possibilities and possible fume date.
5. Make Sure You Have Cash on Hand
Many companies are going to experience a cash shortage in the upcoming crisis. Having a cushion to rely on will make all the difference when things get tight. Determine the availability of additional financing out there and look for additional financing early on. Consider drawing on lines of credit while you can, as well as talking to possible investors.
6. Mind Your Money
Make sure you always have a clear insight into your financial situation. This should take into account all incoming and outgoing payments. Once you have a detailed list, go over it and evaluate each item. When it comes to income, reach out, and try to secure payments. On the other hand, you will also need to look for ways to lessen the blow of expenses. Communicate with companies and explain your situation. Most people will understand, as long as you are upfront and willing to work with them.
7. Don’t Panic
When disaster strikes and your crisis preparedness is tested, taking action is the only thing that will bring results. However, acting out of fear and panic can do more harm than good. As business leaders, you need to strike a balance between moving quickly and being cautious. Realize that you will need to commit to a course of action, but it is still essential to put some thought into your plans.
Businesses all around the world are facing similar issues presented by the novel coronavirus. The good news is that not all is lost. With careful planning and proper action, CFOs and their finance teams will be able to push through these difficult times. If you are looking for a way to alleviate some of the workload and focus your efforts on strategizing through the national pandemic, consider Consero. We offer numerous financial services, as well as consulting.