By Tom De Waele
Covid-19 is unlike any previous crisis and taking traditional crisis-response approaches will not be enough, writes Tom De Waele
As the novel coronavirus outbreak has upended businesses around the world at alarming speed, one thing has become clear to executives grappling with the crisis: doing nothing is not an option.
Covid-19 is unlike any previous crisis and taking traditional crisis-response approaches will not be enough.
With our operations running smoothly and business running effectively amidst the Covid-19 pandemic, we share the steps that CEOs need to take today to mitigate the effects of the outbreak.
The process of containment and slowing the spread of Covid-19 in each country will create major disruption, irrespective of the seriousness of the virus spread. This should not cause additional fear in a situation that is already frightening for everyone, rather, it is a simple reminder that during times of crisis, such as the financial crisis of 2008, the strong will get stronger and strength here will be define by clear leadership, plans and actions.
The high likelihood of a substantial revenue disruption will lead to a potential liquidity crisis for many businesses. This could mean that the recovery may not be a quick bounce-back. Accordingly, CEOs need to plan for multiple quarters of lower revenue.
All stakeholders including employees and customers are probably experiencing fear or panic. Hence, you need to appoint a senior, fully dedicated Covid-19 war room team focused on this all day, every day.
As CEO, you must be out in front with a planned cascade of possible actions, probably more aggressive than your team can imagine right now. Customers will change some behaviours permanently, accelerating prior trends. Taking bold action now can set you up for success through the downturn and beyond.
1. Protect your employees and customers
Implement the best-known guidelines available for both employees and customers. This includes monitoring global health guidelines and other companies—and continue to fine tune. Don’t be afraid to overcommunicate with full transparency and assist epidemic-limiting initiatives in any way possible.
2. Stress test P&L and liquidity
Outline macro scenarios by market, translate into revenue-decline and P&L scenarios. You should also build extreme downside scenarios as this has the potential to be a 100-year event. Therefore, an outline of the major operational actions should be in place.
3. Defend against revenue declines
You need to take a customer-centric view and ask yourself questions like how you will build trust, loyalty and market share through and beyond this crisis. Similarly, you should build specific revenue-mitigation actions for declines in core revenue streams.
4. Stabilise operations for the new normal
Stabilise supply chains of physical goods from likely geographic and labor disruptions while building contingency operational plans for all aspects of the business
5. Plan urgent cost cuts to conserve cash
You can control the sending hand brakes by initiating immediate actions (e.g. hiring freeze, opex, capex, working capital). Similarly, set aggressive break-the-glass cost actions triggered by more extreme revenue scenarios. Outline a medium-term plan to lean out the cost structure for the future. It should be a plan that is more automated, more variable and, more shock resistant
6. Play offense, not just defense
Define how you'll outperform competitors and expand share through and beyond the crisis. This also means that you should prepare for bounce-back and recovery. At the same time, plan for and take advantage of a leapfrog change in customer behavior —especially digital.
There are several moves that CEOs can take right now to help ease the impacts of the epidemic and come through stronger on the other side. As the economic fallout continues, business leaders will want to first model their exposure to the coronavirus fallout and street test their P&L and liquidity. There will be critical “triggers” where more aggressive actions will be needed. We recommend immediately launching three actions simultaneously:
1. Align your senior team with a wake-up call
2. Establish a dedicated senior team in a war-room setting
3. Outline macro scenarios and translate to contingency plans
It is obvious that the Covid-19 outbreak is unlike any previous crisis. Hence, CEOs need a unique, tailored and immediate crisis-response. A wait-and-see approach has no chance of being effective.
CEOs should be aware of the situation and up to speed with the latest updates. They should also understand that there are six main priorities to focus on during this calamity and accordingly implement a carefully mapped out action plan.
Tom De Waele is Middle East Managing Partner, Bain