The Impact Of COVID-19 On Business
The COVID-19 crisis is a systemic shock to the global economy that has affected all organisations. The Association of Chartered Certified Accountants (ACCA) recently conducted a survey to which over 10 000 _ finance professionals and stakeholders from around the world responded.
Survey results indicating the impact of the pandemic on business
80 per cent of business leaders expect a significant downturn in revenue and profit year on year. Employee productivity identified as the most widespread concern facing organisations.
Over one-third of organisations are already facing cash flow problems.
One-fifth of organisations are deferring investments.
Almost half of businesses had not undertaken a reforecast impacting their ability to plan.
Over one-fifth of organisations are already freezing recruitment.
Only 17 per cent see current government interventions as effective.
Almost one-third of organisations have no business continuity plan in place.
How to respond to challenges
Organisations should plan a response based on what the ACCA describes as the “3As”:
Act and respond in a sustainable manner
For all organisations, the safety of employees, customers and other stakeholders must be an immediate priority. The physical and mental wellbeing of human capital is particularly exposed in a crisis of this nature, and an effective workforce is critical to activating an appropriate response both immediately and over the short- to medium-term.
Accept the short-term focus and demonstrate true leadership. A key implication for any business responding to a major crisis is an immediate plan for response and recovery. Timelines and targets will need to be refocused on very near and near-to-mid- term horizons. In this situation, senior leaders in the organisation must accept the change of focus from strategic to tactical, particularly with a crisis such as COVID-19 where the situation is both new and continues to evolve.
Recognise the changing needs of your customers and other stakeholders. Continuous communication is crucial, both to understand evolving needs better and to respond accordingly.
Use a crisis management team and establish a resilience plan. The work of crisis management teams and mobilising the relevant skills across the organisation are important for overseeing major issues, formulating business contingency plans, co-ordinating and aligning implementation across different departments, and ensuring speedy responses and decision-making. Focusing on a wider business resilience approach, not just business continuity processes, is crucial in the immediate response to an event.
Analyse the different information sources
It is important to understand how using both external and internal data with analytical capabilities can put the organisation in a stronger position, and help it understand the operational and financial impact of different scenarios that may arise. This requires the analysis of the type of resources and assets the organisation needs to safeguard to be able to resume.
It is important to monitor the relief measures and policies introduced by the government and prepare to use fully the benefits made available to support businesses and employees. Organisations should also keep assessing the impact of government policies and their implications for the medium- and long-term perspective and plan for the stages when government support will disappear. For smaller organisations, the support of small- and medium-sized accounting practices can be key here.
A strong focus on cash management and liquidity should be maintained to bridge different business scenarios while accepting that recovery to full liquidity is likely to be a long process.
Anticipate the future business impact
During any crisis, there is always opportunity.
Once the immediate response to the crisis is secured, organisations should consider opportunities for short- or medium-term innovation.
A crisis such as COVID-19 provides an opportunity to re-examine business models, explore new channels to market, consider supply chain diversification, and explore opportunities to grow in new sectors.
See ACCA’s COVID-19 hub, which includes useful resources to help organisations deal with the impacts and implications, including advice for ACCA members in practice and in business, students, and a section on wellbeing.