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.
I. The situation
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.
II. Six urgent priorities
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. Stabilize operations for the new normal
Stabilize 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.
III. Actions to take now
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
Get the full team aligned with the true severity of the macro COVID-19 situation and worst-case financial scenarios
Set safety as the number one priority
Set cash conservation and liquidity as a secondary priority
Avoid inaction; “wait and see” approach could damage the company
2. Establish a dedicated senior team in a war-room setting
Set up a senior, dedicated team from multiple disciplines (ops, sales, HR, finance)
Prioritize and put major work streams into action; set a tone of daily progress using an Agile Methodology
Break the usual reporting and update cycles; Urgency of the situation requires a different model, such as daily informal CEO updates
Put a tracking tool in place
3. Outline macro scenarios and translate to contingency plans
Outline specific macro COVID-19 scenarios by major geographies
Translate those scenarios into tangible revenue-decline and operational-disruption scenarios
Begin to outline no-regret moves. There will be an impact so start acting wisely
This needs to be done in days, not weeks (and you can continue to iterate)
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.
Written by Tom De Waele, Middle East Managing Partner, Bain