The rapid spread of the novel coronavirus (COVID-19) has caught the global economy and businesses largely off-guard. We now find ourselves in a period of unprecedented uncertainty and volatility, the long-term consequences of which, are very hard to accurately assess, as we are not yet aware of its duration and possible outcome.
The first signs, however, indicate that we may be staring at a new global economic crisis. It has been estimated that, if the coronavirus spreads uncontrollably, it could very well cost the global economy somewhere around $2,7 trillion. At the same time, according to Sentix’s monthly report, Eurozone investors’ optimism dipped to its lowest level since April 2013 – the peak of the economic crisis – while estimations about a new recession in Europe during 2020 are on the rise. It is worth noting that, barely a month ago, indications were positive and optimism about economic growth was booming.
It would appear that the implications may be far deeper and more serious compared to recent virus outbreaks, as the H1N1, Ebola and the Zika. In an interconnected global economic system, it is safe to assume that, sooner or later, the current situation will take its toll on a big part of business activity worldwide, creating new risks. From our daily interaction with clients from Greece and the global EY network, we understand that the following sectors are already being impacted: financial markets and businesses’ financial management (e.g. operating costs, liquidity, etc.); global trade and supply chains and, subsequently, product and service demand and consumer behavior; human resources management and organization, including ensuring the wellbeing and safety of employees; legal and contractual considerations, focusing on contract defaults and their legal consequences, etc.
EY’s Global Risk Survey 2020, found that the majority of businesses do not posses the capabilities required to effectively and safely navigate crisis periods, as 79% of board members state that their organizations are not very well prepared to deal with a crisis-event. Thus, each of the visible – or unseen – threats that the coronavirus brings, requires instant and proactive action today, as well as continuous monitoring of the situation’s development.
For that to happen, each company must, first and foremost, detect and understand potential risk-prone areas, and set clear priorities that will be translated into a detailed and agile response strategy.
As each company faces different challenges and each sector is impacted in different ways, it is evident that a common strategy to address the coronavirus does not exist. There are, however, some basic steps that all businesses can follow, in order to develop a reliable crisis response mechanism. These steps include:
1. Building a crisis management team of key-decision makers, not limited only to the company’s leadership, but also including representatives from at least the strategy, operations, HR, communications and corporate affairs functions. This team should be empowered to make and implement decisions quickly.
2. Immediately addressing the need for the maximum protection of employees, through personal actions (hygiene, remote working, travel freeze, avoiding group gatherings, etc.). People are a company’s most important asset and their protection should be priority number one.
3. Regularly reviewing, amending and updating current business continuity or contingency plans, as this an unprecedented and highly fluid situation, which is drastically transforming existing assumptions, and will continue to do so in the coming months.
4. Establishing an information mechanism, which will allow for the gathering of accurate and up to date information from trusted sources and cascading it to all business functions concerned, thus minimizing the risk of misinformation.
5. Ensuring the company’s capacity to rapidly respond to emergencies. Incident response should be a deliberate and structured process, free of any knee-jerk reactions and delays and not dictated by outside factors.
6. Assessing the company’s exposure to risks associated with third-parties (i.e. supply chain, human resources, business partners) and searching for alternate channels.
7. Ensure a systematic, transparent and positive communication with employees, clients, suppliers and all those that – directly or indirectly – depend on or are affected by the company. This is an essential step towards building the highest possible level of confidence and trust between the company and its partners.
8. Ensuring that the organization as a whole, both at a local and a global level, is aware and understands the crisis response procedures that are in place. Equally important is readjusting business plans, but also updating the company’s strategy for managing major crises accordingly.
In conclusion, we must underline that, at moments such as these, panic and misinformation are the worst counsels. As in every period of adversity, changes in the market bring a lot of risks, but they can also create new business opportunities and drive innovation in businesses and sectors. Digital media & home entertainment, as well as social media companies, are already seeing an uplift in revenues, as an increasing number of consumers opt for solutions that allow them to continue enjoying their hobbies and communicate with others, all from the comfort of their home. In short, the sooner a company detects the potential threats posed by the coronavirus crisis and organizes a robust defense and response plan, the bigger the chances are that it will overcome this crisis with the minimum possible losses, adapt to the new context, as well as recognize new areas of business activity.