Monday, May 20, 2024

What businesses can do to cushion the impact of Covid-19


By Solomon Markos (PhD)

The outbreak of Corona virus has caused a global health crisis. The decisions of governments to partially or fully lockdown their nation in their effort to contain the pandemic has affected businesses profoundly. It made the business world more uncertain. ILO reported that worldwide, more than 436 million enterprises face high risks of serious disruption. These enterprises are operating in the hardest-hit economic sectors, including some 232 million in wholesale and retail, 111 million in manufacturing, 51 million in accommodation and food services, and 42 million in real estate and other business activities. The same report indicates that the first month of the crisis is estimated to have resulted in a drop of 60 per cent in the income of informal workers globally. This translates into a drop of 81 per cent in Africa. If the pandemic is not controlled within short period of time, many companies will be out of business resulting in loss of jobs thus leading to total economic crisis affecting the livelihood of billions of the most vulnerable workers across the world.
ILO estimated that almost 1.6 billion informal economy workers (representing the most vulnerable in the labor market), out of a worldwide total of two billion and a global workforce of 3.3 billion, have suffered massive damage to their capacity to earn a living. Consequently, many countries slashed their economic growth forecast to reflect the impact of Covid-19. As reported by Ethiopian Planning Commission, Ethiopia has slashed its growth forecast by 3 to 4 percent. Besides, a study conducted by the Job Creation Commission of Ethiopia indicates that the pandemic has put a number of jobs in many organizations especially in manufacturing and service sector at risk. As the same report shows, the pandemic, assuming its duration will be three months, could lead to loss of over 1.4 million jobs. One can image how businesses can be more affected and the likelihood that the pandemic could lead to national economic crisis as time passes. Business disruptions and subsequent closures may lead to more and more unemployment and other economic costs exacerbating the already fragile political system.
Cognizant of these facts, Ethiopian government is preparing various stimulus packages to help businesses survive and thrive amidst Covid-19 related challenges. The author is of a strong opinion that more is expected from business leaders themselves.
The roles and responsibilities of business leaders have dramatically changed in the past few weeks and months. Before COVID-19, CEOs and other executives in high-growth companies were focused on fostering innovation, driving revenue, and expanding market share. Now they need to revisit their business goals and strategies. Today, many of those same leaders who used to focus on growth must change areas of priorities and make rapid decisions about controlling costs, maintaining liquidity, resolving supply chain issues, curbing team shortages, and operational challenges. All the while, leaders and their teams are navigating health and safety concerns, working remotely, and supporting their families through the pandemic. This is a huge transition in business leadership.
Below I have outlined some measures businesses of all sizes and shapes can take to cushion and shield themselves from long-term economic damage created by Covid-19 based on my readings: These are five strategic priority areas to manage the crisis:
Manage safety and health of employees
It is imperative to always put human at core of business processes. Business leaders should strictly and frequently follow guidelines set by the Centers for Disease Control and Prevention (CDC) and the World Health Organization (WHO) to protect the wellbeing of their employees and make sure that all employees are aware of these guidelines. Strong occupational safety measures and rescheduling of working hours into more shifts (e.g., three to four shifts) to reduce the number of workers working at a time so as to create space for keeping one’s distance in work place would help continue production. The case in point is manufacturing sector – the textile industry for instance for which Covid-19 has brought about an opportunity to expand its production as demand for facemasks increases. This, doubling of shifts might also create additional vacant positions that can employ those in search of jobs. It is recommended to minimize contacts and reduce non-essential travel where possible.
Ensure liquidity
Businesses need to have team of financial analysts who frequently conduct financial stress testing, identify trigger variables that affect revenue and cost and suggest possible contingency plans along with business scenarios. Here over-thinking and over-analysis are not encouraged because speed of action and start up mindset is more important than research and analysis to ensure rapid recovery of revenues and maintain liquidity.
Transform operations and monitor supply chain
Following the outbreak, the demand patterns for different products and services have changed a lot. In effort to respond to these changes, smart firms have quickly adapted, creating radical new levels of flexibility, productivity and end-customer connectivity. Adaptability is also extremely essential as Covid-19 has caused short-term disruptions in supply chains thus necessitating consideration of non-traditional collaborations with partners at upstream and downstream of the supply chain. Companies need to redesign and rebuild operations and test the viability of the once-prevalent global sourcing model and revisit their supplier mix and assets bases. Furthermore, accelerating end-to-to end digitization of supply chains will enable fast communication and collaboration among value chain partners and increase flexibility thereby cutting cost significantly. Of course, the future of work is expected to be characterized by intensive use of technology and automation. One can realize that Covid-19 has hastened its pace (see that many companies now ask employees to work remotely from their home using digital collaboration tools). Effective monitoring of supply chain requires forecasting real-time consumer demands more accurately thereby enabling stabilization of supply chain through giving maximum possible attention to pre-booking possible modes of transportation and inventory control as to avoid stock out.
Improve marketing and sales
Covid-19 has shifted our cultural moments. As a result, marketing teams face unique challenges during this crisis. They need to adjust their marketing campaigns and communication approaches. At this difficult time, businesses should demonstrate empathy and avoid capitalizing on crisis. Businesses need to stay close to customers, keep them engaged and reassured in the short term. It is advised to provide discounts and special offers to incentivize current customers. Besides, firms should start researching and targeting other market segments and opportunities for growth to be successful to ensure long term financial stability. Finally, it is worth investing in digital marketing solutions as predictions indicate Covid-19 will boost digital marketing (Many people are speculating whether the Covid-19 crisis will likely lead to changes on social attitudes, lifestyles and how people work and shop, thus being an opportunity for digital marketing).
Reconsider the organization
Corona virus outbreak has demonstrated to organizations once again the need for working remotely through digitized working environment, altering operating models, using cross functional and operating teams to make fast decisions instead of too hierarchical and lengthy corporate bureaucracy to respond rapidly to changing and uncertain business environment. This rethinking of the organization could go to the extent of questioning and reconsidering who they are( for example reconsidering goals, strategies, orientations and leadership roles), how to work (For instance, what are new ways of doing things, how to retain the right human talent) and how to achieve and sustain competitive advantage (For instance, reconsidering ways of corporate growth especially though creating learning platforms, and cultivating an organizational culture that creates business value).
Covid-19 has further complicated the already complex and uncertain business environment. The challenge it poses to businesses is enormous and multi-faceted. However, through strong leadership that sets priorities, defines clearer goals and develops the right strategies, businesses can effectively cushion the impact of Covid-19, find and navigate their ways to the next new normal.

The author is currently working as assistant professor at School of Commerce, College of Business and Economics, Addis Ababa University.

Read more