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. 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.
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.
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.
Six urgent priorities:
#1 Protect 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
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 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 for 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 Conserve cash
You can control the spending hand brakes by initiating immediate actions. 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
Define how you will 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.
- Revenue disruption will lead to liquidity crisis for businesses.
- Recovery may not be a quick bounce-back.
- CEOs need to plan for multiple quarters of lower revenue.
- Stakeholders including employees, customers are probably experiencing fear.
- You need to appoint a senior, dedicated war room team focused on this all day, every day.
- COVID-19 is unlike any previous crisis.
- Taking traditional crisis-response approaches will not be enough.
By Tom De Waele, Middle East Managing Partner, Bain.