COVID-19 has shifted the business landscape in a myriad of ways. Observation of this landscape can classify business response in one of 4 ways: business as usual, acceleration, pivot or hibernation. Here, we will discuss the resiliency approach for each type of business and what successful businesses are doing.
1. Business as usual
Few businesses are seeing little to no shift in operations. Examples include specialty online retailers, landscapers and food producers such as farmers. Supply and demand is seeing little change and perhaps no change at all for very small operations or virtual sole proprietorships. Virtual technology businesses are seeing a slight decline in demand due to market uncertainty, but their services are still needed. Time will tell if this downward pressure begins to ease but they should be prepared and have continuity plans should the environment begin to shift.
- Non-essential goods still face headwinds as the economy heads into a recession and potential depression and unemployment skyrockets. It is likely that the majority of consumers will begin to curtail their spending if they haven’t already done so.
- While the demand for these goods and services may remain steady, supply chains are still vulnerable. These companies should bolster their raw material inventory while they can and prepare for alternate supply chains should their primary suppliers become disrupted.
- Partnerships between these companies can be a valuable asset.
- Social media is talking a lot about these companies. If there is an opportunity for social media marketing at this time take advantage of it.
Businesses still need to operate, no comma and the law of supply and demand is not suspended. While COVID-19 is causing a precipitous decline (forced or secondary) in demand, others are seeing a marked increase in demand for their services. We have seen Amazon overwhelmed to the point where they have throttled delivery for many non-essential items. Medical supply chains have been strained to the maximum and essential goods manufacturers have moved to 24/7 and expanded operations to meet demand. What these businesses are focusing on now is maintaining their increased pace while minimizing employee risk and preparing for workforce shortages due to COVID-19 infections.
- Manufacturers have modified their operations to meet increased demand through new equipment purchase, equipment re-purposing and increased shifts.
- Accelerated business operations are also having to adjust to comply with new local safety requirements
- With expanded operations comes more workers and the potential for exposure. Accelerated businesses should prepare for increased sick and leave time for workers and implement or expand cross-training programs.
- Some businesses are offering quarantined quarters for workers to live when they are not working in an effort to limit public exposure.
This is the most common scenario in the current environment. Businesses are having to make massive adjustments to their operations in order to continue to provide goods and services or meet new demands. Examples include restaurants shifting to all takeout, doctors offices implementing and rolling out telemedicine, schools shifting to distance learning and clothing manufacturers such as Fanatics pivoting to manufacture medical gowns and masks instead of sports clothing. The Fanatics story is an interesting one as they are using supplies already on hand and adjusting their operation in order to fulfill a market need, provide a public good and help their employees stay financially solvent (not to mention a great public relations story).
- Creativity reigns supreme in this class of business.
- Lessons are being learned about the limits of supplies and services
- Many brick and mortar stores are implementing curbside pickup and delivery and are being forced to limit the number of customers entering their store.
- Restaurants are having the biggest challenge at shifting their operations to pickup and delivery. Owners/operators are finding that the customer experience in the restaurant are a large part of the experience. Servers are no longer receiving as many tips.
- There is currently a groundswell of support for local restaurants and non-essential businesses operating in a modified manner. However, we are seeing stories of frustration and a general sense of ‘enough is enough’. As households are further strained by economic factors, they are likely to reduce their convenience consumption which has generally seen a decline in quality and service.
- Businesses that had a continuity plan in place prior to COVID-19 are seeing much more success and less disruption in their operations than those who were caught unprepared.
Some businesses and entire industries have been placed on life support in the hopes to survive the state of emergency. Entertainment venues and the travel industry is just two examples. Expense reduction and communication to customers are critical factors for these businesses. These companies should clearly communicate that they are temporarily closed for business but plan to return as soon as they are able. Unfortunately, this class has the highest risk for insolvency and many will never reopen their doors.
- Expense reduction. Drastic cuts. This is akin to cutting off a diseased limb in order to save the body. It’s not pretty but potentially necessary.
- Communicate clearly to your staff and customers what your plans are. When they are able to return many of them will but not all will be able to. Be prepared for a long recovery with reduced demand.
- Consider any opportunities to pivot your business into a new product or service, even if it is temporary. Your assets, physical and intellectual, may be able to be utilized to fill a new market demand.
- Having a financial plan is critical here for multiple scenarios such as a 3-6 month or even a year closure. What would you have to do if you were to close for a year and still be able to reopen? Whatever it is do that. Prepare for the worst case scenario and execute those plans. Now.
- With the few key staff members that remain, even if part time, focus on your recovery plan. Next, plan for the next business disruption. Ask yourself the question “What could we have done 6 months to a year ago to be better prepared for this?” Take those lessons learned and incorporate them into your new business plan both tactically and strategically.
- Some business owners are not moving quickly enough. They are hemorrhaging capital on a daily basis while struggling to keep their doors open with significantly decreased revenue. They should have had a plan in place with automatic triggers for operational reductions and closures in order to remain solvent. Unfortunately, it is already past the point of no return for many businesses.
- Government programs to support these operations are coming but not fast enough and likely to be difficult to navigate with significant overhead.
- Banks are now offering reduced interest loans for small businesses. However, these are still loans that will need to be paid back with uncertain future revenue.
Good luck, be smart and keep it simple
Tempest Risk Management LLC
If you are interested in engaging Tempest Risk Management to provide Business Continuity and Disaster Recovery consultation, email firstname.lastname@example.org to schedule a no cost, no obligation consultation.