Business plans need re-boot amid coronavirus pandemic

Sanjeev Jha

Globally, one-third nations are under a lockdown of some kind, bringing economic activities almost to a halt. Only essential services as recognised by governments are operating and businesses worldwide have been impacted, depending on what they deal in. Although no-one was prepared for the alarming speed at which the coronavirus pandemic hit us, it is time to act now and take proactive measures.

Finance leaders in companies all over the world have been galvanised into action to prepare for this challenge that no one had foreseen.

According to various survey findings, just the period between the first week and the end of March has changed the opinion of many CFOs. While most of were not sure of the impact on their business when questioned at the beginning of March, by the end almost 60-80 percent saw a serious potential impact and started working on the plan for their business due to the lockdowns imposed in response to the pandemic.

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Most organisations will have to relook at their carefully laid business plans for the year. The short term requires radical rethinking. Mid- to long term impacts will have to be estimated to get an idea of how to prepare during this crisis. Be prepared to change plans based on how long the pandemic will run its course, before allowing for life to come back to normal. Remember that "unusual times require unusual actions."

While there are a few companies that have seen their demand surge owing to the lockdown - these are only a handful. These companies need to plan to handle unprecedented levels of demand that they may not be able to cater to. However, most companies be it in manufacturing, trading or services industry - online or offline - are witnessing disruptions at multiple levels. From reduction in demand of goods or services to liquidity issues resulting in delayed payments or non-payments by customers.

The immediate step that CFOs need to take is to assess the immediate impact on their current balance sheet and profit and loss accounts due to the lockdown and altered market forces. This will help determine the effect on cash flows in the short to medium term. There should be significant focus on outstanding receivables and collections to avoid liquidity issues. Putting in place what are called as 'cash war rooms' is a good idea during this period to monitor cash flow and ensure prudent use.

The Financial planning and Analysis (FP&A) function needs to be made completely dynamic to ensure that critical data points are being updated continuously so that decision making can be quick and effective. Making sure that the FP&A is able to churn the data required at a good speed is important to handle both the speed at which the business is impacted and also the possible longer term effect on the business. This will also help in keeping various versions of the business plan ready to act upon when the time comes.

In this impact assessment process where your cash war room data and FP&A function are acting as your guides, CFOs and business leaders should come together keeping business needs in mind to achieve the following goals.

The first goal should be to retain the status quo in terms of employees, customers, suppliers and partners. All non-essential spending needs to be stopped. Some other key actions to undertake include:

- Frequently review new hiring plans depending on you industry segment
- Relook at capex/expansion plans timings, re-evaluate planned investments of any sort
- Evaluate exposure to company investment in stock market/debt market/mutual funds/bank FDs etc keeping cash/liquidity requirement in mind
- Revisit M&A timings- Try and reduce office space cost by allowing few people/functions to work from home even after the lockdown, where ever there was facility expansion plans in progress
- Optimise training and development costs, public relations and advertising costs
- Another option is to request employees to use leaves which are available during this period
- This is also a good time to look at opportunities to outsource some of the non-critical work to third party vendors and improve productivity without any permanent investment
- Many other non-essential costs like travel, events, etc will need a prudent relook in terms of their timings

The second goal is to determine how you will be able to sustain given the impact on topline and the balance sheet due to potential loss of business. You need to answer questions on how long you can continue to run operations with limited or no income scenarios.

Improving productivity and synergies across teams is a priority to keep costs at the bare minimum. This would mean different things for different businesses, but it will help to plan for best-case, mid-case and worst-case scenarios with lockdown times as a variable. Also, revisit plans on frequent intervals including cash flow position since the situation is dynamic.

Keep up to date on government announcements for companies on possible tax cuts, debt reliefs, deferment of tax payments like GST etc, employee perks and other relief measures to incorporate into your business plan.

This is also a good time to consider venturing into possible services/products based on existing capabilities and resources and explore possible synergies with existing partners or suppliers through which you can propagate the current business or a similar business to keep company operations going.

For example, automotive companies are actively preparing ventilator prototypes to start working on manufacturing ventilators that will be required to fight the coronavirus pandemic. The idea here is to keep the business running till things recover and stabilise.

The third goal should be to revisit costs even on the essential front when all possible measures on the non-essential front are not sufficient. This may lead to harsher decisions and may involve pay cuts for temporary periods (within a legitimate framework), deferring of increments for some time, put few urgent launches on hold, deferring large IT investments which were critical and essential, moderating employee strength (within a legitimate framework) and revisiting some discretionary employee benefits.

Remember that this is already a difficult situation for everyone involved and the humanitarian cost of the entire crisis cannot even be estimated. Whatever decision you take should consider the larger good of your employees too and deal with mid to long term scenarios.

There could be a likely situation that when you have to ramp up again, you may not get people fast enough and hence a fine balance is needed between letting employees go and retaining them. You should lay off only as a last resort, if you can help it. You can deploy your CSR (corporate social responsibility) budgets to address this issue too as a deemed CSR activity.

The fourth goal should be to keep the communication lines open and let everyone concerned know what the current situation is, so they are not caught by surprise and not overwhelmed by anxiety. Transparency and communication will help in keeping the people you value - employees and customers - close to you, so they are ready to get back into action once the crisis tides over.

The fifth goal is to keep a contingency plans ready to ensure business continuity. You will have to keep ready various options to raise debt, consider potential mergers and acquisitions and consolidation of business. These are your go-to strategies depending on the amount of business impact. It is also possible that the pandemic changes the way we do business forever, at least in some cases. It is important to know these trends to align your business accordingly when the lockdown is eventually lifted.

While you plan for a possible long-drawn impact on the business, you will also need to provide for a slower return to normalcy owing to the nature of this pandemic. Since this is a worldwide phenomenon, it will take time for normalcy to return and many industry segments may see a 'U' shape recovery patterns over a 'V' shape recovery and lifting of lockdowns may also be phase-wise. Prepare for a future lockdown to stop a second wave of pandemic too.

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The ultimate aim for all of us will be to see through this crisis and come out on the other side, well and active to face various challenges, while keeping it all together. Because, like the old saying goes - this too shall pass, and all change is good.

The author is CFO - India and Director on Board at Kelly Services, an American office staffing company that operates globally. An alumnus of Shri Ram College of Commerce, Jha is a chartered accountant and cost accountant. In a career spanning nearly three decades, Jha has worked across companies such as AT Kearney and IBM Daksh BPO. Views expressed here are personal. They do not reflect in any way the views of his current or previous employers.