The COVID-19 pandemic is evolving at such a rapid pace that the Government has imposed a Movement Control Order and further extended it to curb the outbreak in Malaysia. The ensuing uncertainties require organisations to action rapid assessments to mitigate the adverse impact on people’s safety, business continuity, financial liquidity and even legal liabilities.
To help organisations stay resilient during this challenging period, we have developed this alert which can help you and your teams navigate across key priority areas -people safety, business continuity, liquidity management and stakeholder management.
1. Put People Safety First People, your key assets, are subject to high stress when dealing with fear, anxiety, ambiguity and uncertainty given the extent of the Covid-19 impact on a personal level and on work. Safety, health, wellbeing, care and job security become immediate priorities to deal with the present and coming challenges.
Your team will also need clear and transparent communications on how the Government’s stimulus package may help them.
Action to Take1. Be extraordinarily human
Companies Need to Do Their Best to Steady the Ground and Transition People Into New Ways of Working.
2. Protect Business Continuity
The COVID-19 pandemic has disrupted economic activities, including supply chain networks. Businesses lose clarity on demand as buying behavior shifts drastically. Ripple effect emerges as companies’ sources of supplies are disrupted, compounded by temporary suspension of support services. It is imperative for businesses to rapidly assess, recover and respond to their supply network disruptions.
Action to Take
1. Visibility and monitoring
- Is there a single view across your supplier and customer networks on supply chain capacity, availability and product flows?
2. End-to-end supply chain risk assessment
- Are your supply chain ecosystem partners proactively engaged to identify risks and close gaps?
3. Contingency and scenario planning
- Is contingency and scenario planning in place with standardized emergency response processes?
4. Supplier network diversification
- Is there clarity on your supplier base and dependencies, with alternate suppliers in place?
5. Stimulus and incentive packages
- Have you considered available tax, financing, and other moratorium benefits?
Building A Resilient Supply Chain is Key to Mitigating Economic Risks.
3. Build and Secure Liquidity
COVID-19 will disproportionately impact highly leveraged businesses and those with low cash buffers already facing tough trading conditions. Liquidity tightening across the markets will cascade, from business to business, impacting the supply chain network. Key questions for CFOs to consider:
1. Have you assessed the liquidity impact on the range of stress-test scenarios presented by COVID-19?
2. Has management agreed on an appropriate contingency funding plan based on the stress-test scenarios?
Action to Take
1. Identify available cash and due payments
- Track down cash buffers, calculate available cash and unutilised credit lines
- Identify urgent payments (e.g. invoices and treasury settlements)
2. Allocate cash reserves
- Identify opportunities to pool liquidity
- Monitor the financial status of entities within the group
- Allocate liquidity to entities in need of cash
3. Forecast cash flows
- Establish a cash forecast including various scenarios
- Calculate the group’s cash forecast to identify cash bottlenecks and surplus
- Provide adequate liquidity reserve to prevent insolvency
4. Monitor financial covenants
- Regularly review forecast to ensure compliance with financial covenants
Both Internal and External Factors Will Tighten Liquidity During COVID-19 and Rapid Assessment is Needed to Test
4. Engage Stakeholders
With most businesses planning to reshape their organisation to sustain in these challenging times of the COVID-19 pandemic, stakeholder engagement is more important than ever. Lack of communication or unclear messaging may trigger speculations and raise doubts among stakeholders. This may result in the loss of stakeholder confidence and lead to an adverse shift on how the organisation is perceived. In time, this may have long-term financial and operational impact on the organisation.
Action to Take
1. Understand stakeholders’ critical priorities
- Identify key stakeholders and their short to medium term priorities
- Examine the impacted stakeholders due to the current economic situation
2. Create a cross-functional response team to address challenges/issues and track position daily
- Identify the decision-makers within the organisation
- Establish daily cadence and appropriate governance to address issues and risks
3. Prepare a targeted engagement plan to address needs and priorities
- Establish a proactive and comprehensive communication plan to address both external and internal stakeholders
- Designate single points of contact to facilitate seamless engagement with internal and external stakeholders
4. Address legal liabilities
- Establish process to notify and engage with regulators proactively
- Establish mitigation action on any potential lawsuits and negative brand impact to the organisation