As I write this, we are beginning week two of Massachusetts’ version of the COVID-19 “shelter in place” emergency order. For our clients in non-life sustaining businesses, this Brief condenses what we have been advising, particularly for those running small-to-medium sized companies most severely impacted. While the short term is all consuming, there may be opportunities for your company to make a difference in the fight against the novel coronavirus. And, at the same time, consider how your crisis management responses might strengthen your company, staff and community, and your relationships with your customers, suppliers and other partners for the long haul.
No time to waste. Here are some practical steps to help you deal with the crisis.
Shift to the short term
Even for our clients who have already moved aggressively with immediate emergency actions, it is helpful to reconsider all that could be done. Here are several key areas to consider.
Crisis management leadership
By now you are well into the execution of your business continuity plans (BCP). The crisis management team is the mechanism to bring your organization through these times. Leadership, along with effective communications, is crucial. Is this in place and operating effectively?
Health & safety
Double down on the health and safety of your workforce, community and partners. Repeat.
It is essential to communicate effectively on a timely basis and not to burden stakeholders with non-essential communications.
- Establish and test your communications protocols before you need them (Zoom, GoToMeeting, other tech tools)
- Keep your employees and external stakeholders proactively informed with relevant information
- Consider your ability to meet contractual obligations in light of the COVID-19 crisis and relevant force majeure provisions
The COVID-19 impact may last longer than any of us expect. For companies facing a cash crunch:
- Consider all possible payment deferrals
- Ask your customers to accelerate receivables
- Delay or cancel purchase order commitments
- Verify that short-term lines of credit are accessible
- Utilize tax deferral programs as they unfold
- Apply for government direct assistance as available
- Consider options to renegotiate loan agreements and funding mechanisms
- Prepare workforce and/or payroll expense reduction contingency plans
At least until there is clarity on the current situation, suspend work and spending on all long-term initiatives where feasible. Through the crisis leadership team, reassign resources to short-term actions. Ask vendors to suspend project work and related cost liabilities.
Prepare alternative versions of your monthly and full-year operating budget outlook. Be realistic, no matter how unsightly it may be.
- Prepare alternative “what-if” scenarios (e.g., disruption lasts 3, 6, 12 months; various rates of revenue fall off and recovery)
- Reconsider the assumptions and calculations behind key numbers, as many inputs may have changed. For example, the average price of diesel fuel in the US is down more than ten percent year-over-year
- Factor in local, regional and national government assistance programs as known or projected: e.g., loans, grants, tax deferrals/holidays, and payroll assistance
Consider external assistance
Consider all sources of outside help:
- Crisis management leadership support
- Customers, suppliers and partners
- Restructuring expertise
- Government assistance programs
Update your business continuity plans
In real-time, redraft and incorporate the actions you are now taking, as they deviate from, extend or enhance your BCPs. Prepare missing BCPs.
Currently, there are critical shortages of medical supplies and equipment. It is a rapidly revolving situation. We are already seeing companies outside of the life-sustaining supply chain leveraging their business capabilities to assist, even in small ways. For example, luxury goods maker LVMH is shifting a bottling line in France from perfumes to hand sanitizers for distribution to local healthcare facilities. Los Angeles Apparel is already producing surgical masks and shortly adding hospital gowns.
How can you repurpose your company’s capabilities to assist those in the trenches? Emergencies like this can bring out innovative thinking, actions and results. Create a project team. Reach out to your employees, customers, suppliers and other partners. Great things come from collaboration – you may be surprised at the results.
Finally, if you have the means individually or as a company, please consider making donations to community organizations strapped for cash and to volunteers who bring meals and other assistance to those most at risk.
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David Frentzel is a Partner at New Harbor Consultants. Dave brings 30 years of management consulting and hands-on executive leadership experience to improve business outcomes. Prior to joining New Harbor, he held various senior positions at 3PL and supply chain technology companies. Dave has extensive global management expertise having spent more than ten years living and working internationally helping companies with their global go-to-market, organizational, sourcing, manufacturing and supply chain strategies and operations.