There is no doubt that the COVID-19 pandemic is one of the most disruptive world events of the last century. Its impact is surprisingly greater than that of SARS in 2003, or Ebola in 2014.
The effects of our response have been unprecedented. We have seen cultural organizations receive zero visitors, religious institutions shut off mass gatherings, the entertainment industry canceled big events, and educational institutions made hard decisions to carry out online classes.
What has been the effect to your organizations? As we approach the end of the year, the pandemic’s effects are not showing any signs of stopping. This has made the future impact on the economy difficult to model and assess.
Organizations and businesses should start to shift their focus to recovery and stabilization. Right now, it is best to start preparations for a post-pandemic recovery in order to become well-positioned towards sustaining operations and achieving mission delivery.
Which areas can we focus first? Let us look at these five: Governance, risk management, budget and forecasting, liquidity and human capital.
Transforming governance structures
At the onset of the pandemic, organizations were pushed to exhaust their crisis management teams. The risks affecting business needed to be identified immediately, so that concerns with inventory, cash flow and operations can be quickly addressed. Because of the fast transformation of the business landscape, boards and management were urged to make uninformed decisions and act without weighing the pros and cons. This forced organizations to change their governance structures and reporting lines to allow boards and management teams to speed through crises. Constitutions, bylaws and guidelines were basically shunned to make way for the implementation of necessary crisis strategies.
In line with these, a thorough review of the organization’s crisis and continuity strategies, governance documents, the composition of the crisis management team, protocols and checklists can help restart operations safely. Knowledge management teams must determine the skill set of the current board to ensure the right expertise and appropriate guidance by the board. These skills should include occupational safety and healthcare, financial resilience and sustainability, people and culture, risk and business continuity, and information technology.
Applying learnings from the pandemic
Many companies still have inadequate risk management processes, and the time to strengthen them is now. On the other hand, companies with advanced risk management processes should prioritize updating their risk registers, applying learnings gained from the past few months. Gaps in business continuity plans should be identified to minimize unexpected mishaps. There are many factors to consider when creating a well-designed risk management plan, including the following: operations assessment, people, information technology, treasury, stakeholders and program constituents, communication with staff, physical assets, among many others.
Another measure to take is evaluating vendor relationships, business partners and advisors to ensure readiness for challenges that come from the pandemic. Contract disputes with third parties may lead to strains in organizations. A post-pandemic environment would require companies to secure critical supply chains and strengthen relationships with peer institutions/networks for better collaboration.
Adapting with budget and forecasting
As organizations drastically reduce expense on utilities, travel, events and meetings, budgets were somehow positively impacted. Similarly, the office space being used for administrative purposes can be renovated to become programmatic space. The loose budget can be repurposed to prioritize expenses for contactless business processes, IT systems and technologies useful to the work from home arrangement.
This time for recovery can also be used to review measures for reserves management as well as determine the effectiveness of policies in the navigation and reaction to the crisis. The cost for existing programs can also be examined for re-allocation to necessary programs aligned to the mission of the company. Forecasting tools can be used to refine key assumptions and desired outcomes based on the review of all the mentioned factors, allowing for an efficient model and strategy to emerge.
One of the most difficult parts of pandemic recovery is liquidity, leading to stress on company treasury functions. Some strategies that sustain healthy cash position include reducing nonessential costs, cutting on salaries, furloughs of employees and delaying payments to suppliers and vendors. These were immediately countered by decreasing receivable collections from constituents, cancelling events and refunds, calling organizations to exhaust all available lines of credit to boost cash balances.
Since we are on the road to recovery, it is recommended that companies should identify and analyze the available levers to manage liquidity and respond accordingly. Management’s crisis analysis can also include the evaluation of credit facilities.
The impact on human capital
With the crisis making furlough of employees a viable option, a formal policy must be implemented to protect an organization’s people. Formalizing established policies can help ease future activation so they can be more readily available and structured. Code of conduct policies should also be reviewed and modified to address the effects of a remote workforce. As the pandemic can take a toll on one’s mental health, including or enhancing mental health benefits for employees can also be considered.
Sustainability is key
In conclusion, there is no one-size-fits-all approach to responding to the immediate impacts of the pandemic, and there are no accurate predictions of what is to come. Business leaders must have a mindset that allows flexibility to be able to quickly shift to sustain operations and mission fulfillment. Surely, the effects of the pandemic are damaging, but there are lots of lessons learned. It is a matter of cleverly applying these learnings to ensure sustainability during post-pandemic recovery.
Mhycke Gallego is a Partner of the Advisory Services Division of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing firms in the Philippines with 24 Partners and more than 900 staff members. We’d like to hear from you! Tweet us: @GrantThorntonPH, like us on Facebook: P&A Grant Thornton, and email your comments to firstname.lastname@example.org or email@example.com. For more information, visit our website: www.grantthornton.com.ph
As published in The Manila Times, dated 23 December 2020