How Companies Could Survive The Crisis

In the face of COVID-19, businesses face unprecedented challenges. Companies must rethink their business models and continue to deliver through innovative methods. It is also imperative that businesses develop a plan to survive the crisis.

The first obvious measure is to conserve cash. Businesses should defer expenses, halt expansion projects, and freeze new hiring. Companies must identify and focus on high growth and high potential markets, and let go of business with low growth potential.  These few measures will help the company to survive this trying time. 

Management teams often lead in cost-cutting measures by opting in for pay-cuts. By doing so, the management not only demonstrates the belief in the company’s business model but also motivates employees to ride the trough with the company. An empathetic approach is imperative to keep up the morale of the employees through lean times. 

However, proper management teams look beyond survival and focus on rebuilding and growing the business once the downturn ends. Typically, the company requires its full workforce soon after the crisis ends. High-quality entrepreneurs can motivate and, more importantly, retain their core teams through downturns. 

Proactive communication of external challenges to employees is critical in establishing the trust. Multiple “what-if” scenarios must be evaluated by the management and regularly iterated throughout the crisis, as more information becomes available. It is essential to involve the core teams early in the ‘what if’ planning. This measure will benefit the company to mobilize the units for the plan execution phase quickly. 

Identify the most effective teams to hit the ground running as soon as the situation improves by planning for various scenarios. A downturn also provides the company with an opportunity to focus on internal process improvements, including technology up-gradation and new product development. Such process improvements will help businesses in survival and accelerating growth after the crisis phase.

The priorities and needs of customers often change during and after the crisis. Businesses must remain engaged with the customers to adapt to evolving needs. When recoveries begin after the crisis, the company will be prepared to onboard new clients, sell new products capturing the market in high growth sectors.

A recent example is from an emerging market-focused, freight logistics company. In 2016-17, sea freight rates dropped by 60 to 70 per cent. This negatively impacted the company’s business in freight forwarding. The company focused on rapidly developing a technology platform to deliver high-quality service for its customers and to reduce its operational expenses. The company deployed the technology platform soon after the crisis and consolidated all non-customer facing processes to a centralised offshore facility powered by technology. These measures helped the company improve its operational efficiencies to exceed industry benchmarks of efficiency ratios and operating leverage.

Fundamental methods of conserving capital, gaining employee trust and support, understanding of customer needs, and continual evaluation of economic landscape help businesses overcome a crisis. Companies with strong management teams can better implement these fundamental methods and focus on post-crisis planning.

The author is the Managing Director, Portfolio Operations, Zephyr Peacock