Our globalised society has arguably never faced a challenge like the Coronavirus – references to battle and war feature in government briefings all over the world. We are truly living in unprecedented times.
The spread of the virus, as well as efforts to contain it, are now significantly impacting our daily lives. The inevitable knock-on effect is major economic uncertainty, which hugely impacts privately-owned businesses, including SMEs.
One of the reasons that these businesses are so vulnerable is that they typically have less cash, capital and facilities available to them compared to their bigger corporate counterparts. This means that during periods of upheaval they have fewer financial and operational resources available to help steady the ship. Businesses that operate in sectors like tourism and leisure are at the sharp end of the fallout and suddenly enter ‘crisis mode’. Privately owned businesses that are exposed to drastic changes in consumer behaviour and revenue decline, which are the backbones of economies and the employers of millions, face a fight for survival.
It is vital that these businesses face up to the risks posed by the virus and its consequences. Responding to risks quickly is critical, as is approaching the situation with a mixture of pragmatism and optimism. So far, privately owned and SME businesses have rallied excellently, and many have gone out of their way to protect staff and public wellbeing. Even businesses in very delicate positions, like restaurants, have reacted with sensitivity and professionalism. Many have tried to quickly adapt their business model to ensure they meet their customer needs with minimal disruption.
It is now time for others to step up and do the same: policymakers, big business, banks and consumers must return the favour and support businesses which are most exposed. It is encouraging to see governments relax rules to allow restaurants and pubs to operate as takeaways during the outbreak, for example. Similarly, central banks and financial institutions around the world continue to play a substantial role in alleviating the crisis by providing relief and guarantees worth billions. We are even seeing some large corporates pledge funds to help those lower down their supply chains. The privately owned business community must be supported by further robust measures for as long the crisis continues.
For owners and managers, it is now time - if it hasn’t been done already - to step back and take stock of the situation and think about what needs to be done to survive. It may seem counterintuitive to plan for tomorrow when today is unprecedented, but some policymakers believe the disruption will last for years rather than months: it must be done. Planning should start with a thorough review of where the business is in terms of capital, credit and cashflow. From there, they should think about how the balance sheet would hold up in a variety of scenarios, and what can be done to protect against other potential risks.
Businesses should also think focus on supply disruption. This can be an acute challenge for those at the heart of long, global supply chains, which have come under severe pressure from the virus and related containment measures. In the long-term, businesses also need to question their operating model, and how well suited it is to containment measures that could last for a year or more. It is also imperative to start thinking about contingency planning beyond this crisis alone. Many have had a rude awakening and must build greater resilience into operations going forward.
Similarly, businesses need to ensure that they have access to the right advice. Advisors of all shapes, sizes and expertise have a vital role to play in supporting privately owned businesses through this period of uncertainty. There is a growing sentiment that all businesses are in this together. Advisors are now called upon to deliver their expertise and step up to the challenge of mitigating – and helping to solve – what may be a fight for the very survival of countless privately owned businesses.