Dr. Amila Withanaarachchi –
Looking back to what we went through over the last one plus years, no doubt that Coronavirus severely affected our personal life in many different dimensions. Going beyond the implications for our personal life, this epidemic had painful consequences for businesses and national economies. Specifically, in the Sri Lankan context, all the large, medium, and small businesses are currently experiencing and, for some, yet to experience, the aftermath of the damage caused by the COVID-19 virus. However, as John Milton (1634) coined, ‘every cloud has a silver lining,’ and hence this epidemic also taught us valuable lessons, specifically for business leaders. Through this short article, I intend to enrich your understanding of the business uncertainty and provide practical guidance on running your business in these difficult times.
Though none of us like the term ‘uncertainty,’ this is something we face every day. For example, there are a bunch of risks we face in our personal, professional, and business lives, which are measurable, and we can run analysis to predict the probability of occurring such events. So, the firm can buy insurance to cover any possible damage to the business. These include weather risk, currency risk, supplies default, fire, and theft. On the other hand, inevitable disruptions are unimaginable and may severely impact the business and world economy at large. We are now living through one of those with the Covid-19 pandemic. Other similar incidents are global financial crises, 911 attacks in the US, Easter Sunday attacks in April 2019, and more recent health pandemics such as SARS (2002-2003), Swine Flu (2009-2010), Ebola (2014-2016), and MERS (2015). Unfortunately, so far, there is no sensible approach to predicting the probability of such disruptions and measuring the damage it may cause to humanity and business. Thus, as of our knowledge, it is difficult to have insurance to face such a pandemic.
How can such a pandemic cause significant damage to our business? It is because we live in a complex world. Even though we are on a small island in the middle of the Indian Ocean, our supplies may highly depend on East and South Asia. We may rely on the customers in Europe, the US, and the Middle East from the demand side. Though this interdependence may not be direct, it is inevitable for us to shield from what is happening in other parts of the world because we are a part of a complex demand and supply network. For example, something that occurred in Wuhan, China, has now transformed into a global pandemic.
Interestingly, while such pandemics threaten global trade, they work strangely and impact businesses in different dimensions. Yet what we know about this pandemic is that they do not attack the whole world at once. The first cluster goes into China and dies down—then another cluster starts in Italy and dies down. As of early 2021, we see increasing cases in the United States, Brazil, Russia, and India. As per the World Health Organization (WHO), we also need to be cautious about the forthcoming waves of the coronavirus.
With this backdrop, what is your role as business leaders? How would you better respond to such epidemics? Importantly, what are the lessons we can learn from the coronavirus pandemic? Based on my extensive reading surrounding the COVID-19 outbreak, it is apparent that business leaders can take simple and straightforward steps to drive their firms across difficult times irrespective of the pandemic severity. The following are some critical steps made by business leaders worldwide that helped them sail through these difficult times.
Decision-making authority: When the firm faces crises, it is crucial to maintain a central information and decision-making function. Representing the senior management, there should be a team of individuals who gather information to a central location and make decisions. For instance, we saw countries like Singapore used a similar approach to face the pandemic at the national level. This is important for two reasons. First, when the information is gathered centrally, the management can paint a complete picture of what is happening within and surrounding the business. Second, when the decisions are made centrally and communicated with one voice, employees build their trust in the communicated information.
Take this opportunity to give back: While the ultimate motive of any business is to generate profit and grow the wealth of the shareholders, take this opportunity to give back to employees, other business stakeholders, and the community at large. Not only in good times, but specifically in bad times, it is vital to look after the employees. See how you can continue to pay their salaries and inquire and help with their family’s well being. Continue to communicate with your suppliers and try to fulfil the requirements of your customers. Ensure that they are not forgotten even in difficult times. This will help you to enrich the customers’ and suppliers’ bond with your firm. Lastly, contribute back to the community as well. For example, Google made its online tools free for businesses for three months. Many businesses are taking similar actions, such as giving their resources to health care and other essential services. What you do to the community will remain with them for long and will bring better opportunities when things start to get back to business as usual.
Maintain healthy cash flow: Sure, this may not be the best financial year for many businesses to strive for budgeted or targeted profits, but as many business leaders would agree, this is the time for survival. The key to survival is to ensure that your business maintains a healthy cash flow. Among other options, increasing days-payable to suppliers, reducing days receivable from customers, reducing inventory, delaying capital investments, and watching for customers and suppliers’ financial health are some of the options managers can think of. However, when setting the targets, be realistic and ensure that you and your team can attain the said targets this year. Leave the dream targets for the future.
Plan for recovery: Have a strategy as to how the firm can recover from this epidemic. Make this time useful for your employees to learn something new. Do not be afraid to make tough business decisions such as reorganizations and cutting non-performing products or business operations. After all, you have an excellent excuse to do so. Be vigilant on how the government, competitors, customers, and other stakeholders respond to this epidemic. Plan and set targets as to how your firm can recover. Importantly, be realistic on every goal that you set and the decision you make.
True, this is an extraordinary time for every individual, so are the businesses around the world, but this is also an unprecedented time that teaches us valuable lessons. Take this opportunity to renew and refine, and most importantly, to learn new ways of doing things more efficiently.
Why is it so important to learn from this pandemic? It is because as the way things are happening, there is no assurance that this is the only pandemic we would face in the near future!
Dr Amila Withanaarachchi
Department of Industrial Management,
University of Kelaniya,