Will the Coronavirus Impact Your Business and Are You Prepared?
Is your organization or business developing any contingency plans if the 2019 novel coronavirus (COVID – 19) becomes a significant factor in the world and the United States? Are you prepared if its impact becomes more severe and persists?
It isn’t clear right now if and how this coronavirus will affect the health and economy of the United States and whether a pandemic will occur. What is more certain is that economic supply and demand will be volatile as the psychology and behavior of people change as they anticipate possible outcomes. This will impact the business community and the financial markets.
While we don’t know exactly what the impacts will be, and it will vary by region and industry, it makes sense for all organizations to make contingency plans. Our judgement is that the probability falls somewhere between possible and likely that the following 6 major impacts may occur for businesses:
- Supply chains: Product availability may be disrupted as factories shut down and transportation is impacted. This is particularly acute in industries that rely heavily on Asian-sourced products (Opus Consulting Group has a car-dealership client that may face new car shortages).
- High-demand items: Shortages will occur for high-demand items that are only produced in limited locations. (Opus consults with a medical client that is already investigating how they can continue to operate if they can’t find adequate sterilization gear)
- Workforce health and morale: Employees staying home will impact businesses’ ability to get work done.
- Travel restrictions: Firms relying on employees traveling will have to find other ways of doing business.
- Specific Industries: Businesses that rely on tourism, travel, and mass gatherings (sporting events, conferences, graduations, wedding celebrations, etc.) will be severely impacted. For example, the tourism business in the Chinatown section of San Francisco is down 80% in the last month for obvious reasons. How would Maine’s restaurants and other tourism businesses fare if people stop traveling for a period of time?
- The economy: Consumer spending will be impacted as confidence wanes and financial markets suffer.
Have you thought through whether any of the six impacts listed here might impact your business?
Opus recommends that all organizations think through potential impacts of the coronavirus and develop contingency plans to address the impacts. Here are a few examples:
- If your revenue could be impacted, develop plans to ensure you can weather a 25% to 50% business downturn for a period of six months to a year. This plan would include understanding cash flow impacts, postponing unnecessary expenditures, and thinking through how to manage large ongoing expenses including employee costs.
- If you believe supply shortages could occur, the plan might involve stockpiling, changing processes, and developing product or source-of-supply substitution.
- If employee availability or transportation becomes an issue, the plan might include telework policies, health-protection measures, and alternative transportation arrangements.
The most senior and experienced people in your organization must be involved in creating critical contingency plans, including your Board of Directors if you have one. If you need to, utilize outside experts to assess impacts and create a plan.
Opus Consulting Group has proprietary cash-flow models and contingency planning experts to assist you.
From everything we have read, the most likely timing for any major coronavirus impact is for a six -month period, somewhere between June of this year to the end of 2021; but the earlier you plan, the more operational options you will find you have.
Hopefully, the coronavirus doesn’t turn out to significantly affect our health, happiness, and business prospects, and life returns to normal quickly. If that is the case, then the contingency planning will have been an intellectual exercise that will still help you understand your business better.
This planning exercise will pinpoint both your vulnerabilities and opportunities. Unforeseen shocks impact businesses all the time – these events are not limited to health epidemics but can include (just to mention a few) severe weather, legislative changes, and international disruptions. Good contingency planning increases company nimbleness and has not only saved many a business from bankruptcy but also allowed them to capitalize on sudden opportunities.
Contact our team to discuss how you can plan efficiently.