As the novel coronavirus outbreak has upended businesses around the world at alarming speed, one thing that has become clear to executives grappling with the crisis: doing nothing is not an option.
COVID-19 is unlike any previous dilemma and taking traditional crisis-response approaches will not be enough.
We share the steps that CEOs need to take today to mitigate the effects of the outbreak.
The process of containment and slowing the spread of COVID-19 in each country will create major disruption, irrespective of the seriousness of the virus spread.
This should not cause additional fear in a situation that is already frightening for everyone, rather, it is a simple reminder that during times of crisis, such as the financial crisis of 2008, the strong will get stronger and will define a clear leadership, plan and action.
The high likelihood of a substantial revenue disruption will lead to a potential liquidity crisis for many businesses. This could mean that the recovery may not be a quick bounce-back.
Accordingly, CEOs need to plan for multiple quarters of lower revenue.
Hence, you need to appoint a senior, fully dedicated COVID-19 war room team focused on this all day, every day.
As CEO, you must be out in front with a planned cascade of possible actions, probably more aggressive than your team can imagine right now.
Customers will change some behaviours permanently, accelerating prior trends. Taking bold action now can set you up for success through the downturn and beyond.
Six urgent priorities
- Protect your employees and customers
Implement the best-known guidelines available for both employees and customers. This includes monitoring global health guidelines and other companies—and continue to fine tune.
Don’t be afraid to over-communicate with full transparency and assist epidemic-limiting initiatives in any way possible.
- Stress test P&L and liquidity
Outline macro scenarios by market, translate into revenue-decline and P&L scenarios. You should also build extreme downside scenarios as this has the potential to be a 100-year event. Therefore, an outline of the major operational actions should be in place.
- Defend against revenue declines
You need to take a customer-centric view and ask yourself questions like how you will build trust, loyalty and market share through and beyond this crisis. Similarly, you should build specific revenue-mitigation actions for declines in core revenue streams.
- Stabilise operations for the new normal
Stabilise supply chains of physical goods from likely geographic and labour disruptions while building contingency operational plans for all aspects of the business
- Plan urgent cost cuts to conserve cash
You can control the sending hand brakes by initiating immediate actions (e.g. hiring freeze, opex, capex, working capital).
Similarly, set aggressive break-the-glass cost actions triggered by more extreme revenue scenarios. Outline a medium-term plan to lean out the cost structure for the future. It should be a plan that is more automated, more variable and, more shock resistant
- Play offense, not just defence
Define how you'll outperform competitors and expand share through and beyond the crisis. This also means that you should prepare for bounce-back and recovery. At the same time, plan for and take advantage of a leapfrog change in customer behaviour —especially digital.
Actions to take now
There are several moves that CEOs can take right now to help ease the impacts and come through stronger on the other side.
As the economic fallout continues, business leaders will want to first model their exposure to the coronavirus fallout and street test their P&L and liquidity.
CEOs need a unique, tailored and immediate crisis-response. A wait-and-see approach has no chance of being effective.
CEOs should be aware of the situation and up to speed with the latest updates. They should also understand that there are six main priorities to focus on during this calamity and accordingly implement a carefully mapped out action plan.