There is a Chinese proverb: “A crisis is an opportunity riding the dangerous wind.”
During previous epidemics such as SARS (Severe Acute Respiratory Syndrome), scores of individuals, organisations, and governments rode out the dangerous winds, and did it very well.
So, when it comes to the current Covid-19 outbreak, what can businesses learn from the earlier crises and experiences, and how can they take action?
Risk management
The first priority should be to manage the risks and immediate fallout.
Most corporations have, to date, successfully protected their staff from contracting the virus and ensuring social distancing. These measures include temperature screening, health and travel declarations, logging for contact tracing, cancelling and deferring events, and implementing business continuity plans.
With the “circuit breaker” imposed by the government to restrict public gatherings and non-essential services, business continuity has moved from split teams and flexible working arrangements to almost all staff working from home where possible. The focus was on protecting those staff providing critical services and products that cannot be done from home.
Even after the circuit breaker and some restrictions are relaxed, many of these measures would still be needed before the situation stabilises.
Prudent firms have also examined the financial and legal implications of disruption to their business. From an economic standpoint, many companies are looking at containing their costs and cash flow, and, if needed, fundraising. From a legal standpoint, they are examining major contracts on rights of termination and the force majeure provisions for non-fulfilment of legal obligations; and checking insurance policies and increasing coverage.
It should be noted that effective protection measures are not only good risk management but also, in some respects, a business opportunity. Customers and business partners, for example, do not want to continue to do business with a company that is putting itself at reputational or financial risk in the pandemic.
Relief measures
Second, companies should seek to understand and benefit from the relief measures.
Both the government and the business community recognise the adverse impact of the virus outbreak. Relief in various forms is being offered.
The government has announced a S$55 billion package to stabilise the economy and help businesses and workers tide over the slowdown. These include job and cash-flow support to help retain workers and specific sectorial subsidies.
As a goodwill gesture, some private companies are also offering discounts, rebates, extended terms, cancellation waivers and other concessions to their customers and suppliers.
Companies should, obviously, be grateful for and avail themselves of the relief measures. Without being overly reliant on them for the longer term, there is no reason why they should not seek out those reliefs which are not yet offered.
The Singapore government is not the only one providing support. Hong Kong, for instance, has announced a HK$30 billion (S$5.4 billion) relief package. This means that where Singapore companies have operations in other countries, they should understand and seek to benefit from the relief measures available there.
Even as companies take advantage of these relief measures, they should recognise them for what they are: relief. They can buy some time, but they are not long-term solutions. Companies must continue to be viable and proactive in planning and executing any restructuring needed in their business.
Products and services
That brings us to the third priority of companies adjusting their offerings in line with changes in their supply and demand.
With lockdowns and restrictions across the world, there has been a general drop in demand across the board, although some industries have benefited from the outbreak. Those providing healthcare equipment, cleaning and sanitation services, online entertainment and goods delivery services have seen a spike in demand for their products and services. While they might be tempted to increase prices in the immediate term, they should also be sensitive to the optics of profiteering from the crisis.
Most companies, however, saw an overall decline in activity and traditional business. The travel, hospitality and retail industries are among the hardest hit. They need to adapt their offerings to reach their customers. Restaurants, for example, have tweaked their menus to offer healthier options and promote online takeaways. Some education and health service providers now deliver part of their consultation and other services online.
One clear impact for many businesses is the disruption of their supply chains. Proactive companies analyse the present and future implications of this and reconfigure their sourcing models and supply chains for agility and resilience. Amazon, for example, is adjusting its traditional “lean inventory” approach to increase inventory levels, especially for goods from Chinese suppliers.
Future-ready
Finally, even if companies cannot do much for their business today, they can prepare for a better tomorrow.
The slowdown is an opportunity for staff training and development and planning for the recovery. Now is an excellent time to think about and act on matters that the board and management have not previously had the time to focus on.
One such matter is to consider how the company can be more resilient for future crises. The “Bird Flu” occurred in 1997, SARS in 2002, H1N1 “Swine Flu” in 2009, and MERS (Middle East Respiratory Syndrome) in 2012. Black swan events are becoming more regular.
Besides business continuity planning, a key lesson for many companies has been the value of diversification. Diversifying resource pools allows work to continue when part of the workforce is out of action. Diversifying revenue sources enables the company to stay above water when crisis-impacted business dries up. Diversifying suppliers – both the number of companies and their geographical locations – minimises disruption in the supply chain.
Another lesson lies in leveraging technology. When people cannot travel or meet in large gatherings, they rely more on communications technology to stay in touch and get work done. The CEO of videoconferencing company Zoom said that the virus resulted in record usage and demand for its remote work tools. When people stay at home, they engage in online gaming and eCommerce for their goods. PC gaming companies reported ramped up playtime in the last two months in China when there were major lockdowns of cities.
Companies may also consider how these trends could impact their future business and business models. SARS was said to have given birth to Taobao and JD.com, now two major eCommerce companies in China. In Singapore, SARS prompted the development of the pioneering infra-red thermal imaging scanners for mass temperature screening by the Defence Science and Technology Agency.
What new technology or business models or even startup unicorns could emerge out of Covid-19?
Indeed, as some companies have formed a Crisis Control Committee to plan, coordinate and implement the measures to contain the outbreak, perhaps they could also workshop a Crisis Opportunity Committee. The scope of such a committee could cover some of the immediate actions to protect revenue and realise benefits from the outbreak, while exploring its aftermath and impact on the company’s business model. Of course, both committees are separate units because the mindsets of risk management on the one hand, and silver linings on the other hand, are different.
The jury is out on how long the Covid-19 situation will persist, but the tail is expected to be long. In the meantime, companies should not squander the opportunities it offers not just to survive but thrive.
This article was co-written with Lau Yin Cheng, then Head of HR for Singtel Group Digital Life. It came out of a fairways’ conversation on the opportunities, beyond playing golf, in the COVID-19 crisis.
This article was published in the SID Directors Bulletin 2020 Quarter 3 issue. It was adapted from a version of the article first published in The Business Times on 26 February 2020.