Recover to thrive

The Covid-19 situation has changed greatly our environment and most probably, it will change the future of doing business as well. Some changes will be inducted due to predicted global shifts in supply chains and the restrictions until risks of a resurgence of the disease fade, however internal factors will also impact enterprises.

In the post Covid-19, the difficult recovery will ensue as enterprises start to rebuild operations. Amongst fears of prolonged pandemics situation and in the worst case, virus re-emergence during the second half of the year, the discovery of a vaccine would be the real end of the crisis. However, as of latest evaluations, that could take 18 months to be developed, and not taking into account the process of vaccinating the population, which would significantly add up to the timeframe.

As measures start to lift, enterprises should cautiously start to recover, however they should also prepare for possible return of the emergency and restrictions. Nevertheless, recovery response aim is to strengthen and thrive in the new environment that Covid-19 will leave behind. We predict that the key themes of the recovery will be:

1. Damage report;
2. Plan restart of operations; 
3. Re-engage workforce and continue enhanced health & monitoring;
4. Analyze imminent risks;
5. Continue cash management & improvements;
6. Rebuild supply chains;
7. Assess demand and engage customers;
8. Leverage technology to orchestrate efforts. 

Damage report

Enterprises should quickly analyze the status of their business. Understanding impacts and underlying effects is key to structure and plan recovery measures. Comprehensive analysis should be done on:

• Finance status – Analyze financials and ratios to have visibility on impacts to cash reserves, financing options, balance sheet and profit & loss.
• Operations status – Analyze business operations across core business and support operations. Define what are the critical processes that need to start quickly during the recovery and the resources needed.
• Employee status – Analyze available human resources, employees that were laid-off and employees put on annual leave. Furthermore, analyze health impacts including psychological effects that returning to work may pose to their efficiency.
• Suppliers’ status – Enhance visibility to both tier 1 and tier 2 suppliers. Analyze effects of the crisis they have faced and potential risks to the supply chain during recovery.

Plan the restart of operations

Enterprises affected by the restrictions with shut down or reduced business operations should carefully plan all activities for the restart and analyze possible risks associated. Such plans should build upon emergency response plans and take into account changes in supplier operations, customer demand and financial performance after relief of restrictions.

In addition, enterprises that are having opportunities during the crisis, such as food and essentials retailers, pharmaceuticals and Technology, Media & Technology should start planning for the post emergency phase. Possible disruptions may still occur, such as broken supply chains or decrease of revenue due to economic recession. Customer channels may shift focus and these enterprises could be caught unprepared.

Re-engage workforce and continue enhanced health & monitoring measures

Enterprises should start shifting their focus from the emergency response to gradual recovery. This can prove challenging due to chaotic operations and decision making when still faced with uncertainties of the recovery. In order to promote recovery, enterprises should foster cross-functional collaboration between teams, carefully plan and monitor their daily activities and have clear visibility on the workforce environment. Cross-functional teams should orchestrate the restart of business processes in harmony with each other and plan for possible risks.

Employee health will still be important, not only because government restrictions, but also to promote a safe environment for employees to work. Some functions that have adapted to work-from-home may continue that way, however enterprises should implement technology solutions to monitor efficiency.

Analyze imminent risks

End of Covid-19 containment measures does not mean the struggle is over, not to mention the uncertainty that a second wave of the pandemic can resurge in autumn. Enterprises should be wary during the recovery of underlying financial and operational risks.

The above are only some of the risks that enterprises will face during recovery. In order to mitigate that, they should quickly start defining their risk functions. These functions comprised of different business lines experts will be the foundation of risk management and will have the task to initially analyze recovery risks and design mitigation plans. Furthermore, in case of a resurgence of the pandemic, proper analysis and plans should be made for that scenario.

 Process – The situation of disruption and recovery puts difficulties managing operations. Fragmented technology also adds up to that. In order to benefit from implementing IT systems and digitalization, enterprises must organize and standardize their processes. Moreover, in this situation, that is also beneficial to restructuring their cost and gain much needed efficiency improvements.

Mobile working – Working from home can become a theme, not only if the pandemic resurges in autumn and new measures are enforced, but also as an effective way of work. The pandemic showed that working from home increased employee engagement, despite initial adaptation difficulties. Such systems will also be beneficial to enterprises working in multiple locations and on the go by offering better efficiency and controls.

Automation – Some industries, such as banking, experienced an overload of work during the quarantine situation. Other enterprises may experience a similar situation in case customer demand rebounds to high level after the measures are lifted. This, coupled with mostly manual processes will overload the staff and harm customer service levels. The recovery phase is a good time for enterprises to look at process automation opportunities. Simple automations may offer a great deal of reducing costs and giving more time to employees to deal with important issues.

E-commerce - One trend that grew immensely during the emergency is the shift to e-commerce and this trend should be taken seriously. During the 2008 financial crisis, the trend that followed was discount shopping and that has continued until today where price and value for money was key to customers. Deducing from that and taking into account growing of e-commerce, it can be the new “normal” after Covid-19. However, enterprises should not jump right into e-commerce. First, they need to improve on some key business components such as, but not limited to:

• Redesign their operating model and processes,
• Develop logistics model
• Employ category management concepts,
• Change the way of cross selling and up selling,
• Redesign their supply chain towards Omni channel supply chains,
• Enhance billing models,
• Transition to a digital culture.

Cost management – Post Covid-19 difficulties will inevitably show on enterprises profits. During the emergency phase, cash flow may be more important, but as recovery ensues, businesses need to become profitable to thrive in the future. Apart from cost model restructuring, enterprises can use technology to benefit from lower costs. This does not only come from process automations, but also from enabling integrated management of business functions such as planning, inventory, finance, sales & CRM, loyalty programs etc. Thus, combined higher work efficiency, better planning, better client retention and marketing and lower costs on the long term, will greatly improve profitability in the future.

For any issues or advice you can contact our Deloitte team.

References:

• Deloitte 2020, The heart of resilient leadership;
• Deloitte 2020, Orchestrating the recovery of organizations and supply chains.