New Coronavirus Pneumonia Crisis Management: Ten Questions Worth Thinking about

Source: EY 2020-06-01

The new pneumonia outbreak has exacerbated global business and economic turmoil and added uncertainty to the outlook. Analysis shows that the new type of pneumonia outbreak will cause this year's global gross domestic product (GDP) to drop from 2.5% in January 2020 to 0%.

In this crisis management situation, companies are also struggling to cope with the impact of new pneumonia on their strategic goals and customer needs.

Therefore, we confirmed:

· In the crisis, five steps that every company should take to achieve better performance

· Ten help you eliminate the problem of crisis paralysis

How can companies achieve better performance in the crisis?

When a crisis occurs, immediate action must be taken to protect the medium-term and long-term results. To this end, the organization should formulate a professional crisis management plan that should address employee health, brand reputation, financial management, supply chain, and legal issues that may arise from the crisis.

These are the five basic steps we suggest companies should take when their business is in crisis.

1. Put the health of employees first

Employees are your greatest asset. In a crisis, companies have a responsibility to act in the best interests of employees, customers and other stakeholders. This era is the best time for companies to recruit, manage and retain talent, but at the same time, it becomes more difficult than ever to control costs. Therefore, companies must adapt to these rapid changes more quickly.

Companies must find alternative work arrangements and resume business as usual, while also complying with local labor laws and giving top priority to the health and safety of employees. Through timely and relevant communication, as well as employee support plans to overcome the difficulties.

2. Communication-timely, clear and transparent

Open communication is the best communication. In all business scenarios, clear, timely and transparent communication is essential. This is especially true during the crisis, especially when you want to continue to receive long-term support from customers, employees, suppliers, investors, and regulators. Enterprises will also hope that through appropriate communication, customers will understand whether the crisis will have any impact on the delivery of products or services. Once the supplier or production is interrupted and the contractual obligations cannot be fulfilled, negotiations should be conducted immediately, because active communication and actions will help to mitigate punitive losses, perform responsibilities to the affected customers and damage the brand reputation.

3. Monitor expenditures and prepare for budget deficits

Determine how the crisis will affect the budget and business plan. Stress test the financial plans of multiple programs to understand the potential impact on financial performance and assess how long the impact will last. If the impact is large, and the current budget assumptions and business plan are no longer appropriate, please remain agile and modify. For businesses that are significantly affected, please consider reducing operational requirements, including dependence on labor, suppliers, location, and technology.

If necessary, please seek short-term financing from banks or investors, debt refinancing or other credit support programs, or support from government policies. At the same time, companies must also review overall operating costs and consider slowing or reducing all unnecessary expenses.

4. Identify and repair the interruption of the supply chain

The crisis of the new type of pneumonia has caused significant damage to the operations of most companies or caused poor business performance. In particular, some businesses that operate in countries or regions severely affected by the new type of pneumonia or are located in these countries and regions will have the opportunity to encounter supply chain and production disruptions.

When an enterprise encounters a supply chain interruption, it needs to maintain regular contact with suppliers to understand its ability to deliver goods and services, and to develop a repair plan.

Reshape the supply chain model, through the digital ecosystem and market network, and the use of new forms of collaboration to make the interrupted supply chain work again.

5. Prepare for accidents

Normally, corporate organizations are prepared for legal obstacles under normal circumstances. But the unforeseen crisis will still bring them unforeseen legal challenges. Companies will have to conduct contract risk assessments and determine preventive measures to deal with contract disputes between customers and suppliers due to economic impact or supply chain interruptions, and even prepare to invoke the “不 resistant 力 event” clause when necessary.

When communicating with stakeholders, please consult the legal team for suggestions regarding potential responsibilities, and should also consult the relevant business departments to understand how to manage communications regarding ongoing violations and evidence collection (if any).

Ten ways to help you eliminate the problem of crisis paralysis

The best way to deal with a crisis is to stay ahead. Enterprises need to maintain a healthy crisis management system and be prepared in advance, even if there will be no crisis in the end, they can ensure that they can take timely action when necessary.

You can ask yourself ten questions to assess the vitality and applicability of the current crisis management system:

1) When a crisis occurs, how will your company ensure the health of employees and the safety of production lines?

2) How do you ensure sustainable financing and stable cash reserves?

3) Are your communication systems and plans well coordinated and standardized to ensure that communication with all stakeholders can be kept clear and transparent?

4) Does your company have a crisis management team to manage the short-term liquidity impact and take appropriate countermeasures?

5) What model do you use to assess potential risks and determine countermeasures in the event of a crisis?

6) Have you considered the impact of the crisis on the financial budget and business planning process, and implemented an early warning mechanism?

7) When the crisis has a significant impact on finance, how do you adjust your business model to reduce short- and medium-term costs?

8) How will the disrupted demand affect your business and how to recover from the crisis?

9) Have you confirmed the supply chain and production risks caused by the crisis or how to mitigate the impact of these risks?

10) Is your business model resistant enough to resist risks and recover from crisis?

During the crisis, the top priority for businesses and governments is everyone's health. Enterprises can contribute by developing professional crisis management plans. A sound crisis management plan can not only help companies ensure the health of their employees, protect their resources, but also enhance the resistance to perform best when they encounter adverse factors.

Conclusion

In order for the enterprise to survive a crisis, the enterprise should formulate a professional crisis management plan, and the plan must fully cover the health of employees, brand reputation, financial management, supply chain, and legal issues triggered by the crisis.

Performance

New Coronavirus Pneumonia Crisis Management: Ten Questions Worth Thinking about

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