Now that COVID-19 has ‘officially’ arrived in India, the question right on top of everyone’s mind is -
How long is this going to last?
This is a very important question, especially for businesses to plan their expenditures in such uncertain times. The only way you can even try to guess this is by listening to what the administrators have gone through in China, or what they have implemented in Singapore or how they are preparing for a new normal in South Korea.
With major cities under a lock down, most media is talking about the COVID-19 virus being brought under control by the month of April 2020, and business being impacted for the April-June quarter; it seems like a super optimistic scenario. The BEST estimates for businesses to go back to normal appears to be atleast 12 months. That is also assuming that the pandemic it is brought under control, and quickly.
This is because even after the pandemic is brought under control, there will be spurts of re-occurrence that will required to be dealt with. And each such re-occurrence will be a mini speed breaker in the flow of regular trade and business.
What should a Business Owner do?
This means that as a business, you should start preparing for the long haul. Things are not going to be back to normal very soon. You need to plan your business activities and your cash flow spends assuming a 12 month period before which things get back to normal. If we get lucky and things get better faster, you can always ramp up your expenditures.
But you need to plan today and be prepared for a prolonged stagnation in your business affecting you for the next 12 months. As a business you need to talk to your clients and understand how this has impacted them and its subsequent impact on your revenues. This will help you arrive at your expected cash inflows for the coming months.
All your expenditures should to be broken up into essential and discretionary spends. You should make a forecast of whether your business can sustain through this period with lower profitability or you will need to seek external funds to stay afloat. Once you have an answer to this question, you can then plan your discretionary spends for the year.
Once this plan is in place, it will be a good idea to reach out to all your stakeholders, especially your employees/suppliers and let them know as to what they should expect in the coming 12 months.
This may actually be an opportunity for you to evaluate running your business with your employees working from home (WFH) as a sustainable mode of operation resulting in you saving a lot of costs related to real estate, internet etc.
Will this result in a permanent shutting of borders by countries?
Vivian Balakrishnan, Ministry of Foreign Affairs, Singapore had a very valid argument here. Trade is the bloodline for any nation and is required to be able to fund an effective health care system to fight such pandemics and global trade will resume eventually.
But, just like the 9/11 attacks brought into existence the elaborate security measures at airports globally, we should be prepared for more such checks and counter checks as trade between countries resumes at some point in time.
The pandemic caused by COVID-19 is not going to be an event that comes and goes. It’s going to take quite some time before which it is completely out of the way (with the development and administering of a vaccine).
Before that it is going to have a severe economic impact in the immediate 12 months leaving businesses to manage severe dents in their cash flows. Planning well today will help you manage this better. And as things limp back to a normal, newer stringent checks and controls are going to be the new norm with us having to give up a small part of our privacy to get us ready to fight the next pandemic.