Covid-19: Impact on your Business

The outbreak of coronavirus is a human tragedy, which not only poses a threat to the lives of tens of thousands of people, but also has a growing impact on the global economy. The purpose of this article is to discuss the impact of this evolving epidemic on companies.

During the week of 24 February 2020, covid-19 passed an inflection point. As of February 29, the number of cases outside China exceeded that inside China for the first time, with 54 countries reporting cases. The outbreak is most concentrated in four transmission centers – China (centered in Hubei province, east Asia (centered in South Korea and Japan), the Middle East (centered in Iran) and Western Europe (centered in Italy). Overall, the most affected countries account for nearly 40 % of the global economy.

While the situation in China has been stabilized by extraordinary public health measures, new cases are also on the rise elsewhere (including in Latin America (Brazil), the United States (California, Oregon and Washington) and Africa (Algeria and Nigeria).

In the face of this, heavy consumer confidence will be eroded, especially travel restrictions and mass gatherings will be further weakened. China is likely to recover first, but we expect the global economy to slow.

The Economic Impact

There are 3 scenarios that might happen.
The continued spread within areas, as well as community transmission in new areas, drives a reduction in global GDP growth of 0.3 – 0.7% in 2020. At this point, China continues to recover and the economy restarts by the middle of the second quarter. The continued rise of cases in other areas will lead to a rapid reduction in demand. As for the recovery in demand, it will depend on a slowdown in the growth of the epidemic.

For now, the most likely cause is “seasonality”, similar to how warmer weather reduces the spread of flu in the northern hemisphere. Areas that have not seen rapid increases in cases are increasingly likely to see more sustained community transmission, such as the Americas, where each western emergency cluster has expanded.

There is no doubt that industries will be affected to varying degrees, such as airlines, tourism, and hotels, which will lose a lot of demand. It is hard to recover from the shock of reduced demand.

And the worst case scenario, assuming that the virus is not highly seasonal, the economic outlook through 2020 will face major challenges, even a global recession. In addition to facing the challenge of reduced consumer demand, it is more important to deal with the challenge of supply chain.

Where the business should focus

There are five actions that can help your business during the outbreak.

1. Maintain close relationships with clients. Companies need to invest in their core customers and anticipate their behavior. For example, despite the decrease in consumer demand, the number of customers in China has not decreased, and most people are turning to online shopping. 
2. Maintain a healthy cash flow at your business. The enterprise needs to define solution examples that are appropriate for the corporate environment. For key variables that affect revenue and cost, input numbers can be defined by analysis and expert input. Companies should model their finances, identify factors that reduce liquidity, and organize stabilization initiatives, such as prioritized accounts payable and accounts receivable, or cost reduction, divestment, etc. 
3. Protect your employees. Faced with the danger of COVID-19, it is emotionally challenging. Business as usual is not a good option for the company. Leaders should start developing and executing plans, and need to communicate with employees at the right level and frequency. 
4. Stabilize the supply chain. The company defines the extent and duration of its supply chain exposure to areas and inventory levels that have undergone transmission. Ensuring the resilience of the supply chain is an important response to the current virus crisis. 
5. Demonstrate the purpose. Businesses need to figure out how to support response efforts, for example, by providing funding, equipment, or expertise.

In short, we still don’t know what the outcome of the coronavirus crisis will be. However, human health and life, as well as the development of enterprises are under great threat and challenge. At the moment, companies must take steps to protect employees, ensure healthy cash flow, stabilize supply chains, stay close to your customers, and demonstrate purpose.