Measuring the Impact of Corona Virus on Global Business

Avoiding public places, check. Ensuring personal hygiene, check. Limiting public contact, check. Ensuring preventive measures by layering a mask, check.

These measures are no longer part of random health advisories of various governments but are increasingly becoming an everyday essential for people across the globe. With the outbreak of the Covid-19, corona virus disease is turning out to be much more than just a biological phenomenon or a human health hazard.

From the small business entities to some of the world’s biggest companies including the likes of Facebook, Google, Apple etc, the global outbreak of the dreaded virus is casting an ever widening shadow. With China facing the maximum impact upfront, the overall impact on global business is being measured keeping in mind the fallout of slowdown in Chinese manufacturing. Estimates published by United Nations Conference on Trade and Development (UNCTAD) reveal how the virus is disrupting world trade with a likelihood of $50 billion reduction in exports across global value chains. With United States and Europe relying heavily on China as a supplier, the impact may intensify as the situation develops over the next few months.

And the impact is not just limited to companies importing goods and services from China. MasterCard for example has had to cut down its growth forecast since people are limiting their international trips owing to the virus outbreak. The US S&P 500 index lost nearly 11.5% of its value propelled by fears of possible economic impact if corona virus were to spread across US in the weeks ahead. The Harvard Business Review has meanwhile predicted that the peak of the impact is most likely to occur mid-March leading to more susceptibility on possible negative impacts.

The Covid-19 situation and what businesses can do to minimize impact

With Covid-19 being an ever developing situation and amid talks of war time measures by China to retain any spreads, businesses are still better off having a contingency action plan in place to ensure minimal impact.

Setting up of cross-functional COVID-19 response teams

A Bain Macro Trends Group analysis of the global COVID-19 outbreak has suggested businesses must activate their first-level contingency procedures to face the challenge. Protecting employees from the emotional fallout of the likely impact of corona virus must be a definite head start for enterprises.  Business as usual policies must be changed to calibrate with contingency plan for employees.

Setting up a cross-functional COVID-19 response team reporting directly to CEOs is an able response measure. Employees’ health, financial stress-testing, supply-chain monitoring, managing marketing and sales responses to any demand shocks and able coordination and communication are the 5 core pillars around which such response teams should be implemented.

Ensuring optimum liquidity

Liquidity crunch has a direct correlation with emergency situations. An able measure for businesses is to ensure they have ample liquidity to weather any such Corona virus induced emergency. To begin with, enterprises should model their financials and identify any trigger points that may impair liquidity. A definite move to measure each such trigger point must then be undertaken to ensure optimum liquidity at all times.

Focus on stabilization of supply chains

Convid-19 is impacting supply chains as outsourcing of supply chains often means having global vendors. Companies are better off undertaking a holistic view to the extent and likely duration of their supply-chain exposure especially in areas where the outbreak is severe. With Chinese manufacturing units looking to resume operations soon, the focus on supply chain stabilization is a core imperative. If supply chain stabilization masks on the red, businesses must optimize their networks and initiate search for new suppliers concurrently.

Staying connected with the customers

Consumers are changing their purchase habits like shopping online instead of venturing out to stores. These times are best suited for companies to stay connected with their consumers ensuring a sense of confidence and underlining how they are in it together. The situation maybe challenging but by being there for the consumers can act as a worthy essential that can help businesses escalate their brand value even in these tough times.

Conclusion: As the Corona virus spreads, so is the uncertainty over its global business impact. With a contingency plan of action in place, businesses can limit any such negative impact as hopefully the virus gets under control in the months ahead.