BC Business
During the COVID-19 crisis, you can take steps to manage the financial and other risks to your business—and even seize new opportunities.
As everyone keeps saying, there’s no playbook for the COVID-19 crisis. But you can take steps to manage the financial and other risks to your business—and even seize new opportunities. For some advice, we turned to two partners with PwC Canada‘s deals practice: Vancouver-based Michelle Grant, who specializes in corporate advisory and restructuring; and Edward Matley, a Squamish-based specialist in business continuity, including crisis management.
Make your risk management plan as broad as possible
If you have an enterprise risk management (ERM) program, many of its principles will still apply, Matley says. For smaller organizations that haven’t given much thought to risk management, he recommends a broad approach. “It doesn’t have to be a boil-the-ocean-type initiative,” Matley explains. “You want to make sure you’ve got a broad range of stakeholders at the table.”
It’s one thing to focus on the operational aspects of risk management—taking care of your people, trying to get them to work from home and so on. But companies must also consider everything from their supply chain to financial, regulatory and political risks, Matley says. Creating a strong risk plan means getting everyone out of their siloes: “The more people and the more perspectives, the more comprehensive a response you can craft as an organization.”
It’s also crucial to square risk management decisions with the organization’s values and culture. “There’s a lot of knee-jerk reaction—people are trying take action, and they want to move quickly,” Matley says. “But we want to make sure that clients are thinking about some of those decisions and how they more closely align with what they’ve decided as their corporate goals.”
Follow these three steps to put your plan into action
When it comes to enacting a risk management plan, there are three stages, Matley says:
1) Mobilize. “That’s where most organizations are at the moment. It’s around making the changes, identifying what needs to happen, activating plans, moving people, getting things in place. Hopefully most organizations are moving through that quite rapidly.”
2) Stabilize. “How do [organizations] stabilize in a new normal position?” Matley asks. “We don’t know how long this is going to last. We’re definitely hearing messaging around weeks, months, so there needs to be a new normal.”
In response, companies must stay nimble, Matley says. Your organization should identify what he calls “one source of the truth”—a person who acts as the liaison for understanding what’s happening externally, gathers information internally and communicates a consistent message.
At the same time, pull your senior management team together often so the business can pivot where needed. “It’s not like a set-and-forget risk management plan at all,” Matley warns. “The organizations that are most resilient and most likely to succeed or even thrive through a disruption like this are those ones that can be agile.”
3) Strategize. “This is around thinking about yes, once we’ve got through the key pain points, are there any strategic opportunities that are available for us?” Matley says. Although it’s tempting to put all hands on deck for response capability, task someone in the organization with taking a step back to weigh those potential opportunities.
Crisis can present opportunity—but don’t rush
“For a company with a strong balance sheet, there will be significant opportunities to either acquire or invest in companies that are clearly not in the same position,” says Grant, who notes that PwC published a CEO survey on succeeding in uncertainty before the crisis erupted. “We would advise clients to take the time to think about targets, consider whether this is a good opportunity to diversify a product offering, expand into a new market, vertically integrate or just pivot into a new industry.”
Grant’s other advice: “You need to make sure that you come out of this in a stronger position, so you’re going to make those decisions while thinking about return on investment, whether those things would have made sense before the crisis. So you don’t just look at it in a vacuum.”
Companies can also seek ways to improve discipline within certain processes, Matley says. A few examples: working from home, robotics automation and artificial intelligence. “Can you leverage those moving forward?” Matley asks. “Are there ways of working that you can adopt and that you’ve identified, or that this would present an opportunity to accelerate?”
Remember that cash is king
“Companies have to focus on both the cash coming in the door and also the cash going out,” Grant stresses. “It’s important not to forget both sides of the ledger.”
Besides limiting non-essential spending and releasing cash trapped in working capital assets—accounts receivable, inventory and accounts payable—don’t forget about prepaid deposits, Grant says. “On the revenue side, companies want to be thinking about mitigating risks around key customers. So that means staying in touch, making sure a company understands any delays that might be coming so they can manage their expenses accordingly.”
Find ways to turn your inventory faster. “There’s all sorts of options, but inventory sitting there is not valuable in a situation where you really need to monetize your assets,” Grant says.
When it comes to cash going out the door, focus on your key suppliers, she advises. “How are they being impacted? Will they be able to supply, and if not, what are your alternatives? Because if you have issues in your supply chain and you can’t produce your product or service, you won’t have any cash coming in the door.”
Talk to your bank
If you’ve determined that you need extra support from your lending partner, Grant recommends reaching out to the customer relationship manager and having an ongoing dialogue with them. But be ready for those discussions, she says. The bank will want to know that you’ve made a proper risk assessment, thought through the support you need and done the financial analysis to back up your request.
In situation like the COVID-19 crisis, your forecasting must be dynamic because the situation is changing so rapidly, Grant says. “And lenders understand that. They’ve established these relationships over a period of time, and in times like this, lenders obviously want to support their clients. So it’s about being honest and forthright in those discussions and being prepared.”
Communicate authentically and widely
During this unpredictable and stressful time, how should you communicate with employees, customers and other stakeholders? “Part of it is making sure you’ve got authentic leadership, that the messages you’re giving out are consistent and aligned with your values,” Matley says. “We’re seeing that there’s no such thing as too much communication with employees.” Ensure that your messaging is strong and genuine—and that it comes from the right people.
Companies should also think broadly about their stakeholders, from banks and vendors to regulators and investors. Matley suggests “taking some time to step back and have a strategy around identifying who those stakeholders are and thinking about the kind of information that’s going to be important to them, identifying who should be in contact with them, how they would be in contact with them and that they’ve got the right contact information.”
Whoever the stakeholders are, decide how frequent your messages to them will be by creating a matrix, Matley suggests. “That gives the organization a broader perspective on making sure that the communication is good and strong.”