Since the business climate is unsettled and constantly shifting, due to global factors including but not limited to the COVID-19 pandemic, it's natural for directors to wonder whether their companies' strategies are keeping pace.
BDO Partners, Mark Cushing and Danny Olsen, delved into four topics relevant to these turbulent times in a recent webinar for the Australian Institute of Company Directors (AICD), namely the ongoing impact to companies of the novel coronavirus, the nature of agility in strategic planning, the challenges experienced by businesses today and some practical ideas that will help you overcome similar challenges in your own work.
1. What ongoing impact is the COVID-19 pandemic having on companies?
From federal decisions such as the Australian Taxation Office's expansion of tax write-off eligibility to states' cuts to payroll taxes, there have been numerous impactful moves by government departments to keep companies strong and maintain the connection between companies and employees.
While panic and anxiety were included in companies' first reactions to the crisis, directors pulled together quickly to change the way they envision their operations, helping their organisations survive. Going forward, directors will have to consider the immediate effects of any potential outbreaks in their areas, as well as the expansion of cases worldwide and operating in a new reality.
The long-term impact of the pandemic will differ heavily by industry. Some such as essential services and product providers have actually benefited financially, while others such as health care, landlords and essential services are expected to bounce back in time.
A third category of companies may experience longer-term impacts. This encompasses retail, education, entertainment, oil and gas, hospitality, transportation and tourism. Not-for-profits (NFPs) have also been affected with remote communities suffering as NFP organisations struggle to retain staff and momentum, though the boards that we work with are planning ahead and preparing to come back stronger. The culture and arts have also been severely impacted with many in this sector losing their funding and struggling to be able to hold events.
2. What does strategic planning mean now?
Companies returning to a higher level of operations have to consider their options, strategically. What practices from the pandemic era should they retain, and which were merely temporary survival measures? Thinking this process through can take the form of a roadmap and should consider:
- Sustainability: Businesses have to think about the essential parts of their operations, so they can retain and prioritise those.
- People: Companies must have contingency plans in case a single, important staff member is forced to take extended sick leave. They also need to consider their training approaches and mental health offerings.
- Health and safety: As businesses return to work, they must keep track of new government safety mandates and implement processes that will support their workers, whether remote or on-site.
- Technology: The greater use of remote work opens up new IT requirements, from facilitating collaboration to securing intellectual property and preventing cyberattacks.
- Supply chain: With new considerations such as gradual border openings and trade bubbles, it is time to rethink logistics.
Businesses need strategic planning to set their directions, prioritise their ambitions, align workers with goals, simplify decision-making and communicate their way forward. With a strategic framework in place, companies can achieve a modern definition of agility, meaning they are ready to be flexible and adaptive in the face of challenges that until recently were unimaginable.
3. What challenges are companies encountering today?
The exact nature of difficulties which companies are facing differs based on their location, as well as whether they serve a regional or national clientele. The challenges seen among BDO client firms break down into eight general categories:
- Crisis management: Companies need to continue to maintain crisis management plans and ensure that their Business Continuity Planning considers multiple scenarios.
- Workforce: Companies now need to consider not only the potential impact on their workforce if forced into lockdown but also productivity issues associated with a workforce that is demanding flexibility.
- Cashflow and capital: The government's response to the pandemic has focused on difficulties with cashflow. M&A activity has stayed strong as buyers have sought companies needing protection and stability.
- Demand-side issues: Forecasting revenue has been very difficult throughout the year and this has forced severe and material changes to policies and processes companies use in managing their businesses, particularly in their supply chain. Companies now need to consider whether it is time to once again revisit these policies.
- Operations: Businesses are dealing with new safety mandates, adding layers to their operational planning.
- Supply chain: The supply chain has become newly complex, especially when dealing with international raw materials matters, as rules differ between countries. Companies will now need to again review their policies, processes and contracts to see what needs to be changed and embedded to secure supply as demand begins to return or increase.
- Collection and credit risk: New temporary regulations made debt collection difficult - in some cases, this led companies to drop high-risk customers outright. Companies will now need to consider whether it is time to loosen some of these policies.
- Regulatory and legal: Organisations are dealing with rapidly evolving legal pictures through new measures introduced throughout the crisis. This has seen some significant changes to board structures. One notable change has been the addition of the chief medical officer in some cases.
4. What are some of the tools, methods and practical examples that can aid your organisation?
Once they have identified the most vexing issues they're facing, companies need actionable ways to react and respond. Having a flexible and agile strategy is sometimes misunderstood as being a strategy that constantly changes. It is imperative that the mental models used in guiding companies are focused.
Some management theory from earlier years is still relevant and effective in directing companies today, such as the management principles of the Theory of Constraints, whereas others such as ‘Just-In-Time’ have struggled or failed during the pandemic. The key question that now needs to be considered is what models, processes and principals will best serve companies as the world moves forward and out of the crisis.
The evolution of continuity planning
Other examples of companies surviving the pandemic in their own way include a water utility that developed a real-time continuity plan that would keep a supply of fresh water flowing, and an agribusiness organisation forced to build agility to cope with new regulations and economic stimulus opportunities alike. Some or all of these strategies may prove pivotal to your own business's continued strength amid difficult circumstances.
If you would like to learn more about how your organisation can pivot and take an agile approach in the evolving business landscape, please contact your local BDO Adviser.