Covid-19: The New Normal After Coronavirus Epidemic Lockdown

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As I sit to write this opinion piece, I am faced with a dilemma about whether I am qualified to write this. The Covid 19 pandemic has resulted in an economic scenario which neither me nor anybody I know has ever experienced. The sheer magnitude of the pandemic and the havoc it has wrecked on economies globally is unprecedented. Never has the world gone in a total shut down mode not even during the great wars.

However, great disturbances bring great disruptions and great disruptions bring great opportunities and new ways of attaining goals. Businesses all over the world have suffered immensely and the small and medium enterprises are the hardest hit. Many businesses will not survive and those that do will have a long journey to recovery. There are some precedents that we can fall back on, which though not of the same magnitude, do still give indications on the markers we need to sight on the long path to recovery.

Being in the consulting business and dealing in all three key verticals of Marketing, Technology and Finance, Orion Consulting has access to a host of clients across sectors from where we get great learnings of how to proceed on this journey ahead. I list down a few suggestions that might be of help.

  1. Short term and long term strategies

It is important to think afresh and anew. This is not a blip where a mere strategy reset will do the trick. It will be a long road to recovery and we must have a short term strategy for survival and a long term strategy to rebuild and do business differently. Depending on how long the shut down continues, the short term strategy needs to focus on survival first. In this, the most important is to retain the core team and retain cash in the business by aggressively cutting costs and deferring cash outflows wherever possible. Even in this sphere a zero based budgeting will help. We should not just look to make incremental adjustment but look at our business from a bottom up approach to crunch costs and retain expenses which are essential. Even big businesses will need to think like start ups in terms of retaining cash and cutting costs.

In terms of long term strategy, this shock has taught us not to take anything for granted. So all status quo needs to be challenged. The first pointer would be to focus on core business and look at vertical dimensions to expand. Retail needs to think of booking sales online and home deliveries like ecommerce sector, Real Estate and auto sector need to integrate with enterprises providing home loans and auto loans and banks would need to merge and consolidate instead of opening more branches randomly.

  1. Physical to digital

All business processes which can be converted from physical to digital should be looked into and implemented. From order processing to internal communication, from supply chain to client servicing all processes should be looked into and digitized. This was already a trend but this crisis has made this imperative. 

  1. Fixed cost to variable cost

We must relook at our businesses afresh and change fixed cost structures to variable cost structures wherever possible. Staff compensation will have to be relooked at in a completely new light and performance bonuses based on individual and company performance will need to be a large chunk as compared to fixed pay. Similarly, vendor contracts, professional services and non core activities like accounting, HR and administration can be moved to outsourced models which would make them more variable costs rather than their current fixed nature. Just in time production based on order books needs to be a more broad based practice rather than be a buzz word for a select few industries.

  1. Technology, technology, technology

This crisis will lead to a huge acceleration in technology development in all spheres of business. Just like war time gives rise to new technology, this pandemic will give a fillip to the pace of technology change and we must be not only prepared to adopt and change but to be the harbinger of this change. This is our chance as a developing nation to catch up on missed opportunities in the past. We have already seen the rapid rise of communication platforms like Zoom and the OTT platforms in the entertainment space. These changes would have taken several years in normal times, but during this crisis it took mere months.

  1. Relationships

It is important to nurture and preserve all relationships during this long journey to a new normal. If we can travel together during this tough times, we will emerge stronger and closer to each other. Employees, Customers, Vendors, Bankers…….all need to be taken together. Any hard decisions that need to be taken needs to be communicated clearly with the reasons. In my experience, if the communication is clear and the parting is handled with respect and dignity, the relationship survives and can be renewed.

  1. Redundancies

We must build redundancies wherever possible. The current crisis has shown that manufacturing organizations which didn’t have redundancies in terms of supply chain were the hardest hit. Just like the early 90’’s taught us to have offsite data storage and mirror servers to keep our IT system operational during contingencies, We need to build redundancies in our business processes to make them flexible to challenges. Having local vendors as a standby instead of one centralized vendor pool is a great example that some companies are adopting. This might increase procurement cost but will give chance for businesses to be operational during crisis.

  1. Cash and Capital

We must look to limit and reduce leverage in capital structuring wherever possible. Leverage and debt are great options in an expansionary economy but the same structuring hits hard in times of long term contraction. Cash is king and needs to be preserved till there is more clarity on the duration of this crisis.

  1. Government policies

Government policies and support are critical to aid SME sector in these times. Despite some nominal relief given to businesses like moratorium on loan installments and some extension of procedural deadlines like return filings, very little has been done to provide tangible support to SME’s. Infact the moratorium on filing cases under Insolvency law and extension of limit to Rupees 1 crore of debt for filing cases under bankruptcy law is a huge setback to SME’s who can’t rely on the civil court procedural delays to recover their outstanding overdue receivables. The SME Samadhan and SME redressal forums are highly ineffective and nonfunctional. In one such case, we were asked to go to the defaulting debtors office and plead for recovery by the concerned officials. The commercial jurisprudence needs to effectively redress the collection scenario for SME’s.

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Hard times don’t last, hard people do. We are faced with an unprecedented scenario and we need both caution to weather the storm and intuition and innovation to grab the opportunities that this presents. We need to be judicious and decisive in our journey forward for one thing is certain in these uncertain times………………………………………..we will be operating in The New Normal.

Article By 

Manajit Ghoshal

Founder & MD, Orion Consulting

The author has 30 years of Industry and entrepreneurship experience and has been on the Board of multiple companies. Manajit Ghoshal is a Chartered Accountant, Cost Accountant, Company Secretary, MBA (Marketing), B.Com.

Author can be contacted on www.orionconsulting.co and www.manajitghoshal.com

1 COMMENT

  1. I think it will take quite a long time until the lockdown will come to an end. I speak to many people in COVID-19 chat in Utopia p2p and the situation in the world is not so good. As many countries try to prove they’ve fight the virus. But they didn’t.

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