With the official world-wide death toll having passed the grim milestone of one million, COVID-19 has cemented itself as one of the great tragedies of the globalised world.

Established western economies are now contending with second waves of infections. Even for those who have not been affected by the virus itself, the public health measures taken to curtail infection rates have upended normal life for billions of people. As the human cost of the pandemic steadily mounts, so too does the economic cost. Adaptation has been of paramount importance, manifesting in everything from queues outside supermarkets to mass remote-working.

No business was prepared for so many risk scenarios being realised at once. However, even within sectors, some businesses were more prepared to face these risks. Such resilience was achieved through building agility and embracing innovation (even after the crisis hit and damage control was prioritised). Yet it cannot be denied that many industries were inherently more exposed to the pandemic: stories of mass redundancies, bailouts and bankruptcies have become almost commonplace in sectors such as aviation, tourism, and brick-and-mortar retail. Size has been no guarantee of security – over 200% more large US companies went declared bankruptcy in July and August compared to the same period last year.

Behind the job-losses and business closures looms mounting levels of debt. Whether it comes from government-backed loans or the open market, many businesses are increasingly desperate to find sources of liquidity to shore up dwindling cash-flows. Estimates indicate that global corporate debt will increase by $1tn in 2020, a jump of 12% on the total pile. The terms of these bonds are also becoming increasingly steep: some airlines have been forced to secure debt against their own planes.

The steep terms are symptomatic of the underlying uncertainty in the market. The crisis is still ongoing with no realistic end-point in sight, so there is no guarantee that companies will be able to rebuild their financial resilience for quite some time. Too many questions remain unanswered for investor confidence to return. When will a vaccine be ready? How severe will future waves of infection be in the meantime? What measures will governments take?

Of greater long-term concern is the aftermath of the pandemic. Crises not only cause short-term damage, but challenge established assumptions and norms. The ubiquity of the office-job is most obvious at present, but it remains unclear what other facets of the old normal will be supplanted by something new. As these new norms emerge, so too will new enterprises – along with others becoming obsolete. No-one could have imagined seven months ago that something like the city-centre coffee chain would ever be considered an unviable business model. Whatever new normal the pandemic creates, resilient businesses will be the ones best placed to seize the opportunities it presents.

Caroline Das-Monfrais
Global Resilience Lead