Resilient organisations must be able to withstand disruption and shocks, both internally and in their external markets.
Before COVID-19, many businesses were already facing major structural challenges, many of which have now been amplified by the pandemic and have required businesses to make rapid changes to both their capital and operational structures.
of G20 companies are in distress as a result of the pandemic
G20 companies report that they have restricted investment since the start of the pandemic
of G20 companies believe supply chains have been permanently disrupted as a result of COVID-19
THE IMPACT OF COVID-19 ON BUSINESS
The pandemic has caused huge disruption to the financial planning of many organisations. Over 6 in 10 surveyed companies across the G20 agreed that the crisis has meant they are finding it hard to service all their debt requirements. 16.5% of G20 companies deem themselves to be ‘in distress’.
Though maintaining liquidity ensures the short-term continuity of the business, any longer-term survival is dependent on having a viable operating model. Over three-quarters of G20 companies believe their business models must fundamentally change as a result of the pandemic.
When faced with a crisis, the apparent operational and financial resilience of specific sectors largely hinges upon the nature of their business. In certain industries, remote working and general social distancing have had a comparatively mild impact on the specialised knowledge production activities with which they are associated. By contrast, the food and beverage and transport sectors are heavily affected by rules that limit the ability of people to congregate in social settings.
In responding to the pandemic, short-term financial survival has been the key priority for many businesses. As well as seeking to conserve cash and access fresh liquidity, many companies have quickly adjusted their business model to cope with the immediate step-change.
The crisis has also led to many businesses considering how they can improve their capital structures and generate new money – 29% of G20 companies have taken steps to restructure or refinance.
The pandemic has led to a tightening of controls and significant changes to the way that organisations monitor and plan their operations and finances. Over 50% of G20 companies are looking to update their crisis response plans as a result of the pandemic, and 91% stated that their organisation has a greater focus on planning for unknown risks than before.
Many organisations have embarked on a period of retrenchment. 1 in 4 G20 companies reported that they have restricted investment. Faced with a rapidly changing public health environment, and with many leadership teams reassessing the business strategy and operations of their organisations, M&A activity and investment have been widely reduced.
Organisations have had to build resilience rapidly to withstand the shockwaves caused by the pandemic, and 70% of G20 companies stated that they have already taken decisions that impact their business strategy and model that will be difficult to reverse. But businesses also need to think to their longer-term future. As 70% of respondents are already undertaking contingency planning in anticipation of a prolonged downside, businesses should fully assess their options and ensure they make ‘no regret’ decisions that will leave them more resilient and able to thrive in the long term.