Surviving a post-pandemic
downturn is not enough.
Businesses should be building
robust new models to ensure
of G20 firms believe their business models must fundamentally change as a result of the pandemic.
G20 companies are facing challenges servicing their debt requirements since the start of the pandemic
of businesses are undertaking contingency planning in anticipation of a prolonged downside as a result of COVID-19.
The scale of the impending financial crisis following COVID-19 is not yet known, but there are signs of a long winter to come. Estimates of unsustainable corporate debt in the UK alone exceed £100bn.The Bank of England predicted an aggregate cash flow deficit of around £140bn from Q2 2020 to Q1 2021.
Operational risks present before the pandemic have been amplified. Now COVID-19 has added complexities of its own to the picture. These include disturbances to the supply chain and general operational disruption stemming from social distancing and hygiene measures – not least the move to mass working from home.
Most businesses’ focus is currently on protecting short-term viability, but equal attention should go towards building long-term strength by adapting the operating model for this new business environment.
Balance sheet resilience can be increased via operational and financial restructuring – the latter entailing a combination of refinancing, de-leveraging through disposal of non-core assets and tighter cash flow management.
AI and analytics are vital aids to risk mitigation; three in every four G20 firms now use these to monitor risk scenarios compared with two in four pre-pandemic.
To compete in a transformed ecosystem, businesses must challenge old assumptions around financial and operational best practice. Those that do will emerge leaner, smarter and with renewed purpose.