Surviving a post-pandemic
downturn is not enough.
Businesses should be building
robust new models to ensure
Institutional investors attribute an average of
increased value in companies as a result of having a very positive ESG rating
Pre-COVID, more than
business leaders surveyed thought the crisis events with the biggest impact on turnover were major product defects and cyber attacks
of business leaders expected issues arising from bad debt to be a problem in 2020
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 predicts an aggregate cash flow deficit of around £140bn from Q2 2020 to Q1 2021 – a type of problem anticipated by only 7% of respondents to FTI’s January 2020 Resilience BarometerTM .
Operational risks present before the pandemic have been amplified. The Barometer revealed cyber-attacks and product defects as the biggest threats to turnover (each named by 11% of respondents). 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; they were already the most popular tools for this purpose before the pandemic, according to the Barometer, which found they were used by 50% of respondents. Now, cost pressures make technological solutions indispensable.
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.