Surviving a post-pandemic
downturn is not enough.
Businesses should be building
robust new models to ensure
long-term resilience.
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
Pre-COVID, only
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.
Perspectives
