The repercussions of Covid-19 pandemic have been multi-folds in all parts of the world and in all walks of life. Its severity was never envisaged earlier nor was there any forecast about what was in store for the entire corporate and social communities.
The sudden dwindling of markets, shrinkage of demand, depressed growth figures, liquidity crunches and bankruptcies, vanishing corporate net worth in billions and diminishing incomes, uncertainties of when the unlock be announced to overcome the deadlock on resources, numerous challenges and hardships the entire globe had to undergo, and possible lingering poverty – all these depressive events have culminated into a series of catastrophes for all of us. The lack of preparedness besides the absence of sure-shot vaccine as medical treatment have actually caused chaos, panic and tragic events.
In this hour of crises, the utmost important steps as possible viable and practical solutions to implement as remedies require a cool, focused and positive mind set to succeed. In fact, there are already few positive fall outs and bounce backs on sales, with consumer spending partially rebounding after the coronavirus had shut down businesses, flattened the economy and paralyzed growth during the previous three months.
Globally, never before employees worked remotely and got engaged round the clock which also had a stronger sense of well-being and togetherness as a team by virtual room meetings. However, those required on-site in non-remote jobs – had little flexibility do so, thereby were exposed to health risks.
The Covid-19 crisis, and the political, economic and social disruptions it has caused, is fundamentally and irreversibly changing the traditional context for decision-making by leaders. The inconsistencies, inadequacies and contradictions of multiple systems – from health and financial to energy and education – are more exposed than ever amidst a global context of concern for lives, livelihoods and the planet. Leaders find themselves at a historic crossroads, managing short-term pressures against long-term uncertainties.
But far from showing a strong resolve, the Covid-19 saga reveals the lack of a coherent strategy and full preparedness. The pandemic has been an ultimate leadership test for CEOs, CFOs and CTOs who were embracing thoughtful, far-sighted macro-policies as a recipe for success and well-being.
In this Article, we have discussed and proposed few winning recipes in this unprecedented crisis that required unique fiscal combination of economic-development and public-finance strategies.
We also shine a spotlight on immediate steps by Leaders to develop a credible short term measures and ensure longer-term financial sustainability of their business or nations.
Big Unlock of our economies - nobody wins unless everybody does
As the world continues to grapple with the effects of the pandemic, no part of society seems to be left unscathed. Fears are surmounting around the economy’s health, and dramatic changes in life as we know it are also underway. It is first and foremost a human tragedy that has played out across the globe and everyone is experiencing unprecedented levels of disruption in their work-places, homes and communities. If there is a silver lining in all of this, it’s that organizations and Leaders are stepping up in critical areas for the new normal – resetting growth plans beyond the crises – for long term horizon.
While those measures do not yet offset the tremendous uncertainty and anxiety that many continue to feel, they do point to a distinct sense of employee confidence and trust in their Leaders. Previously our economies were locked during this Covid-19 crisis and now we want to have an unlock strategy – which is a big challenge but we have to start.
It is estimated that by a leading Consultant from now to the end of 2023, the difference—in lost global GDP—between economic scenarios with only partial virus-spread control and those in “near-zero virus” situations will be as much as $15 trillion.
There are three main paths forward that Leaders around the world are exploring:
1. Balancing act: a staged reopening of economy and controlling virus spread within the capacity
2. Near-zero virus: opening the economy while imposing virus-control measures that stop short of a total lockdown
3. Transition act: implementing elements of near-zero-virus packages as soon as they are ready
Each path implies very different outcomes for the lives and livelihoods – based on any further spread of infections, the pace of economic recovery, and the speed at which it can help crush the uncertainty. This also requires ramp up of health infrastructure that is "supposed to" be done by now because, any more lockdowns will make the already difficult jumpstart exponentially more difficult.
From the Government and Banks, we expect some stimulus like developmental packages and measures this is a part of economic recovery such as :
1. Loan deferment period by six to twelve months
2. Relief and slashed interest rates for those industries who are heavily tied up in LIBOR
3. Reduce offices rent for small and medium businesses
4. Reduce Corporate Tax Rate for this financial year
As budget deficits mount, Governments and Corporates must consider a wide range of options. Some are, in effect, monetizing their debt through central banks. Others lean on additional borrowing or are considering ways to sell off assets. Whichever path is chosen; they have to face a great balancing act of managing record fiscal deficit levels while restoring economic growth. What the Stock Markets tell us about global economy, that the panic may have calmed and the economic pain deferred, but uncertainty still abounds and looms over the next few years.
Mitigating Risks – global and regional
Risk Registers and Financial Models are being relooked and revalidated as a deep drill down into micro level details. Insurers have had to follow this transformation and adapt their way of underwriting likelihood of major risks we face in the aftermath of the pandemic :
· Economic : consequent to prolonged global recession, trillions of dollars-worth packages and policies, can inadvertently burden countries with even more debt.
· Societal : inequality may worsen and the national social fabric & safety nets can be under pressure
· Geopolitical : global trade has drop sharply while foreign direct investment (FDI) is also projected to decline, beside the trade tensions between USA and China that continue to simmer. The drop in foreign aid could also put even more stress on existing humanitarian issues, such as food insecurity in conflict-ridden parts of the world. The main risk is on how to they would maintain their economic links and avoid a descent into anarchy, whereas the world needs a new trade architecture soon.
· Technological : increased dependence on digital tools has enabled remote working, however the technologies for developing a vaccine cure remains at large
· Environmental : there could be a severe bounce-back effect on the environment as economies reboot and sustainability may take a back seat causing alarming missed climate targets that could put the Earth further behind on action.
Legal Impacts
Industrial Workers are protesting and demanding their full-scale salaries for the working hours during the crisis period. The employers are unable to pay due to financial losses and in this situation workers have escalated for legal advice and justice.
For the ongoing projects, there is lack of cash flow today to invest and to take forward the projects to completion. In this situation if the owner wants to stop a project, then the legal problems do appear. We can’t stop the projects, so either we pay the penalty or delay or postpone the projects by waiting for the economy to improve than restart or continue the project.
Legal systems are under pressure for crisis advisory services and due to several frauds or even law and order situations due to protests, uneasy circumstance and discomforts due to unemployment and sudden loss of livelihoods.
The exploitation of crises by merchants due to weak government controls and delays or slow pace in purchasing medical protection supplies has created a black market where masks, gloves and face shields are sold at obscene, exorbitant and exaggerated prices in violation of the needs of people spurred by the spread of coronavirus. Even the increase in crimes due to utter poverty and hunger have created a new challenge for the legal system to handle such anti-social elements. Behavior-change scientists and psychologists also play an important role to bring back a stable state of mind and restore the much needed confidence back on track, as we move from fear to hope.
Innovative ways of conducting business while maintaining social distances
Prioritizing the innovation areas is the key to unlocking post-crisis growth potential. This is the best time to invest in Healthcare including personal protection equipment (PPE), ventilators or kidney dialysis, Remote Education system and Supply Chain Sectors.
Novel ideas are up in automobile manufacturing industry which includes subsidies for the purchase of cars to spur investment in the industry and workforce training. Restaurants are evolving new Business Models and menu novelty while maintaining social distances for customers by having mannequins between each two seats .
Some found in this situation a golden opportunity to work and earn a livelihood by making the personal protective items and medical masks at home and selling them to those in need. Sanitizing is necessity for the business premises giving ample opportunity for new start-ups in sanitizing services. During this crisis, the government and private sector have gone ahead fully for online services, online shopping offers and home delivery schemes. From thinking about the next normal to making it work, decision on what to stop, start, and accelerate are most vital, including humanitarian aid and generous assistance for those unfortunate ones living in crippled economies.
Oil and Gas Sector
The Oil and Gas sector too has been forced to operate at lower capacity, reduce annual Opex Budget and Capex for long term investments. The sector is reassessing and evaluating its priorities, curbing travelling costs, social events, redeploying skilled manpower, etc. Some of the business segments like aviation fuel and lubricants are undergoing structural changes.
OPEC’s transition to production cuts may have little impact on the market, since these do not directly translate into oil exports. Therefore, OPEC and non-OPEC should cooperate on supply side as well due to low demand of oil and regulate the drop in oil prices for global economic benefit.
Critical questions that are key to success in this heavily invested and highly competitive business are:
· How reliable are these complex facilities?
· How does capacity utilization compare with that of others?
· Are the Opex comparable to those of companies with similar facilities?
· Do these facilities produce competitive and sustainable margins ?
Remarkably, the Asian Development Bank expects Southeast Asia’s mix of energy-surplus and energy-deficient economies to continue to grow over the next two years. Its relatively upbeat forecast, published in April 2020 at the same time as the IMF’s report, largely assumes Covid-19 impact will peak in the second quarter, with a gradual return to normality in the second half of 2020.
Meanwhile, Saudi Arabia has announced a leading step into Hydrogen Transport Fuels, marking an important milestone to diversify its economy and reduce dependence on oil, as part of its reforms program. Interest in Hydrogen from an oil-focused economy illustrates how deeply it has gained importance, which is scheduled to come on stream by 2025.
Swiftly begin rebuilding Kuwait to achieve its “Vision 2035” is very essential and be ready to diversify, if oil prices collapse again. The Solar project has been stopped indefinitely which is a right move. However, Kuwait’s national economy has some imbalances, headed by the limited role of private sector in economic activity. There is greater importance now to reform the labor market, by rationalizing employment policy, addressing distortions in wage structures between public and private sectors and developing education and vocational training to provide real job opportunities for its talented national workforce.
Finally, it is evident that…. “When the winds of change blow, some people build walls and others build windmills”. At this juncture, since Covid-19 has opened new horizons and provided more opportunities to innovate and sustain, major decisions by Leaders that are firm and positive would make a vast difference and lasting impact in our future life.