In America, the business landscape and the lives of Americans are changing by the minute. These landscape changes have a significant impact on American businesses and require critical considerations and decisive actions from business leaders. The impact of the coronavirus outbreak was devastating to both Main Street and Wall Street. These impacts will likely continue for some time into the future. In reaction to these lasting impacts, Congress and the Federal Reserve have taken significant actions to stabilize the markets.
Business Impact and Risks
Businesses should evaluate the impact on their business, and related business risks, from coronavirus outbreak, including:
- Changes in demand for products or services
- Changes in the availability of goods and services from your suppliers
- Business interruption from government restrictions
- Management of workforce and legislative changes
- Cash flow and business liquidity
- Access to new SBA loans, Federal Reserve loans, and other government initiatives
- Potential significant needed business changes (i.e., Closure or relocation of operations)
- Price volatility in markets (e.g., stocks, commodities, foreign currency)
- Protecting against coronavirus-related fraud and cyberattacks
Business Critical Considerations and Decisive Actions
Many organizations have had to suspend parts of their operations because of the health protection measures enacted by state and federal governments as well as the changes in demand for products or services due to changes in customer patterns. There are operational considerations and actions necessary in these changing times.
First – Protect your employees and their families
It’s important that you communicate regularly with your staff, both through email and in-person. Share the latest CDC information about the virus as well as your company’s updated operating procedures. Be sure to update employees on government initiatives that may be helpful to them and always be direct and clear. By keeping employees informed will help reduce stress and panic.
Second – Protect your business
The following can be used as a checklist for critical business considerations and decisive actions:
Form a small multi-disciplined working group to evaluate your business risks and the potential impact. Develop a comprehensive listing of business risks. See the listing above for the types of considerations. Use this listing to guide the organization’s next steps in gathering more information, analyzing the situation, and creating an action plan.
- You may want to consider involving trusted external advisors in the work of the small group.
Contact your top accounts and customers. Use it as an opportunity to let your key customers know that you’re thinking of them and you’re there to help. Gather information on their overall status in the aftermath of the crisis.
- Understand their anticipated future purchases and their liquidity position. Use the initial contact to open the door to future communication and stay in touch regularly.
- Contact your key suppliers and vendors. Understand whether there are any expected interruptions in deliveries and shipping. Depending on the sensitivity of the supplier to your business, consider daily communication on product flow & delivery schedules. Check for alternative sources of materials in the event of supply chain interruption. Monitor shipping methods and delivery routes to make sure shipments aren’t affected.
Keep communicating with your stakeholders (employees, customers, vendors, investors, lenders, etc.). Each stakeholder is important, and each has different things that are important to them. Be sure to keep each other informed and identify ways that you can work together.
- If there are issues, be direct and look for a solution. You are likely to want those relationships to be positive in the long term.
- Evaluate your key contracts. What are your obligations and your rights? Will coronavirus allow a contracting party to pull out of its obligations on an existing contract? The exact wording of contracts are important, which means that you may want to consult with your legal and professional advisors on anything sensitive.
Evaluate and protect your liquidity. Prepare a cash flow projection based on available information. Understand your availability of cash through your line-of-credit agreements and other sources of liquidity.
- Continue to update your cash flow projection regularly. If there are signs of tight liquidity, evaluate sources of cash flow through investment and lending sources, business interruption insurance, and government loans and grants. You may want to consult with your professional advisors for assistance.
- Evaluate your insurance policies. Have a close look at your business insurance policy to see if you have any business interruption coverage and precisely check those terms. You may be eligible for business interruption and loss recovery. You may want to consult your insurance agent and involve your professional advisors.
Understand the new government initiatives and stimulus packages, and how you can take advantage of them. There are new governmental rules on paid sick leave and family medical leave, and there are related tax credits for eligible employers. New SBA and Federal Reserve loans are now available to small-and-middle sized businesses and there are even opportunities for economic stabilization grants from FEMA and other agencies.
- Consult with a professional advisor on these matters in the event that you are unsure how this pandemic will affect you and your business’ tax situation.
- Understand the necessary updates to your accounting matters and your financial reporting. In these changing times, fresh consideration is essential for accounting matters such as asset impairments, credit losses, inventory issues, investment portfolios, and revenue recognition. There may also be updates necessary for financial reporting for subsequent events, use of estimates, concentrations, debt covenant violations, discontinued operations, and assets held for sale.
- Evaluate your investment strategy and employee benefit plan changes. There have been drastic changes on Wall Street, which means that there are new considerations for investment portfolios and your employee benefit plans. Consult with an investment advisor or an employee benefit plan consultant for help within your organization.
- Consider other risks and action and continue to update your business plans and processes. If there is a total shut-down, what will happen? Be mindful that fraud increases in times of crisis, so consider your organization’s cybersecurity practices and other potential risks. Be sure that you are staying alert and taking decisive action when necessary.
With change comes business risk, but when there is a thoughtful plan, there is an opportunity to mitigate risk and create opportunities. If you are unsure of next steps for your business, reach out to your CRI advisor for more information.