The long-term consequences of COVID-19 are still uncertain, but one thing is clear: This crisis will profoundly influence how business will be done in the future. Once the short-term survival of their firms has been secured, leaders are well-advised to consider the potential impacts of this crisis on their strategy.

Up to now, Swiss executives have been busy managing the emergency. COVID-19 has resulted in many macroeconomic worst-case scenarios unfolding simultaneously.

As an export-oriented country dependent on international trade, Switzerland has been hit hard. As figure 1 shows, the initial downturn on the Swiss Market Index (SMI) was more severe than at the beginning of the financial crisis 2008/09, signalling significant economic problems ahead. Since then, the financial markets have made up for much of the decline (standing at "only" minus 8% as of 8 May), but most observers see this as a case-in-point for the disconnect between the financial markets and the real economy. While the exact speed and shape of recovery of the real economy are still being debated among economists, most experts believe that there will be a prolonged and severe downturn.

On a microeconomic level, many Swiss firms are therefore facing unprecedented challenges amidst uncertainty. Over the past two months, Swiss executives had their work cut out for them by:
 

• Managing liquidity: Demonstrating the impact of the crisis on cash flows, reduction of cash outflows by reducing dividend payments, postponing investment projects and extending access to credit facilities, from both private lenders and government-backed support schemes. The government-backed COVID-19 credits were in high demand. By May 11th, 123,564 credit agreements had been received, for an estimated total of CHF14.8bn^[1].
  
  
• Reducing fixed costs: As revenues contracted, many firms had to reduce the staff on their payroll to secure survival. The number of unemployed workers increased from 2.5% in February to 3.3% in April^[2]. In addition, by April, SECO had received applications for short-time working from more than 187’000 companies for a total of 1.9m Swiss employees^[3]. This is 21 times the previous record at the height of the financial crisis 2008/09 in May 2009 (see figure 2)^[4].
  
  
• Re-engineering core processes: For firms lucky enough to continue operations, many had to re-engineer their operations within days – be it by equipping office-based personnel for home office, reorganizing production lines to allow for physical distancing rules or designing new shopping operations at large retailers such as Migros and Coop.

However, we expect this crisis to have a significant impact on how business will be done post-COVID in many industries. And some of these forces may well make leaders reconsider parts of their current strategy. For example:
 

• De-globalization of supply chains: COVID-19 has made visible the vulnerability of today’s global supply chains. Companies and governments alike have been reminded of the value of 2nd and 3rd production sources. It is likely that in some industries, future regulations will require increased domestic production or re-introduce export restrictions. Reliability will gain importance relative to price.
  
  
• Subdued mid-term demand: In some industries, it appears likely that demand will not recover to a pre-COVID level in the mid-term. Aviation is a striking example: major European carriers such as Air France-KLM or Lufthansa have cut capacity by over 90% for the coming months^{[5, 6]} and Airbus^[7] has cut production by a third, both indicators that these players do not expect demand to recover anytime soon. This decline in air traffic, in turn, has also affected many adjacent industry branches like airport ground-handling services, duty-free retail, aircraft catering, aircraft component suppliers, etc. While aviation is one such example, similar impacts could occur in physical retail (as shoppers get used to e-commerce) or tourism (holidaymakers will increasingly spend their holidays where they can go by car or train).
  
  
• Acceleration of digital transformation: These days, a joke has been circulating on social media. It goes: "Who pushed your digital strategy the most? The CEO, the CFO, or COVID-19?" There is a grain of truth to the joke. Or, as Satya Nadella, CEO of Microsoft, put it in the Q3/FY20 Earning Release end of April: "We’ve seen two years’ worth of digital transformation in two months". Lockdowns across the world have forced consumers to adopt e-commerce and digital payment means. Firms had to enable their employees to work remotely from home. Universities had to move their classes online. Private households switched to fresh food delivery services to avoid narrow supermarket aisles. As a result, the trend towards digital formats – and the decline of traditional formats (e.g. physical retailing, in-person classes, office presence) – are likely to be accentuated by this crisis.

The complexity does not result solely from the effects of such a crisis on the business world. It is the correlation between various macro factors, such as economics, politics, society, ecology, technology, regulation and more.

Taking fundamental strategic decisions is difficult at this stage – not least, because the situation is still so volatile. However, many of the above-mentioned factors have disruptive potential. We therefore strongly recommend that business leaders take a holistic view of their potential impacts now – across their entire business and operating model, and rethink their strategy soon.

Our recent thought paper outlined some of the key questions that business leaders should ask themselves now. They help board members and senior leadership to align challenging financial ambitions with the core elements of a sustainable business model and the aspiration of operational excellence and resilience.

COVID-19 has brought a lot of suffering around the globe. However, history teaches us that every crisis brings with it opportunities for those who are well positioned to seize them.

Think of investors who are in a strong cash position: they can now engage in transformational M&A at a substantial discount compared to a few weeks ago. Alternatively, think of the corporate giants that were born in recessions of the past – from Disney to HP or Microsoft^[8].

By asking the right questions early on and adapting their strategy to the newly emerging forces, Swiss leaders can now position themselves as the future winners from this crisis. For further details, please consult the original paper.

_{1 Applications for COVID-19 bridging credits
2 Arbeitslosenzahlen
3 Point de Presse Coronavirus, State Secretary Marie-Gabrielle Ineichen-Fleisch (04.05.2020)
4 SECO
5 Article Business Traveller
6 Article Fortune
7 Article Financial Times
8 Article The Startup}