COVID-19: Business as usual COVID-19: Business as usual

As lockdowns ease, businesses are eagerly looking forward into the New Reality: what will the world look like post-COVID-19?

Now, I’m not suggesting the many predictions out there are wrong – to the contrary, I highly recommend some – but in most cases, these trends aren’t new, they are just no longer nascent. COVID-19 is simply accelerating business in the socio-political direction it was already facing.

 

How and when will it happen?

When I talk about the New Reality, I mean business as usual. Not usual in the sense that it won’t be different, but containment measures have either been fully lifted, or we will be living with those remaining for several years.

There are a few versions of this New Reality, and how we get there will be critical to defining the timeframes and parameters of this new world:

1. No COVID-19: the low likelihood but best case scenario of the virus disappearing. All upside, barring the companies making big bets on vaccine research.
2. Post COVID-19: in 12-18 months, we have an effective vaccine that is widely available at least among advanced economies and all restrictions have been lifted.
3. Coexist with COVID-19. There is no vaccine, or at least not one in a short enough timeframe. And/or the political equation changes pre-vaccine: public attitudes shift as health data improves, or economics worsen. We go for herd immunity to the extent possible, like the flu.

Now this may seem obvious, but I think a lot of government policy and business strategy is being underpinned (perhaps subconsciously?) by this assumption that we will be post pandemic in a comparatively short time period. It is critical to include a scenario in your business planning that considers a world where that does not happen.

 

What will it look like?

Major world economies are diverging. Those governments with overstretched fiscal and monetary policies may have less capacity to respond to social inequality. Social discontent rises – from the globalists worried about the global commons (climate, cyber, human rights etc.), to the localists concerned about their day-to-day and the resilience of their communities.

Sound familiar? It should. (Arguably) business is facing the same macro trends already coming – just in a compressed timeframe. It may look a little different depending on where you are in the world, but for the sake of brevity, even where COVID-19 no longer has a direct impact, a number of macro trends are likely to have accelerated:

1. Productivity redefined: automation and technological displacement accelerate, and labour is no longer the most important factor of production. A potential conundrum for ESG-aligned companies, as well as governments seeking to boost productivity in a post-COVID-19 world.
2. Market economics redefined: protect your own is the new policy catch-cry. Expect more nativist regulation (particularly in strategic sectors), market concentration and potentially nationalization in the case of bail-outs, and heightened tax scrutiny as governments look to pay back their debt or fund programs to respond to social discontent. Meaning a more local and regional model in terms of supply chains and business models to match the shift from efficient (which companies have been spending decades finessing) to resilient.
3. The purpose of a company redefined: the corporate safety net rises in prominence, as governments prioritize local constituents today over what could happen tomorrow (think climate, public debt). Employees and the public look to companies to fill the gap. Companies that adopt a ‘do-it-yourself’ attitude come out ahead – like adopting a ‘man and machine’ business model and prioritizing investment in reskilling of local, domestic workforces.

 

_{Author: Sophie Heading - Global Geopolitics Lead, Global Clients and Markets at KPMG}