The COVID-19 crisis has the potential to fundamentally change the way businesses operate and organise themselves for the future, but its economic impact may not be quite as devastating as feared by many. These were among the key points made by the expert panel at the KPMG hosted webinar Getting Beyond the Crisis.
Ibec CEO, Danny McCoy was joined by KPMG partners David O’Kelly and Owen Lewis to consider issues such as debt and funding strategies, changed business models, changing customer behaviour, and policy measures needed to drive growth and bring stability back into the economy.
Moderator and KPMG partner Michele Connolly asked the panel to address a number of areas including the actions that business, society and government can take to get economy back on its feet. “As we face into the new reality, we have to ask how much COVID19 is going to change us and how permanent that change might be,” she said.
KPMG Managing Partner Seamus Hand introduced the webinar by pointing out that Irish businesses had a role to play in rebooting the economy in the wake of the COVID-19 crisis. “KPMG has played its part by putting forward its proposals to get the economy moving again. Today we will explore actionable strategies to enable Irish business to recover strongly from the crisis and to succeed in the post-COVID world.”
According to Danny McCoy that world may be a lot better off than many people think. “This could be a very shallow recession for Ireland,” he commented. “Before the crisis, I thought 2020 could be another 2015 when we had 33% growth. I expect a real surge in the second half of the year if we can get consumer confidence back.”
And the damage to the public finances is not as bad as it may seem either. “The deficit is illusory, it won’t be the horror show that people think,” McCoy added.
It won’t all be plain sailing, of course and the damage to consumer confidence has yet to be assessed. “I am pretty confident the demand side will come back quite quickly,” Mr McCoy added. “But there are supply side issues and the manufacturing sector may have difficulties with a labour market which is quite dysfunctional due to the large numbers of people who effectively got a pay rise from the COVID-19 payment.”
Access to capital is critically important for any recovery, according to David O’Kelly, Deal Advisory Partner, KPMG. Looking back over the past three months he said businesses which had found themselves in the eye of the storm moved quickly to minimise the cash drain. “They furloughed staff, made temporary redundancies and took other steps,” he said.
“The government schemes were very helpful in that regard and kept a lot of businesses afloat. The banks also reacted very well as responsible counterparties,” O’Kelly continued. “I don’t know where we’re going to be in six months’ time. There are no perfect forecasts and all we can do is plan for as many scenarios as possible, but the big issue is access to capital. Business needs to source more capital to deal with the challenges that lie ahead. It won’t be the survival of the fittest, it will be the survival of the most adaptable.”
There are sources of capital available and the banks will definitely play a role, according to O’Kelly. “There are government measures such as the SBCI and people shouldn’t ignore the role of the private finance sector which is eager to play its part. There is a trillion dollars in private equity funding that can be deployed. There is definitely more room for government support. There is clearly a role for an expanded EIIS.”
Ibec has proposed €20 billion government supports to help reboot the economy but Danny McCoy says this figure needs to be seen in context. “The amount we are talking about is not that big. It works out at about €10,000 per household and that’s just the deposit on a wedding these days. And it’s regenerative spending which will be used to kick-start the economy. We need to see consumers coming back.
The money is to be used to put forward what McCoy described as a menu of deferrals, grants, loans, equity and other supports. “You have to open up first and see what the situation is and then see what support business might need. Let’s not make the mistake of saying the pandemic has destroyed the economy.”
The changes wrought by COVID-19 extend beyond the financial, according to Owen Lewis, Head of Management Consulting at KPMG. “We’ve seen a real shift in thinking of late,” he pointed out. “On a personal level people are asking what work feels like for them while organisations are looking at a whole range of issues such as the new cohort of digital customers to serve, new business models and challenges to the way businesses are set up, and new workforce models which could perhaps see 40 per cent of people based in the office and 50 per cent or more working remotely. The rebalancing of our cities could be really exciting.”
New leadership models are also emerging. “Leaders are trying to find ways of capturing the pace and drive shown by their organisations in recent months were we have seen things done in five days that a lot of people said would take five years to achieve.”
Danny McCoy had a different perspective. “We have been more suppressed than fundamentally changed. We tend to need a shock or a particular event to change our adoption of new ways of work or new technologies. We may know that it is possible for us to work at home but that’s not the same as wanting to work at home. I am sceptical about the extent to which COVID-19 will change us.”
The opportunity still exists to take advantage of the opportunities for lasting change created by the crisis, however. “I would urge business leaders to take advantage of this moment to look at better business models, to examine how they have benefited from the COVID-19 experience and see how they can retain that value.”
Workplace organisation is just one area to address. “Why should teams all meet in the same location with people getting into traffic to be there at the same time. What if just 60 per cent of them would be in the room and the other 40 per cent participate remotely? I wonder whether it’s peer pressure that’s driving us to lose that benefit. What is the culture that takes us back to a way that prevents us from realising productivity and other gains? Businesses need to learn how to bottle those benefits. COVID-19 is potentially the biggest digitally disruptive event we have ever seen, and business leaders need to make sure that the opportunities it presents don’t slip through our fingers.”
Our webinars address the practical challenges faced by Irish business and explore strategies for taking advantage of the opportunities. As ever, we value your feedback and if you have any comments or queries on how we might best help you and your business address the above and related points, we’d be delighted to hear from you.