Many businesses have contingency plans that were developed with an eye on disruptions to the microenvironment, such as power outages, inability of staff to reach their workplace, and the unavailability of machinery. However, such plans might not be adequate for the type of macro-environmental disruption we are currently experiencing which affects many, if not all, stakeholders in a business’s ecosystem. This compounds the ramifications and makes the disruption more acute.
For now, businesses need to manage in a highly challenging environment, that for some, is tantamount to a crisis. To succeed, they require strong leadership, and they will need to adapt and improvise. Short- term success can be measured through the immediate safety of their workforce and compliance with relevant laws, followed by continuity of operations and brand perservation.
Businesses need to answer some difficult but important questions:
- Are you fully prepared for a crisis?
- Do you understand all potential risks?
- Have you thought “outside the box” regarding risks and responses?
- Are all responses documented?
- Do you have the right resources readily available to assist?
The current environment will test most businesses’ ability to operate and manage in a crisis. An effective response by a company requires transparency, accountability and above all, strong leadership. Businesses need to be clear about who is making the decisions, keeping the board regularly informed, and maintaining the board’s independence.
Businesses must also rapidly establish their immediate and longer-term risks, and develop a response plan accordingly.
In developing that plan they should consider:
- Who will act as internal lead, and who are their backups for each category of crisis?
- What is the role of each member of the crisis team?
- Which outside advisors should be on the team?
- Who is responsible for communications with each constituency (e.g. regulators, investors, employees, clients, media and the public)?
- What is the role of the board vis-a-vis management?
KPMG has compiled a series of Business Continuity Insights to provide guidance to businesses across all sectors during difficult times. These insights outline key focus areas that organizations should pay attention to when developing an effective COVID-19 business continuity strategy. KPMG has a dedicated team that focuses on helping companies through this special situation. Some of the services our team can provide include:
– Rapid performance improvement (RPI) – professionals with both financial and operational expertise to identify and adjust fundamental business levers to enhance cash flow generating capabilities, improve operations, reduce costs and maximize EBITDA.
– Stress testing and scenario modelling – revaluating core assumptions in financial models to stress test key variables underpinning financial forecasts and to draw light to alternate scenarios for management consideration.
– Debt advisory – review existing capital structures and debt facility agreements and to provide assistance to management in negotiating with lenders to secure financial covenant amendments/waivers, obtaining flexibility to debt agreements and where necessary assist in running competitive processes to refinance existing facilities.
– Distressed/accelerated M&A – in distressed scenarios and working with constraints faced by the business, KPMG can work alongside management to deliver a timely sale of shares or sale of business and assets, either within or outside a formal proceeding while generating fundamental value to shareholders.
– Restructuring – KPMG can support stressed companies to act quickly and decisively to avoid critical complications. Examples of core services include: crisis cash management, financial and operational restructuring and financial reviews and turnaround planning and implementation.
We hope that you will find our series informative. If you require any additional information please do not hesitate to reach out to a KPMG professional who will get the right people in on the discussion.