As organizations and their customers adapt to a new reality due to COVID-19, the applicability and sustainability of operating models and customer interfaces for enterprises are essential.
In our COVID-19: A guide to maintaining Enterprise Resilience, KPMG professionals look at how enterprises in Asia Pacific are managing — and working towards alleviating — the effects of the pandemic. We cover the three areas of financial, operational and commercial resilience, setting out practical suggestions for short, medium and long-term considerations.
The question often asked today is: “What will be different as we emerge from COVID-19?” A more pertinent question, however, might be: “Will anything be the same?”
We’re now operating in a different reality, and most aspects of business have changed. While change has always been part of the business ecosystem, now more than ever we need to take a disciplined and structured approach to how we respond to these changes.
For businesses to develop appropriate strategies to ensure long-term financial and enterprise resilience, they need to consider all facets of their operations, strategies and customers. This holistic approach can be broadly divided into three categories: operational, commercial and financial. Here, we explore some key considerations for each.
In this new reality, operational resilience cannot be merely “battening down the hatches.” Instead, it’s about rethinking business models that will thrive in this new operating ecosystem, resetting how you operate to minimize cost, or addressing other matters critical to operational success.
Consider how customer needs have changed. Digital and online delivery channels, coupled with rapid home-delivery options for physical goods, are now the expected norm. The importance of face-to-face meetings has declined, which may necessitate a revamp of sales models. For instance, if you had previously relied on conferences as a key sales tool, it’s time to think again.
That’s for customer-facing operations. But internal operations must adapt as well. Remote working, no matter your opinions on it, will now be the default — at least for the immediate term — and will continue to feature in some form in the future. Depending on the industry, this can create significant operational challenges and disruptions, especially when considering the disruptions other companies along the supply chain will also be experiencing. Do you know which of your employees have to physically be in your business to ensure operational resilience? Do you know which staff members can operate effectively from home?
Navigating these challenges requires able leadership that can execute the necessary steps to revamp operational processes across the three verticals: customer management, supply chain management and internal people management. Of course, the question then becomes: “How can we ensure the leaders themselves remain resilient, when they must now work longer and harder than ever before?”
The traditional way of thinking about commercial resilience was simple: do the same thing as always, but do it better, faster or cheaper. In this new reality, that is no longer likely to be good enough. New strategies and plans that accurately reflect this new reality must emerge.
With the amount of variation between different businesses and sectors, where can we begin? A good starting point is categorization. KPMG professionals have developed a new framework to sort COVID-19 affected businesses into four broad categories according to recovery patterns and risk exposure:
Depending on which category it falls into, each business must prioritize different factors to strengthen its resilience, whether these are capital preservation or digital transformation. It is also important to consider the impact of the larger supply chain on resilience. For example, one company might be in the “surge” state while its suppliers are in “transform to reemerge,” and their interconnected nature means the prospects of the former may be affected by the latter’s lengthier road to recovery.
The economic recovery pattern from COVID-19 — especially from the perspective of individual businesses — is unlikely to be linear. A “W” shape is far more probable as there will likely be repeated spikes in virus outbreaks. At least for the near future, this means that a state of crisis management may have to remain the norm. Crisis management may also need to operate in tandem with a recovery or growth strategy.
Moving forward, businesses will be required to conduct more frequent planning — once-a-year planning will no longer suffice. This will shorten business and investment cycles, put pressure on short term ROI and allow businesses to adapt faster to changes in the macro-environment.
Finally, businesses everywhere will be scrambling for investment dollars, whether to sustain, transform or scale operations. Stricter discipline and rigor when prioritizing capital allocation is therefore paramount, and careful measurement of ROI is a must. And as with the business cycle, project cycles should also be shortened, making possible a more agile response to changes in our new reality. As the pandemic has so aptly driven home, the only thing that never changes is change.
KPMG member firms are standing shoulder-to-shoulder with clients with the aim of ensuring you receive timely, informed and practical guidance, drawing on the latest industry insights and experience from specialists across the global KPMG network. You can complete an interactive questionnaire to help you assess the completeness of your response to COVID-19. Questionnaire responses are kept anonymous, so do share your report with your local KPMG contacts if you’d like to discuss the results. Explore COVID-19 Guide to maintaining Enterprise Resilience.