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Executive Summary – Covid-19 Business Forums | 20th April – 1st May
4 May 2020
- Thought Leadership
Finance & Support
Business Interruption Loans and Support
Access to funding continues to be a challenge for many businesses as the government-backed funding schemes are felt to be largely irrelevant for the many pre revenue or pre profit businesses in the technology sector as they are ineligible, and many third sector organisations do not qualify A large number of businesses outlined very stringent qualification criteria and many currently sit between the various loan schemes, not qualifying for any.
Furlough
Despite the recent Government confirmation that the furlough scheme has been extended until the end of June, there is an acknowledgement that the Government will need to provide a further update in the middle of May with regards to the applicable time period, given the statutory requirement to allow a 45 day consultation period with regards to redundancies.
There is a strong feeling with some organisations that if mass redundancies are to be avoided, the furlough scheme will need to be extended in some form until at least Q1 2021
FWB Park Brown have been hosting a number of industry specific and functional leadership forums, focused on sharing issues and learnings from Covid-19 and the future business landscape.
Whilst the themes and challenges vary between each forum, there are common threads throughout, of which we have noted.
A full list of forum types can be viewed at the end of this article.
Liquidity
This continues to be a growing problem and it has been accepted that lending criteria with commercial lenders has become, and will continue to become more stringent. It has become more difficult for businesses with little or no previous credit history to secure funding.
Equity & Value
For many business owners, protecting value and equity will be extremely difficult, with valuations plummeting. This however may be an opportunistic time to invest capital and whilst some valuations may never return to a “pre-COVID” level, the Group did feel there is the opportunity to deliver long term returns with appropriate investment. This may mean that businesses seeking capital or investment in the short term could see increased liquidity from investors.
Policy Support
There appears to be very limited collaboration on business policy at an international level between governments and this is causing international businesses major problems. Policy is very much being driven in a localised manner. We are even seeing problems between UK and Scottish approach.
Any businesses have commented that due to the lack of alignment between UK and Scottish Governments, should the UK return to work prior to Scottish business, this could in turn result in a loss of revenue and contracts for many businesses.
Cash critical businesses such as the construction and contracting sectors are under extreme pressure. We are likely to see businesses with full order books unable to return to full capacity due to cash constraints.
Business Operations & Returning to Work
The big problem for organisations is in how to ensure they operate safely whilst maintaining social distancing in which people feel safe and comfortable to return to work. Although saying that there appears to be a growing appetite from individuals to return to work.
It appears widely accepted that it will be difficult to fully return to work and normality until a vaccine is available.
Many organisations who are looking to return are also exploring the opportunity to rationalise their property portfolios, rather than pay rates on buildings only 50% occupied and implement flexible (remote) working and alternate office working patterns.
People First
A number of organisations have relaxed policies with regards to absence, holidays and working time to ensure people do not feel pressure to return to work but do so willingly.
They have also invested in raising hourly rates for those returning in the short term, with many doubling overtime.
The majority of organisations are allowing individuals to self-isolate for 2 weeks whenever needed on full pay.
In some instances, businesses are extending holiday entitlement into next year whilst creating flexibility in the short term and if someone wants time off they can take it off, no questions asked.
Many businesses have adopted staff engagement tools to measure staff wellbeing, with many apps available now providing real time analysis.
Communication, Culture and Visibility are Key
Across business, communication has increased significantly, and clarity is required. With so much information on the pandemic, it is vital that organisations are clear and factual about expectations, process and support available. Many organisations do this daily.
There have been a number of innovative and rigorous steps taken to ensure social distancing is adhered to and health is monitored – with some organisations implementing thermal imaging cameras at the front door to ensure anyone with a high temperature is checked and / or sent home. Visible steps like this increase comfort and employee security.
Many organisations have created several new online company meeting spaces, increased video updates from the Executives and created a number of extra-curricular programmes for employees around wellbeing, fitness, and socialising/fun.
The focus on people and community has become ever more pertinent, and businesses are doing what they can to minimise the impact and strain on their staff. Several companies have created small hardship funds to support employees on a case by case basis should they be experiencing cash flow issues with regards to rent etc. This desire to support and care for staff will no doubt build loyalty and engagement long term.
Many businesses are using the time to allow and support individuals in learning and development initiatives.
Operational steps
It became apparent that any return to work should be maintained and managed on an iterative basis with processes, systems and schedules being continually evaluated and tweaked accordingly.
Areas in which businesses are implementing change include:
- employee health monitoring through thermal imaging, video systems and alerts to ensure social distancing is adhered to
- shifts being staggered in interval breaks and all process and people flows being broken down by elements of process paths to reduce congregation
- no locker rooms, built shelving so no congregation points and no communal kitchen gathering and 2 metre stripes around car parks and smoking areas
- stairs segregated all the way through sites and designated entry and exit points
- provision of PPE and increased cleaning schedules
- the need for observation systems to assess impact of changes with the need to change and refine in real time
Considerations
Cost – Implementing these changes comes with significantly increased direct and indirect cost and businesses need to account for this when evaluating additional space/property required, potential reduced output, investment in new systems etc
Behaviours – Changing subconscious behaviours are difficult, work is a social place and breaking down the habits people have with regards to distancing can take time. Issues can also be raised on scheduling break times.
Security – Many businesses who have mobilised staff to work from home have given little attention to cyber security risks. Many home routers may still be carrying original passwords and those who have VPN access, become a more vulnerable security risk for organisations and this should be reviewed where possible. There has also been an increase in cyber scamming and phishing which organisations should seek to manage in terms of risk and communication with employees.
Strategy & Governance
There is an ongoing drive from businesses to adapt to the ever-changing environment, this has resulted in companies diversifying and bringing new products and services to market quickly. Business leaders feel that many of these changes may be required in the long term and fundamentally the make-up of their offerings will change.
It is likely there will be a short to medium term requirement for businesses to restructure in terms of finance and funding, corporate governance and organisational structure to operate leaner and with more agility.
There has been a significant increase in collaboration across industry between businesses who would have previously considered each other competitors. Whilst this may not continue long term, there will likely be opportunity to continue this to some degree and achieve benefits of scale and shared synergies.
The role of the Chair and NED have become vital during the initial period of lockdown, and the relationship between Chair and CEO has to a large extent been emphasised in providing governance, guidance and a sounding board in decision making. As we move out of crisis mode, many Chair’s have felt comfortable taking a step back and allowing the Executive space to operate autonomously.
On each of the forums close to 500 companies have been represented and some have experienced a dramatic cliff edge fall in sales and revenue while others (albeit a much smaller percentage) have had the opposite. For some the crisis has been so significant that looking beyond the next payroll is a challenge, others can try to look ahead and attempt to forecast for whatever the new normal might be. While many of those on our forums experienced the financial crisis and have been able to apply some of the lessons learned most would agree that the uncertainty and scale of this crisis has tested them and their management teams like never before.
Technology & The Future
There is a broad feeling across Technology based companies that business as we know it, and how it is conducted will fundamentally change post-crisis. This will not only be in terms of business size and structure, but products and services will need to be adapted, expanded and in some cases will become obsolete in place of new products.
It is felt that we are at an inflection point in time around how businesses and their employees operate. Whilst many industries have been moving to online service models (TV, Media, Telecoms) over time, many have made these changes out of necessity in the last 4 weeks, effectively becoming ecommerce businesses overnight or significantly increasing their presence online. It was felt that this may drive further regulation and monitoring of the internet in the future, and many companies (e.g. cyber security) will benefit from this.
Technology is breaking down barriers across value chains and helping businesses to become more agile, productive, and leaner which will provide some with a distinct advantage “post-crisis”, including the ability to reduce property costs, headcount and other fixed costs.
It is apparent that non-governmental creditors and lenders are becoming more stringent around lending criteria and the requirement to understand their customer is becoming more important – this could also create opportunity for technology-based risk assessment and blockchain companies to support lending and investment appraisal in the future.
Consumer spend is likely to be significantly reduced for an extended period. The demand pressure is likely to drive a far longer recession than the V shape that was initially hoped for. Capacity has also been lost in a way that will likely endure.
Many businesses have indicated they are planning to hold larger cash balances in the future, consequentially likely to constrain investment.
Third Sector
The charity sector faces three key challenges:
- Severe financial restrictions and an inability to fundraise
- An increased demand for services
- A complete drop off in volunteering
Many organisations in the third sector have called for a fundamental re-think the financial set up and structure of charities going forward, rather than ‘putting a plaster’ on the problem through relief mechanisms such as the recent Government support scheme – although this is only largely available to people focused charities and would not cover areas such as for example natural resources / heritage charities.
Many third sector organisations feel as though they are penalised for having reserves which means that they are not qualifying for government support, while others who are providing essential services are receiving an increased injection of funding. The sector would like to see Banks moving away from more traditional methods of funding to a more fit for purpose model that takes into account the very diverse nature of businesses in this sector.
Charities have been able to achieve in days things that would previously have taken many months with regards to digital transformation and this agility needs to be captured and used in a positive way in the charity sector as they prepare recover and re-open.
Although not overly invested in technology, in many cases charities have managed to re-purpose and are now providing support and services digitally. While face-to-face support is still considered essential in many cases, re-training may result in a change to online support where possible which would, in turn, reduce costs.
Given the economic impact of the Covid-19 crisis, it is expected that there will be a significant increase in demand for services from charities in areas such as mental health and homelessness.
For a downloadable copy of the above article please click here.
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FWB Park Brown
FWB Park Brown continues to deliver its full range of services which includes providing support and advice during the Covid- 19 Public Health and developing global economic crisis.
We have established a range of cross sector as well as sector focused discussion forums for Chairs, NEDs, CEOs and all the main business management disciplines. We are also working closely with the Scottish HR Leadership Group to provide constructive support including discussion forums and Q & As.
Summaries of the discussions will be posted on our news section and also on LinkedIn.
For further information about any of these forums please contact us via enquiries@fwbparkbrown.com