Our COVID-19 Crisis Management Team is providing expertise and resources to assess the business impact of the crisis, respond to the immediate health and financial impacts now, and prepare to restart operations when that day comes. Each phase of our approach is focused on your current state of crisis:
Phase 1 – Respond. The actions taken during the early days of a crisis are critical to set the stage for survival and recovery. What you do today with your people, customers, and suppliers will be remembered forever, positive or negative.
Phase 2 – Restart. While it seems to be in the distant future, we will emerge from this crisis. Solid plans to restart your business begin with thinking ahead of the current state of crisis. Organizations will need to re-structure how they operate their businesses in the new normal of social distancing. Companies who can hit the ground running will be far ahead of those who wait.
Phase 3 – Be ready. We have all learned a great lesson from this crisis. We weren’t ready. Focusing on preparation for the next disruption should be part of our day-to-day operations so it is not forgotten.
Our six-step crisis management guide will help you evaluate your current situation, triage the critical activities required, and prepare an immediate action plan. Here are the critical action areas to initiate immediately — to Respond now.
1. Leadership and communications
Your organization needs to establish its COVID-19 task force with your best and brightest executives. The CEO must be involved on a day-to-day basis, if not already acting as the leader. During the initial days and weeks of the crisis, this effort will be full-time. If not, you run the risk of destroying credibility with your people, irreparably damaging your business, and crippling relationships that you’ll need in the future. This task force is like no other that you have established before. In these times, you must provide coordinated and central decision making — your people, customers, and suppliers need clear communications and directions from you.
In these times, you must provide coordinated and central decision making — your people, customers, and suppliers need clear communications and directions from you.
As we have seen on an almost hourly basis in the news, by providing honest, precise and frequent communications, you’ll go a long way toward managing confusion and uncertainty. We believe it’s vital to have a proactive communications strategy through website, emails, text messages, conference calls, and any other channels. Your staff and business partners need to be kept up to date with fact-based information about your business. These communications need to come from the task force leaders often and clearly. Along the same line of thinking, a regular check on your people is important to monitor their mental and physical well-being.
- Establish the crisis management leadership team (task force) dedicated to leading the effort.
- Set up a comprehensive communications network structure for key groups: staff, customers, suppliers, lenders, governments, and external media.
- Centralize the command structure. We’re in crisis times and your people need to have consistent direction and execution throughout the organization.
- Be visible to your people — communicate with your staff on a frequent, regular cadence as the situation evolves day by day.
- Be visible to your customers, suppliers, and critical relationships. They need to hear from you and have confidence in your ability to manage through the crisis.
The health and well-being of your people is clearly the highest priority in this crisis. Specific instruction to your people on appropriate hygiene, safety, and security needs to happen immediately if it hasn’t already. Providing clear direction to your people on what actions to take when they start to feel ill is critical. For example, staff must not come to work if they’re exhibiting any symptoms such as fever or sore throat in order to avoid infecting others. Reviewing and implementing new human resource policies in response to these changing circumstances and regulations will be required, and quickly. Continuous monitoring of the COVID-19 situation throughout the day and understanding what guidance is being offered will be essential to communicating to your people.
- Adopt necessary screening of employees and others to prevent exposure (high temperature, sore throat, other symptoms).
- Align policies to prioritize staff safety, such as travel, sick leave, PTO, and face-to-face meetings (utilize CDC and WHO guidelines).
- Establish remote/flexible working environments where possible.
- Where remote work is not possible, rapidly assess the viability of the operation to stay open. If required, establish appropriate social distancing policies for the workplace.
- Ensure available resources such as healthcare and government aid are communicated to staff.
- Ensure proper medical resources are available at all facilities.
- Ensure proper cleaning of shared/working environments to limit risk of community exposure.
3. Financial and cash management
Financial management — especially cash and liquidity capacities — are critical during the initial wave of a crisis. Your response plans will likely drive the survival of your business. Your priority needs to be ensuring short-term liquidity needs can be met. Quickly put together your weekly cash flow projections in various scenarios from worst to best case. Understand where your break points may occur. Then evaluate longer-term scenarios of 13 weeks out to quarterly projections to prepare for your coming needs.
- Determine working capital and liquidity needs immediately.
- Implement cash conservation and recovery actions as soon as possible.
- Reprioritize capex and discretionary spending commitments.
- Determine available sources of credit and capital and put together a plan now.
- Contact your banks/lenders to negotiate flexible terms of debt (e.g. extended payment terms, credit lines).
4. Operations: Manufacturing, supply chain, and engineering
If you’re a manufacturer, your business operations will rapidly feel the impact from reduced (or increased) customer demand, depending upon your industrial sector. Manufacturing, supply chain, and engineering must all be reassessed against the real-world facts on the ground.
Financial management — especially cash and liquidity capacities — are critical during the initial wave of crisis.
Triage of your mission-critical operations will need to occur first, driven by demand and supply of materials and people. While you may already have strong operations management in place, with contingency plans, now is a crucial time to review and modify these contingency plans for the multiple scenarios going forward. Likely scenarios include temporary closures of plants, partial closures to keep some lines running, moving production to other facilities, and potential retooling for critical healthcare products. The portfolio of options seems endless, so it’s important to keep the organization focused on critical priorities.
Quickly assess the status of your entire supply chain with special attention to your suppliers and the next tier of suppliers to them. If parts are sourced from China, critically review the status of operations while production begins to emerge from the shut-down there. Communicate any disruptions to customers and then work with your supply base to find alternatives. Evaluate whether it makes sense to expedite deliveries, or build up safety stock if feasible. Consider talking to your competitors to see if it’s possible to work together.
Keep engineering informed and involved throughout. Engineers, technicians, and skilled trades are a critical source of technical expertise for your operations. Utilize them where needed and make sure they can be ready to step in on short notice — new customers may be calling for help that requires immediate engineering input.
- Develop and execute contingency plans for operational disruptions.
- Plan for “graceful” shut-down processes where needed.
- Shift production from COVID-affected facilities where possible.
- Determine risk of supplier disruptions (locations, operations, financial risks).
- Assess impacts of your supply base on operations.
- Communicate your plans for disruptions and shortages to all customers (especially focused on your core customers for long-term relationships).
- Evaluate alternative supplier arrangements, especially to meet short-term needs.
- Monitor the use of expedited freight; prioritize where it’s really needed.
- Establish safety stock of critical inventories, if applicable.
- Evaluate and prioritize engineering requirements for products, especially focused on opportunities from new customers in need.
5. Customer relationships and demand management
Reach out to your customers to assess their situation and understand the disruptions in their business. Ensure that they’re ready to receive your production volume, to avoid wasting money, time, and work effort. It’s important to gather information on their financial condition as they make it available — it will enable you to assess the impact of demand changes in your planning and scheduling, as well as their ability to make payments. This information is mission-critical to your business and financial survival, so set up ongoing lines of communication for regular and frequent status updates.
- Communicate with all customers to understand and support their needs.
- Focus on frequent and deeper communications with your core customers.
- Build your database on customer condition and potential impacts to your operations.
- Determine product demand requirements for significant shifts downward (or upward).
- Discuss what commercial and financial support may be available from customers.
- Connect with your legal advisors to determine the status of your contracts; evaluate the need to utilize force majeure provisions or other contractual remedies that may be available.
- Continuously monitor customer receivables for collection problems.
- Assess and triage the opportunities for new business from customers seeking new sources of supply.
6. Information technology and cybersecurity
Information technology is now a critical lifeline to manage your business, especially if much of your workforce has been dispersed to remote locations. For businesses maintaining work sites, the information systems requirements can be even more challenging, as a lack of face-to-face communications can make it difficult (or impossible) to resolve even minor systems issues. The IT organization must quickly take on the task of ensuring systems are sufficient to handle additional workload and security requirements such as virtual private networks. Expanded services will likely be needed and additional hardware may need to be provisioned. All IT projects and responsibilities will need to be evaluated and re-prioritized during the crisis.
The actions taken during the early days of crisis are critical to set the stage for survival and recovery.
With people operating outside of the normal safety zone of office infrastructure, an additional layer of vulnerability has been created. Cybersecurity must now be a critical focus. Security procedures, protocols, and staff training need to be reinforced throughout the organization.
- Determine critical applications and investments to enable remote work.
- Evaluate and set up remote IT support structures throughout operations (office, factory).
- Re-prioritize IT work activities, projects, etc.
- Assess and monitor IT infrastructure and services for access and performance gaps.
- Re-evaluate security procedures and enforcement; increase levels as needed.
- Identify, address, and plan for cybersecurity vulnerabilities.
With people operating outside of the normal safety zone of office infrastructure, an additional layer of vulnerability has been inserted. Cybersecurity must now be a critical focus.
This guide should be viewed as a critical action list to help your organization focus on the matters that must be addressed now. These steps will be critical to stabilize your organization today, in order to survive the coming weeks of crisis. As we understand the ongoing impacts of the COVID-19 pandemic, we will all become smarter. At Plante Moran, we believe planning ahead will provide immensely more value than reacting to the latest crisis news. We’re here to help.
If you have questions or need immediate assistance, contact us to talk to an expert. Our hotline is complimentary, as a service to management leadership in this crisis.
If you’re a Plante Moran client, reach out to your relationship partner. We care about our clients and we want to help guide you through this tumultuous time.
After your initial response plan is in place, it’s important to start preparing a plan for restarting business operations. Failure to properly plan for the restart phase can create unnecessary disruption and expense. We’ll continue to put out guidance and make resources available throughout the crisis. You can subscribe here to receive them in your inbox.