Daily Times

Covid-19 did not further weaken our system as much as it exposed its inefficiencies. The globaleconomy had encountered recessions before, theeffects of which could bereliably predicted and thenmitigated, but Covid-19 was largely unchartered territory, no economist sat prognosticating this financial Armageddonright as it struck.Now, as the dust is settling and things have become more apparent, the reality has been reset and the pandemic declaredour new norm. Experts anticipate a future characterized by bothvolatility and uncertaintyfor business activitiesandyetonemaystill argue that nothing has changed, not in its principles at least, the practices that underpin business activities and capital planning remain unaltered. Traditional business models were inelastic and already under extreme tension but the pandemic drove them to the brink of extinction. In short, those who were unscrupulous and unwitting in their business practices (postponing investments in technology driven solutions and relying on manual workarounds instead) were struck the hardest.

No company was fully insulated against the pandemic and itseffects, although severe didn’t diffuse outevenly. Small to medium scale businesses faced much stronger headwinds, caving in to their cash flow requirements and failing to increase their liquidity headroom within time. Without a stable influx of investible cash, a majority of small-scale businesses exhausted their reserves early into the lockdown period andcash once againproved itself as”King”.Initials valuations for the fiscal year 2021 have softened and the business community has come to grips withthe radical shift of context in which they must now operate and therefore it is of the utmost importance that theyreassesstheir strategic intent, improvise and adjust futureforecasts for revenues and expenditures,which should then beduly communicated to the stakeholders in order remove expectation gaps (in terms of performance and returns the owners demand and what is realistically achievable under the current circumstances).This would give businesses a handle on their cash runways.To better interpret the cost of covid-19 one should look beyond just numbers and assess the psychological toll it has had on everyone. Health and safety requirements as a result need to be stricter than ever.Recovery, in any case although possiblewillbe aslow process.

Without there being concrete advancements towardsthe formulation of a vaccine, the threatlingers and under such circumstances the consumer remains uncertain, their purchase power constricted and behaviour altered, permanently in somecases. The opportunity costs of Covid-19 have been vast and needless to say, businesses would be inclined to recover them post lockdown by abusing their production capacities. However, doing so puts them at a greater risk because without an active market for their product their surplus inventories wouldsaturate and eventually goobsolete. This will prove more concerning in cases of producers having a less diverseproduct stack and low value addition. Moreover, surplus funds that would otherwise have been utilized for expansion, mergers and acquisitions would now be used to recover revenue and finance operating losses.

Local and export chains were all affected alike but segments that had their zero-rating stripped off last year and which were already enduring a liquidity crunchfound themselves in the immediate impact radius. Manufacturers cannot simply roll over their budgets from the last year and expect production figures matching their designed capacities until both the purchase power and confidence of the consumer has beenrestored. The situation calls for the need to adopt a scenario-based forecasting method where the goals are both realistic and in line with the currentsituation. Recessions of the past have taught us that markets remain transformed after significant crisis’s and Covid-19 is nothing short of an economic storm.

Covid-19 may have irreversibly deformed the business world and in conclusion companies that can attenuate the downsides of these change will undoubtedly gain an upper hand in riding out the uncertainty

Businesses should not be timid in recovery andshould instead take this time, as they emerge from the disruption, to reshape and restructure their business strategies, address their new found weakness and implement more resilient operating models and capital structures. By monitoring key suppliers and customers and working with them in a close proximity, inefficiencies in the value chains can be rooted out.The vacuum created by the pandemic presents an opportunity to restructureand revamp outdated business models, which otherwise under normal circumstances would’verequiredan arduous effortand not withoutconstant risk of being overrun by competition. Businesses are left having to do more with less, using their non-core functions such as tax, compliance, risk, human resources, supply chain management and finance (from their less orthodox channels) to gain leverage.

Covid-19 has made it harder to keep up with competition, especially against those with resilient business models. Acute insight, digital tools and analytics are more essentialto an entity than ever before in hopes for it to remain afloat. The pandemic handicapped businesses into working remotely and only a selected few were adequately equipped in this phase. Legacy systems that businesses had adopted were unable to service their customers or meet their owndemands of remote workingand those, without a digital footprint couldn’t cope and were subsumed by the storm. This confirms why industries associated with retail, traveling,tourism, leisure and hospitality were constantly at the receiving end of the blow whilst others relating to videoconferencing, online technology, food delivery and shopping were better sheltered.

“Work from home”remains a popular buzzword right as we enter this critical stage of post lockdown and back into normalcy.The concept of working from home is often accompanied by agile working and it is beyond reasonable doubt that a flexible and open-minded work structure yields benefits for both employees and employers. Whilst the benefits of agile working hold true for businesses that are service oriented, they are less pronouncedonce applied to labor intensive manufacturing facilities. One should bear in mind that remote working, when forced becomes an obstacle. In the period following the lockdown, businesses need to clarify their intent whether they would indulge the calls for change or instead slip back to their old habits. A company having support staff (such as finance) flanking their primary functions of production would have a harder time deciding the applicability of agile working. It is worth notingthat despite the absence of a business and human rights framework in Pakistan, the themes of mental health and employee wellbeing have the ability to override every argument made against it and owners should carefully execute the transition without upsetting either parties (those who can work remotely and those who cannot). Allowing your support staff to work from home and calling your production staff in at work would widen the divide and have adverse effects on morale. Instilling confidence and a sense of personal security in the employees shouldn’t just be a reaction to the pandemic but instead should be an adopted culture.

The government took prompt action and understood the complexity of the matteras it announced a lockdown. Losses were inevitablehowever; the government alsoundertook means to provide unprecedented support to both household and small-scale business. The total amount disbursed by the government stands at RS 175.6 Billion and they went the length to impose a smart lockdown in order to facilitate the businesscommunity, which was again greatly appreciated.Despite support,many companies are at the brink of bankruptcy and some may even fail. It should be underlined thatbusinesses, their stakeholders and the government are in thistogether and for them to thrive a collective effort is required,which in turn demands that there be mutualunderstanding between the parties. For the economy to be restored, the three parties need to form andmaintain an ecosystembased on trust.

Covid-19 may have irreversiblydeformed the business world and in conclusion companies that can attenuate the downsides of these change will undoubtedly gain an upper handin riding out the uncertainty. By doing so they can hope their exit from Covid-19 to be less rough than their entry. Such companies will recover stronger, rebuild better and offer their management the freedom to push further.

The writer is a freelancer