Responding to COVID-19: What companies are missing

In the past few days I was reading the extremely interesting briefing note issued by McKinsey on COVID-19.

I invite you all to click on the below link and read it:-

What is most interesting is what they said as how they are seeing that companies are responding to COVID-19. They mention that companies are responding with 5 sets of actions:-

What I however found most interesting is their perspective on what companies are missing out on. This includes:-

(a) Optimism about the return of demand is dangerous: Being optimistic that things will soon get back to the way they were is very dangerous. Those companies highly geared or low on working capital or with immediate liquidity/cashflow issues should stop hoping on a fast recovery. So action to face the issues at hand needs to be taken now. Do you need to divest any investment or sell any held assets to help the cashflow? Do you need to avail yourself of any available working capital assistance? Do it now!

(b) Assumptions across the company are misaligned: The response has to be coherent and including all sections within the company. The response cannot be peacemeal with different departments having different approaches. Before acting in a tactical way i.e. credit control chasing credit clients, sales trying to get more business before things get worse, purchases to get more raw material before the supply chains get even worse….it is imperative that everyone is well aligned in the assumptions and the strategy that is built on these assumptions, in the new circumstances we are all operating in.

(c) The near term is essential, but don’t lose focus on the longer term (which might be worse): This crisis is obviously making you focus on the immediate term, on how to safeguard your business and making sure it remains existing. However you also need to think long-term. This crisis is likely to have long-term implications. We could also be facing an economic recession for some years, financing and credit supply may become more difficult and the supply chain may become even more difficult to work out. So take your immediate decisions today with all this in mind.

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