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Coping with the New Normal - Covid-19 and after

Covid-19 will mean governments will need to offer long-term jobs support to avoid economic turbulence

By Jakub Wojnarowski, head of ACCA Poland & Baltic Countries
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Governments around the world, larger businesses and financial institutions such as banks will all have to play a part in helping to rebuild the global economy. That’s one of the main recommendations we make in our report Covid-19 Global Survey: The Road to Recovery.

This is a sequel to research we published in early April about the impact of Covid-19 on business. Between these two reports, we see a picture of businesses and their leaders trying to come to terms with what the new normal means during these times of pandemic. We surveyed 4,500 members globally, monitoring sentiment around the world on the impact of Covid-19, examining how organisations are responding.

In our new report, we make a number of policy recommendations, calling on governments to introduce long-term support measures to protect jobs and promote a return to sustainable growth. However, an alliance with business organisations, financial institutions and even profitable companies will be needed to avoid a prolonged economic downturn or depression.

We anticipate that private, profitable larger companies, who have been less affected by the pandemic, will have to play a part in saving SMEs in their supply chain from going under. The supply chain connections between businesses large and small need to be strengthened.

What’s clear from this most recent report is that the economic impact of Covid-19 will be long lasting. This means that long-term thinking and mid-to-long term support will be required to save jobs and enable a return to sustainable growth.

So governments must look to work closely with business and international organisations in delivering support packages, which may need to be in place long after the pandemic has passed. Failure to develop and deploy comprehensive recovery strategies will only prolong the economic downturn and risk a depression.

The global picture

The latest global data shows an increasing collapse in customer demand, with 53% of respondents saying sales have either totally dried up or reduced. As a result, it’s not surprising that 83% expect revenue to be down year on year, with a stark figure of 40% expecting revenues to drop by a quarter.

Organisations reported that product launches were increasingly being postponed and investment plans deferred. Half of respondents have faced cash flow challenges, which have grown since the last survey three months ago, leading to concerns about financing and debt.

Globally, respondents are prioritising cost reductions, with more than 50% citing that as their priority, along with a similar percentage looking for operational efficiencies.

Despite the widespread gloomy picture, there were a few more optimistic notes. A figure of 82% of respondents have now completed a financial re-forecast of business performance, up from 53% in March.

A growing figure of 32% now see government intervention schemes are effective, which is almost double the 17% figure for March.

The Central and Eastern European view

However here the picture for the 224 respondents across Central and Eastern Europe differs. Only 13% consider the economic stimulus packages introduced by governments in response to the pandemic across this geographic region have been effective in supporting their organisation.

Looking at the other results for our region, we see respondents planning ahead and making the necessary strategic and people related decisions needed to survive, with  54% of respondents saying they are focusing on medium-term organisation stability and opportunities over the next one to six months. A worrying figure of 61% say sales have stopped or decreased, and 36% are experiencing cash-flow problems, which is slightly lower than the global average.

To help mitigate the risks, 83% of business leaders have completed a financial re-forecast, and of those only 6% are predicting negative growth of 50% or more for the expected impact on revenue growth compared with the prior financial year. In terms of protecting people, a higher-than-global average 91% have implemented flexible working policies for their teams, and 44% are implementing staff rotas to ensure there is cover amid social-distancing requirements.

Signs of optimism and recovery?

Audit and accountancy firms are optimistic that the new ways of working present a host of opportunities in advising on issues such as business continuity and resilience, digital transformation and supply-chain improvements. More than 40% believed there would be increasing opportunities across advisory areas including business resilience and tax compliance. And the number who thought that digital transformation would a be a growing opportunity has doubled since March.

Our report offers clear advice about how to plan given pandemic’s profound effect that will resonate well beyond 2020.

The crisis has raised fundamental questions about the future of work and our own lives – the stats show that across CEE, 71% of respondents have identified the transformation of working practices with less reliance on using physical space as the most likely long-term implication.

However, according to our data, there are other potential long-term implications too – including scaling-up of digital investment, a continued prioritisation of employee and customer health, and possible global supply-chain transformation.

Through our ‘roadmap to recovery’ model, we’re recommending that organisations follow the ‘three As’ – Act and respond sustainably to the immediate crisis in the short term; Analyse the different information sources to start to build the path to recovery in the medium term and Anticipate how strategies need to evolve over the longer term.

The fate of SMEs

As the United Nations marked Micro, Small and Medium-sized Enterprises Day on the 27 June 2020, with the aim of supporting SMEs through the global pandemic, our research shows that SMEs are particularly suffering from the lack of customer sales, with almost 60% of them reporting that demand has stopped completely or reduced.

SMEs are reporting a greater level of pessimism than larger organisations when it comes to revenue projections and are also seeing greater challenges with cash flow.

Nearly one quarter of SMEs are still focused on the short-term period, compared to a tenth of their larger counterparts, due to SMEs having to manage their operating fundamentals to survive.

This explains why we need the most profitable firms, those least affected by the pandemic to work with governments to save smaller businesses, who form part of the supply chains inherent in the business ecosystem.

This situation for SMEs presents a concerning picture, especially given the range of support measures introduced by governments around the world to help SMEs survive the pandemic and lockdown.

Moving ahead, with optimism

As some countries emerge from lockdown, we hope this report offers insights that can create change where it is needed. It will be a collective effort and cannot be achieved in silos or in isolation. The road to recovery may well be long, and it is vital we understand the lessons learned from the crisis so that risk and crisis management strategies can be made more effective.

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