Our economy is global and with close business and community ties across borders there is a high likelihood that COVID-19 will spread globally. The situation calls for us to take this seriously, without being alarmist. It may have repercussions on how we live, work, socialize and travel and hence the adage, “It’s better to be safe than sorry” is a good maxim, recognizing that planning and some basic “good hygiene” will go a long way. Although we focus below on business repercussions, COVID-19 is first and foremost a humanitarian challenge, and employee safety should be the highest priority.
As with any business continuity planning there are four immediate actions:
- Create a cross-functional team to assess business vulnerability and impact
- Build a business continuity and response plan
- Protect your employees and customers
- Communicate effectively, demonstrating leadership
1) Create a Cross-Functional Team to Assess Business Vulnerability and Impact
A multi-disciplinary team ensures that risks are evaluated from all angles. Functionally and geographically diverse team members should provide input on business exposures such as the potential for:
- Delayed or lost sales if:
- Business travel to prospects slows which impacts your ability to sell
- Enterprise and consumer demand slows due to shifting business priorities or broader economic slowdown
- Demand in a current target market is impacted (e.g., China, South Korea)
- Lower employee productivity if employees are ill, or offices close and remote working needs to be implemented – and remote collaboration is not feasible for your business, or part of your culture.
- Impact on working capital if sales are delayed.
- Expense increases due to healthcare outlay, remote collaboration costs or lost capital outlays (no ROI) for cancelled events and travel that is non-refundable.
- Lower retention if customers are dissatisfied because business commitments are not met.
- Delayed strategic initiatives and business plan execution (e.g., new product launches, new partnerships).
Business risks specific to consumer and e-commerce companies may also include:
- Lower production and inventory if product inputs originate from Chinese or Asian suppliers.
- Contractual penalties or loss of contractual volume rebates if demand is lower.
A cross-functional team should be set up quickly to assess and quantify each of these risks, irrespective of the current impact of COVID-19 on your business. The risks will differ in severity by company, and depend on end-market buyers; industries like hospitality and travel will be more immediately impacted. Setting up this team before the virus impacts your business will give your executives time to plan effectively and be ready to act if the need arises, minimizing the stress and pressure on employees and impact on the business. Remember, by failing to prepare, you are preparing to fail.
2) Build a Business Continuity (BC) and Response Plan
Most software companies already have a tech BC plan: in the case of power loss, hurricanes or a cyber-attack, companies have a plan to protect data and get systems back online. Functional and geographic areas should replicate this playbook to build their own BC plans for COVID-19, using the same framework of identifying the risk, prioritizing the order of mitigation, and assigning responsibility to a business leader.
COVID-19 requires categorizing risks that are within your control and those that are not. A business owner needs to be assigned to address each of the former, while quantification and scenario planning is needed for the latter. Some illustrative examples are below. The cross-functional BC team should build a similar list.
Risks within your control
Risks outside your control
Pace of hiring and recruiting
Employee protection and containment measures
Changes in cultural interaction norms
Virus infection rates
Population impact on talent pool
Strength of customer demand
Tech investment in collaboration tools
Cross-training for absenteeism
Closing offices temporarily
Supply chain shortages
Expenses not yet incurred
Working capital adjustments
Sunk cost (e.g., cancelled conferences)
Increased cost of capital
Market swings, and economic slowdown
Cost of inputs
3) Protect Employees and Customers
People generally have two reactions to a crisis: under-react and downplay the severity of the threat or over-react and cause panic. Ideally, Insight Partners and our portfolio executive teams, react seriously enough to cause behavioral change and activity that mitigates risk, while demonstrating leadership that calms unnecessary fear. In a situation like COVID-19, overly-alarming risk messages are far more forgivable than overly-reassuring ones, and hence Insight is erring on the side of risk aversion, coupled with transparent communication.
In early February 2020, the U.S. Centers for Disease Control and Prevention posted interim guidance for businesses. We suggest you use this as an additional resource. Key suggestions from other research sources are included in our recommendations.
To note, as leaders we need to be conscious of people’s physical and emotional wellbeing. Taking concrete steps to ensure the former, helps people cope with the latter. People generally feel better when they are doing something proactive. Hence our suggestions below for personal and workplace safety.
- Try to obtain a few extra months’ worth of prescription medications in case supply chain shortages impact the ability to get medicines.
- Make plans to take care of sick family members while working, and plan for ways to provide care without getting infected.
- Consciously try not to touch your face. We touch our eyes and mouth incessantly and this increases the risk of self-inoculation. A facemask is a good defense against self-infection, but a habit of not touching our faces is a better long-term solution.
- Build harm-reduction habits like pushing elevator buttons with a knuckle instead of a fingertip.
- Disinfect your phone at least once a day with santizer wipes.
- Carry hand-sanitizer and use it liberally in all communal environments.
- Stock up on extra grocery items in case a prolonged homestay is required.
Research suggests that employees will show up for work during a crisis if three specifications are met – if they think their family is reasonably safe (discussed above), if they think their employer is being candid with them about the situation (discussed below), and if they have a crisis-specific job assignment in addition to, or different from their routine “peacetime” work (discussed above in BC planning).
In addition to these three specs, we recommend that companies begin to create new norms of behaving and ways of interacting. By implementing many of these now, we can contain the risk of our community becoming ill.
Ten essential steps are below:
- Ban travel to impacted countries, reduce non-essential travel, limit sanctioned employee vacation destinations to specific countries, and use video conferencing facilities.
- Replace handshakes with elbow-bumps (the “Ebola handshake”).
- Ensure hand sanitizer is available in every meeting and conference room.
- Support employees wearing facemasks, especially those dealing with the public.
- Require self-quarantine for employees who’ve visited at-risk countries, or who feel sick.
- Send people home if they show up sick to work.
- Stockpile supplies (if you can at this stage and if it’s relevant to your business model).
- Limit large gatherings of people, specifically conferences (e.g., company Sales Kickoff events) and industry events (e.g., Mobile World Congress).
- If needed, and where appropriate, pay for people to take taxis to work, to avoid mass transit.
- Require sanitizing for all people entering your offices.
These recommendations are easy to implement and within your control. They are all aimed at lowering the incidence rate to ensure worker safety.
4) Communicate Effectively, Demonstrating Leadership
It’s trite to say that in times of crisis strong leadership is essential – but it’s true. Employees will look to leaders for transparency and a framework to guide their behavior. This requires leaders to be ahead of the curve, and to make timeous, effective decisions for their staff and the business.
It also requires effective communication. A clear articulation of the challenge is needed, along with the actions that the business is taking, and actions which people should personally take. Compassion for affected individuals is needed however actions to protect the broader community must take priority.
Communication should come from the top via company-wide emails, townhall meetings and regular updates. The CEO needs to be visible; leaders must provide opportunities for employees to ask questions and be heard. We suggest that a crisis-hotline is established so that employees can have an avenue for their urgent concerns and suggestions.
CEOs must also keep their Board of Directors informed. Specifically, the risk assessment analysis discussed above should be shared with the BoD to help them identify and understand the potential impact to this year’s business plan, based on various scenarios. It’s good governance to analyze the implications, and work with your Board to evaluate strategic options around timing of capital raises, access to capital, product development, expansion plans, and talent ramifications.
Insight Partners takes the threat of a pandemic seriously. We’re acting with the understanding that appropriate business foresight and planning – as well as the engineering of new workplace behavioral norms – contagion and business impact can be mitigated. Please reach out to us if we can review your BC plans or problem solve with you.
Virology Down Under: So You Think You’re About to be in a Pandemic?
Harvard Magazine: Cooperating to Combat Coronavirus