by Saira Akbar
7 simple ideas to deal with the economic impact of Coronavirus
Time to stop. Think. Take stock. Brace for impact!
What will be the economic impact of #coronavirus on us?
So far it seems that the virus havoc is happening in China, mostly. Another place, another country, another planet. The spread has been alarmingly fast, taken us all by surprise. Yet, in general, the overall response from us, the ordinary global citizens, has been a sympathetic, yet a desensitized acknowledgment.
I believe, regardless of where we are on the globe, or what we do, we need to start to nudge our businesses, our teams, our customers and our personal finances, into the direction of planning for downtimes, which will hit us all, from a year or two from now.
How did we get here in the first place?
Almost all industries all over the world, big and small have already started to buckle under the Coronavirus impact on the Chinese economy. China over the years had become the core, the central hub, or engine of global economics. It is, as if, we put all our eggs in one basket, and now someone has come out of nowhere and kicked the basket, and it is a mess. Till, as recent as December 2019, almost all industries, all economies, all roads led to China. The core has now been disrupted. Scenes of empty streets in mega-cities such as Shanghai are surreal, almost like a dark thriller movie.
Prior to the breakout of the virus, businesses in China were supposed to return to work after the end of the Chinese lunar year. That was supposed to be around this time. But streets, factories, businesses continue to be ghost towns that they have become.
As one Chinese factory owner lamented: "How can I bring my workers back? I don't have any safety clothing. Not even enough masks. If there is a breakout, how will I quarantine my people?"
In another case, as recent as today (18 Feb 2020), a major tourism conference, which was supposed to be held in mainland China, announced that they have been forced to cancel the event, and will instead, hold it online. The organizer was trying to drum up support via LinkedIn, for people to register for the online show. Sad affair. An economic meltdown in the making indeed.
What lessons have the past economic meltdowns taught us?
We have two silver-lining factors:
We have a small window of time between now and leading up to the meltdown in next year or so.
Generation X and Millennials have sound, past experience of what a financial crisis looks like.
Just like the #GlobalFinancialCrisis, which resulted from the American housing crisis, had a delayed rippling effect on the rest of the world, the Coronavirus impact will only be felt in other economies in the coming years.
I remember when the American Housing Crisis was playing out in 2006 on CNN and BBC, I was clueless and rather naive about what was happening. By 2008, it was difficult to ignore the news TV channels. Despite my self-inflicted lack of knowledge, I did start to wonder if what was happening in America, a faraway land from my little corner of the world, will the same start to seep into my own backyard also? I remember sharing my fears with some of my colleagues, but they seemed nonchalant and dismissive. In fact to my dismay, despite my warnings of, its-not-a-good-time-to-spend, one of them went ahead and bought a brand new BMW. I suppose it was not his fault. After all, in our times, the world and our generation had never quite ever gone through an economic meltdown.
The penny dropped for us all, when without any warning, whatsoever, a major client, right at the eve of the project launch, canceled the project with us. We were in a state of shock.
From that moment onwards things only went downhill for the markets around me, as well as for my business. Looking back to that moment, I wish we all knew better and had prepped in some ways. I wish that we had the experience, hindsight, and knowledge of how things would pan out during a financial crisis. Maybe, if not the whole business, some of the wreckage of my broken business could have been salvaged!
So what can companies, big or small, regardless of their exposure to China, do, to get into a state of readiness? Without having to create a state of alarm, here are 7 simple ideas, which if implemented, may equip you to deal with the future:
1. Get out of the bubble!
Take stock. Even if things are going smooth and cool for you or your business, internalize and accept the reality that this won't remain the same in a year or two from now.
2. Start designing a new game plan for 2020 and beyond.
It does not matter what strategies or business goals you had set at the end of 2019. Since then the paradigms have shifted. Everything has moved to zero. Old rules mean nothing. Even if all seems okay for now, the rippling impact of the downside of the Chinese economy will impact us sooner or later. Make no mistakes about it.
3. Start talking to your shareholders, CFOs, and teams
How do we tell our talent to be prepared for tough times whilst maintaining positivity and productivity?
How can we redefine and prep for the hunker-down period?
What can we do now to ensure that our business survives the storm and we are not forced to close down the shop?
What should we be spending on or not spending on in the next one to two years?
How do we negotiate higher margins, without creating panic with our customers or suppliers?
These very uncomfortable, yet crucial, conversations are necessary to remain a sustainable proposition during the down periods.
4. If you are in the business of advising your customers, bring their focus to the fringes of the issue.
Help them to design and put in place, distressed business strategies or frameworks, now. These will help to hold their businesses together during the meltdown. Help them to leverage on the lull before the storm by designing short and aggressive business strategies, so that they are able to make the best out of this short window of opportunity between now and when the economic crisis storm actually hits us.
5. Stay conservative and minimalistic with starting anything new - be it a personal investment and/or products and/or entering new markets.
6. However, should you decide to get into something new, then make sure the speed and tempo, to reach the finish line, is exact, measurable and fast - don't drag your feet. Be precise. Be aggressive. Don't lose time.
7. Avoid long-term contracts and projects.
If you do need to sign up new contracts or projects, put in quarterly reviews and revisit-the-KPIs clauses. No matter how stable things look in your backyard, going forward the market dynamics will become fluid and out of sync. So don't over commit. Don't over-promise.
Learning from history and past events, it is clear that the consequences of not being ready for an economic meltdown may result in a heavy price for you and your business.
There is good news, however. As per the leading media forums, the virus is now slowing down. The spread is shrinking in China and around the world. In general, fewer cases of new patients are being reported. Despite the fatalities, many of those infected are now on the path to recovery. A relief to many indeed. But - for world economics, it is too late!
The economic disruption tsunami is well on its way, and there is no stopping it.
Therefore, it is time to be #futureready for a different kind of future: another global economic meltdown.