One of the most challenging aspects to the COVID-19 pandemic involves the speed at which the virus spread. There was no time for long-term strategic planning, as travel restrictions and shelter in place orders rolled out and social distancing measures were implemented across the world to slow coronavirus transmission. This rapid pace created unparalleled uncertainty across all sectors, as organizations rushed to protect their workforce and navigate the new day-to-day operational considerations.
Seeing what comes next is difficult, in part because new developments, and information about managing the COVID-19 virus emerge all the time, and in part because we don’t know yet when the threat of the virus will subside enough that safety precautions can be lifted.
We wanted to get a clearer picture of what the COVID-19 response looks like on the ground, from the view of financial professionals who are helping their organizations navigate this turbulent time. We polled a group of financial professionals from mid-sized companies across the U.S., and the following are some of their takeaways (for full results, click here.)
Remote Work is the Norm, at Least for Now
The highly communicable COVID-19 virus disrupted typical working arrangements. Organizations ramped up cleaning and social distancing efforts and many contended with shelter-in-place orders that directed non-essential businesses to keep as many of their employees as possible at home. Nearly 80% of respondents implemented remote working arrangements as part of their COVID-19 response.
Employees working from home bring challenges and considerations that organizations continue to navigate. For example, remote working may trigger new state and local tax reporting requirements. Remote access to systems and servers creates more opportunities for information security incidents as employees rely more heavily on virtual private networks (VPNs) and third-party applications to conduct day-to-day business activities from their shelter-in-place locations.
A Tricky Trifecta: Supply Chain Disruption, Travel Restrictions and Safety Measures
Strategies to slow the spread of the virus wreaked havoc on international supply networks and distribution channels, particularly for companies with operations in China. Roughly, 42% of the respondents in our survey experienced a supply chain disruption.
Many organizations that sourced products from China had to look for back-up suppliers outside of that region. Distributors and logistics providers might have felt these repercussions first, but manufacturers and retailers soon felt it, too, as products were delayed.
Safety measures that affected distribution networks also affected international travel and the industries that support it, from oil and gas operations to airlines, and the hospitality and accommodations sectors. These groups all saw plummeting declines in demand as country-after-country followed suit with travel restrictions and limitations on group gatherings.
And the Hits Keep Coming: Location Closures, Valuation, and Other Early Financial Impacts
When combined, the immediate effect of the pandemic response could be significant, and many of our survey respondents noted they have experienced this firsthand. Around 42% say they have had to close at least one location due to the pandemic. Almost one-third of respondents have already experienced a shift in their business valuation.
Financial impact may be not be limited to the organizations that have had to temporarily shutter operations or drastically scale back activities. These hardest hit organizations may be struggling to pay their vendors or providers, which then affects the businesses that have the hard-hit organizations as clients. Around 30% of respondents we polled say they have had receivables collections that have defaulted or been deferred.
The ripple effect of the pandemic’s impact becomes particularly clear when you look ahead. We asked financial professionals to gauge when their operations will feel the most severe ramifications from the pandemic, and most said it would be less than four months, with 32% of respondents saying the impact would be felt in one to two months.
Liquidity Prospects Look Good…for Some
Organizations have several options to help them manage short-term impact on liquidity including the stimulus provisions created by the Coronavirus, Aid, Relief, and Economic Security Act (CARES Act). Many are optimistic about their ability to sustain operations given this availability of cash and relief options. In our survey, 37% of respondents said they can continue in this lending environment for more than 12 months, and 30% said they could sustain this pace for five to 12 months.
This is not the case for everyone. A little more than a quarter of the organizations we polled indicated they would only be able to sustain operations for three to four months. Timelines for resuming “normal” operations across all industries and operations are still up in the air. How soon the economy can safely open back up will be a key factor in evaluating the total impact of the COVID-19 pandemic.
Preparing for the Next Steps
We are in a transitionary time with the pandemic response at this point, where many of the safety provisions remain in place, but state and federal governments are ironing out the details of their “return to normal” plans. Our team is here to help navigate the road ahead. We will continue to monitor new developments and provisions that may help organizations manage the impact of COVID-19 on their operations. For up-to-date information, please contact us.
Looking for more COVID-19 resources? Visit our resource center for expertise on impacts to expect and how your business can respond.
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